January 31, 2008

APL report indicates upheaval in Australia's pig industry
 

About 27 percent of Australia's pig producers expressed their intention to leave the industry if market conditions do not improve, according to a report released by Australia Pork Limited (APL).

In early January, the Federal Government Productivity Commission released an initial report, which said that there was no evidence of increased imports threatening the domestic industry.

However, the disappointed APL released a subsequent report that says the contrary.

According to the report, 14,000 sows were culled and another 73,000 will be culled by June 2009, causing a major contraction in the industry; 14 percent of producers had already left the industry while 27 percent are contemplating an exit; the pork industry's facilities have limited or no alternative uses while pig production and pork processing are highly capital intensive and volume dependent, which separates the industry from many other agricultural industries; and there is also a lack of positive cash flow and investments to reduce production costs.

Due to environmental regulations, facilities are located away from urban areas, and in low value land. This would mean that costs associated with leaving the industry are high.

South Australian Farmers' Federation pork committee chairman, Butch Moses said the mass exit is creating a problem because there are much more supply than demand, which keeps the prices low.

Moses also believes that this would create problems for the export market, which would be hard to sustain with a lack of pigs and pork production.