May 14, 2012

 

EU pig farmers struggling on high compound feed cost

 

 

Caught between a slide in pork prices and a rise in the cost of protein-rich soymeal and rapeseed meal used in compound feed, Europe's pig farmers are struggling to maintain production.

 

The price of soymeal has surged nearly 40% this year. Along with rapeseed meal it is used as the main source of protein in compound feed.

 

"There is very strong demand for spot contracts which means that the industry is not well covered," one trader said.

 

"Demand will remain strong as there is no alternative. You need your proteins."

 

The EU high protein soymeal spot contract was quoted at US$524 a tonne fob Rotterdam versus US$383 in January.

 

Argentinean hi-protein was quoted at US$518 a tonne, up from US$377 in January. Rapeseed meal spot contracts were quoted at EUR248 (US$320) a tonne, up from EUR191 (US$246) in January.

 

Droughts in South American key growing areas, along with strong demand from China, the world's largest importer of soy, have boosted prices of soy and others across the oil seed sector.

 

At the same time, pig farming in Germany, the country's largest livestock sector, is suffering as meat processing companies bowed to pressure from retailers and accepted a US$0.05 price cut per kilogramme live animal weight.

 

"The significant fall is an affront to pig farmers who are currently struggling with the impact of ever-rising feed costs," said Franz-Josef Moellers, vice president of the German Farmers Association.

 

The double impact of high feed prices and falling pork prices was something which "pig farmers will not be able to survive for much longer," he said.

 

Europe's livestock sector has been in decline over the past few years as farmers suffered from high feed costs and the expenses associated with ensuring higher standards of animal care.

 

Wyno Zwanenburg, head of the Dutch pig farmers association, said that compound feed accounts for 50-60% of the cost for pig growers.

 

"High (compound feed) prices make our sector less competitive. It comes on top of the high cost of animal welfare in Europe," he said. "Meat prices have gone down in the past week."

 

He said that farmers in the Netherlands could use some alternative feed which is less expensive.

 

"We can use leftovers from beer production, for example," Zwanenburg said.

 

Soymeal and rapeseed meal can be substituted by corn gluten or tapioca which is grown in South America, but neither is available in the EU.

 

Traders in Rotterdam said tapioca has not been on the market for several years as it is still more expensive than soymeal while corn gluten imports have been nearly halted due to GMO issues.

 

Alexander Doring of the European Feed Manufacturers Federation said that compound feed producers would be relieved if they had access to protein-rich substitutes for soymeal.

 

"We are asking the European commission to give us access to other sources of proteins such as corn gluten and dried distilled grains."

 

"We are waiting for expert opinion and we are hoping that the commission can speed up the licensing procedure."