July 20, 2012

As producers were being paid less than GBP1.5 (US$2.36) per kilogramme, down GBP0.20 (US$0.31) than the average production costs, East Angli's pig industry losses have reached an estimated GBP200 million (US$314 million).

According to the latest figures, calculated by senior analyst Stephen Howarth, of the Agricultural and Horticultural Development Board, it costs at least GBP1.70 (US$2.67) to raise a finished pig.

"Based on the July cost of production estimate, this means that producers are losing an average of GBP0.23 (US$0.36) per kilogramme, equivalent to a loss of about GBP18 (US$28) per pig," he added. "In recent months, feed costs have risen faster than the DAPP (deadweight average pig price), increasing the losses experienced by producers.

"Producers have now been in a loss-making position for 22 consecutive months, dating back to October 2010. Cumulative losses during this period are now approaching GBP200 million (US$314 million)."

Feed price have risen sharply, partly because of the global weather conditions, which have forced up the cost of soy. Further, wheat prices have also increased as a result of the severe drought in North America and problems in the Black Sea region and also South America.

He estimated that the cost of production this month will be a record of nearly GBP1.73 (US$2.72) per kilogramme. Feed accounts for about 60% of costs or some GBP1.09 (US$1.71) per kilogramme.

Although pre-harvest costs have risen sharply, costs are expected to remain as high as GBP1.66 (US$2.61) per kilogramme once the combines start rolling. In any cases, and based on futures' prices, Howarth warned that costs will not drop much below GBP1.60 (US$2.51) per kilogramme for the foreseeable future.

In a detailed analysis, he said that the most important component of pig feed for Britain's farmers has risen by more than GBP20 (US$31) in recent weeks. Likewise, such price pressure also causes considerable pain to the poultry sector, which is a major consumer of feed grains.

In early June, the London feed wheat price for July delivery was GBP171 (US$269) per tonne, rising by June 15 to GBP175 (US$275) and three weeks later, it had reached GBP204.25 (US$321) per tonne. There have been similar increases for November futures wheat from GBP154.75 (US$243) per tonne to more than GBP180 (US$283) per tonne earlier this week.

Concerns about a delayed harvest, and also issues about quality of feed grade wheat, have added to the price pressure, noted Howarth. In an international feed grains market, the anxiety about the USA's corn or "corn" harvest has influenced the wheat market.