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AHDB figures highlight huge producers losses as costs of continue to soar

7th May 2022 / By Alistair Driver

The desperate need for a rapid increase in the pig price has been further highlighted by sobering new quarterly cost of production and margin estimates published by AHDB. 

They show that pig producers lost, on average, a staggering £58/head during the first quarter of this year. 

Q1 22 margins

Q1 22 COP

Pig producers have lost an estimated £500m since October 2020 on the back of six consecutive quarters of negative margins and the situation has deteriorated further during the current quarter, at least on the cost front.

The data shows that the full economic cost of production for Q1 rose to an estimated average of 207p/kg deadweight, compared with 193p in Q4 2021. This has been entirely driven by a further hike in estimated feed costs, up from 134p/kg in Q4 to 148p in Q1, with feed now accounting for 71% of total cost. For context, the figure for feed in Q1, 2020, more normal times, was 90p/kg.

With the APP averaging 146p/kg during the quarter, this equates to average losses of 61pkg, or £58/head, more than double the crippling losses of the first half of 2021 and up from -£39/head in Q4.

The APP has risen since then, reaching 171.6p/kg in the week ending April 23, but, unfortunately, so have costs, estimated in April to have reached 230p/kg. 

“With feed, energy and fuel costs increasing throughout the period, this average masks that by the end of March the estimated cost of production reached up to 216p/kg deadweight, as reported in a recent AHDB article,” AHDB analyst Carol Davis said.

With feed prices continuing to rise, and no indication that they will be dropping anytime soon, the full economic cost of production is estimated to have reached 230p/kg deadweight by April, assuming the same performance as for the 12 months ending March 31 2022.

With pig producers experiencing negative margins since October 2020, it is estimated (based on the total pig slaughter numbers to April 2022) that the industry have lost over £500m since October 2020, Ms Davis added.

With producers currently facing such huge losses, the NPA has welcomed the commitment of retailers that have invested significantly in increasing the producer pig price, including Waitrose and Sainsbury's

But NPA chairman Rob Mutimer has written an open letter to Tesco chief executive Ken Murphy urging the retailer to do more to protect its future supplies of pork.