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Pig farm incomes soared in 2016/17 but tougher times ahead

2nd Nov 2017 / By Alistair Driver

Following, the horrors of the previous year, average pig farm incomes grew by 167% in 2016/17, on the back of vastly improved market prices, official Defra figures show. 

FBIThe average Farm Business Income (FBI) for specialist pig farms in England grew by from £21,600 to £57,800, the figures show. 

This represents the highest FBI for pig farms since 2013/14, a period when pig prices were climbing and feed costs were falling. Despite hitting multi year-lows earlier in 2016, pig prices firmed in the second half of the year, largely due to a tightening in supply and the weaker sterling. Likewise, while pig meat production was down over the period, it was outweighed by a considerable fall in costs, largely feed.

AHDB analysis of the figures highlighted that in 2016/17 some of the increase in FBI was driven by an increased proportion of contract rearing farms within the sample and on these holdings some outputs are not paid for by the producer.

For non-contract rearing enterprises, it is expected that farm output increased by more than 25% in 2016/17. Furthermore, in the 2016/17 FBI sample, there was one predominantly influential (but un-named) enterprise, which if removed from the results, the average FBI for specialist pig farms would have increased by 87% to £39,500.

The rise of 167% or even 87% was the largest proportional increase in FBI for any farm type in 2016/17. All farm types excluding specialist poultry enterprises, which suffered from lower output of poultry meat, recorded a rise in FBI during the period, with the income for all farm types averaging £38,000. 

Market struggles 

The outlook is less rosy for the next few months at least. Another penny was taken off the SPP last week, which, as now stands at 156.03p/kg. While still almost 9p above year earlier levels, this is the first time the premium over the previous year has fallen below the 10p mark since September 2016.

Increasing supplies are adding pressure to prices at present, accentuated by high carcase weights, which, at 84.66kg, are 1.6kg up on a year ago. 

Speaking at the NPA producer group's latest meeting in London on Wednesday, AHDB Pork strategy director Mick Sloyan said the gap between the UK and EU average price, which had been very narrow, was now widening significantly, putting further pressure on UK prices. 

With the market conditions as they stand, he anticipated further price reductions in the weeks ahead. 

Longer-term outlook

According to AHDB, following a modest decline this year, UK pig meat production could reach its highest level since 1999 this year.

UK outlookThis follows from modest expansion in the UK breeding herd this year, due to improved producer profitability. Continual improvements to sow productivity, though possibly smaller than in recent years due to reducing antibiotic usage, should also support throughputs next year.

Higher carcase weights, with further increases anticipated next year, could bolstered production even further. As such, the latest AHDB pork market outlookanticipates that UK pig meat production could reach 924.9 thousand tonnes next year, a nearly 20-year high. 

On top of this, imports are expected to increase modestly, following continual growth in shipments of processed products.

More pork may be available on the EU market, as modest expansion in the breeding herd, notably in Spain, could drive an increase in production on the continent. At the same time, increased production in Chins, means EU exports there are expected to remain challenged next year, which could apply downwards pressure to the EU market and therefore increase the incentive to export to the UK.

However, rising production in the UK is expected to support our export market, as volumes were constrained by tight supplies earlier in the year. UK pork exports to China have continued to grow this year, despite the market becoming more challenging.

But AHDB concluded: "Ultimately, however, supplies on the domestic market are expected to increase next year.

"This could lead to more challenging market conditions. However, this will depend heavily on the global market situation and how domestic demand develops. The most recent Kantar retail data for the 12 weeks ended 8 October shows some recovery in pork consumption volumes compared to year earlier levels. While tentative, perhaps this could be the beginning of an improvement in pork consumption domestically. If this continues, it may help the market absorb some of the extra supplies available next year."

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