Producer margins increase during third quarter

Pig producer margins increased to £7/head in the third quarter of 2019, the first time the industry has been in the black since the first quarter of 2018.

According to the latest AHDB estimates, the average cost of pig production in GB during Q3 was 147p/kg. This was 1p lower than the previous quarter, driven by slight falls in feed and breeding costs. Falling breeding costs reflect rising returns from cull sow slaughter.

At the same time, pig prices rose between July and September. The APP averaged 155p/kg during the three months, meaning producers made a positive margin of around £7/head (9p/kg) during the quarter.

This compared with a break even in the previous quarter and a loss of £11/head in the first quarter of this year. 

Even though pig prices are still not rising as quickly as expected, given the global ASF-driven market situation, the picture remains positive for producers, according to AHDB.

Since September, pig prices have continued to rise while grain prices have remained relatively low. The APP is now nearly 160p/kg, and so for many producers margins will have improved further in recent weeks.

"Strong demand on the export market, due to the Chinese ASF crisis, means profitability may well continue to improve into early 2020," AHDB senior analyst Bethan Wilkins said. 

"Between mid-2018 and early 2019, GB producers lost an estimated total of £48 million. In the latest quarter, producer profits amount to around £16 million.

"The better financial position of producers will need to be sustained for several more months to offset the most recent loss-making period. Nevertheless, over the past four years, producers have made a net profit of around £3/head, approximately £108 million."