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Feeding frenzy....

Concerns about the rising cost of feed temporarily eclipsed UK pig industry anxieties about the effective implementation of the new EU welfare rules from January 2013.

Feed accounts for over 60% of the overall cost of producing a finished pig. Extreme weather conditions have significantly affected the expectations for the supply of feed wheat and proteins such as soya in the futures markets – in particular, the drought conditions in the US and several South American countries, with the anticipated effects on crop yields.

These recent developments lead BPEX to produce a Feed Report - which highlighted the current difficulties for UK producers. The cost of production for the typical UK pig producer has risen to around 173p per kg, compared to the average market price at around 150p per kg – translating into a loss of 23p per kg or £18 per finished pig. This calculation is based on current feed and protein prices but the average cost of production is unlikely to drop below 160p per kg for some months ahead.

Some producers will be using up supplies from earlier feed contracts made and others will be able to cushion themselves from recent market developments to some extent, if they produce significant amounts of their own feedstuffs, as is the case with many Danish producers.

Despite the current weakness in pig markets in most EU countries, DAFC recently revised their price forecasts upwards for the next four quarters, mainly due to the expected reduction in the overall supply of pigs across the EU.

The position in the UK will be acerbated by the continuing weakness of the Euro although other EU producers will not be left untouched by the rising costs of feed – the cost increases coming at a time when many producers will need to be making a final decision whether to make the necessary investments to comply with the new EU welfare rules from 2013 and carry on producing pigs in the years ahead.

However, campaigning by British pig industry interests on 2013 related issues continues with regular updates via the BPEX website ('Countdown to 1-1-13').

The recent developments in the grain market have started to prompt the usual scaremongering headlines about another 'global food crisis', as illustrated by a recent article in the Guardian