Source: Alamy 

Over the past six months, at least 40 farmers had exited the crisis-hit pork sector, the National Pig Association said

Pork farmers are quitting the industry due to the soaring costs of production, which have been compounded by the conflict in Ukraine.

Over the past six months, at least 40 farmers had exited the crisis-hit pork sector as a result of the backlog of animals on farms and the crippling cost of production, the National Pig Association told The Grocer this week. Many more will soon have the decision taken out of their hands, it added.

According to AHDB, farmers are facing at least a 38% increase in red diesel prices year on year [52 w/e 22 February]. Feed wheat prices have risen at least 35% over the same period, with concentrated feed prices up at least 15%.

Prices are expected to climb further in the coming days as AHDB data is updated to reflect the current situation in Ukraine, with inflationary pressures translating into unmanageable costs for many pig farmers, the NPA said.

It cited the example of one farmer who saw feed costs rise from £78/pig in April 2021 to £101/pig this month. This was expected to rise to £119/pig by next month due to higher wheat prices – representing a 52.6% increase in just one year.

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Another said his overall cost of production had risen from 160p/kg in December to more than 200p/kg now and was expected to rise even further over the coming weeks.

Others had not bought as much forward feed as usual due to soaring prices, leaving them “hugely exposed” to the ever-rising wheat price. Meanwhile, an additional producer estimated that, with forecasted losses of £50/pig, a 700-sow pig unit would lose £1m over the next year at current prices and costs.

NPA chair Rob Mutimer said the future of British pork supply was now at risk. “Some producers, who have exhausted all financial and emotional reserves over the past year, will be looking ahead to the next few weeks and months and making decisions now.”

In other cases, “the decision might be taken out of their hands if they are unable to purchase feed or their banks decide they cannot extend overdrafts any further”, he added. 

While the backlog was now easing, numbers were still “way over” 100,000, added NPA CEO Zoe Davies. Although pig processors increased prices to producers by between 12p-16p last week, the hikes will take time to filter to farmers and still lag behind soaring European prices, up more than 23p last week.

The NPA’s comments follow warnings from 2 Sisters CEO Ronald Kers last week that the cost of producing chicken had jumped by 50% over the past year.

Meanwhile, the same inflationary pressures have pushed the average cost of producing milk up by almost 40%, ­according to Kite Consulting. It warned supplies were under threat, with the break-even farmgate price now in the region of 40p per litre.

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With milk production down by 4.4% against the same week last year [AHDB, 11 March], there was little prospect of a recovery in volumes until milk prices were “ahead of the cost curve”, Kite added.

Security of supply remained “under threat” as confidence to invest in feed and fertiliser was low, it warned in a briefing note to customers. And production could fall by an additional 1.3% by the end of the year.

This situation led milk processor Freshways to become the latest in a long line of suppliers to announce even further price increases this week.

The business will pay its farmer suppliers 40p for a standard litre of milk from 1 May – up from 36ppl in March.

Freshways said it was “important all parts of our supply chain understand exactly what is happening in the milk fields and with milk processing, and what the implications are of failing to understand, and not acting. Because we are in truly unprecedented times”.

Achieving this level of increase from its customer base would be “an immense task, as despite significant increases in milk price we have seen very minimal increases in the retail sector”, said Freshways MD Bali Nijjar.

“This is mainly being driven by aligned contracts which are significantly behind the true value of milk,” he added.

“Milk continues to be the cheapest liquid on the shelf and for the above price to remain sustainable we will need to see significant retail price increases. If this does not happen then the next shortage on shelves will be milk.”

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