Situation And Outlook for Pigs 2002/03

M.A. Martin

Introduction

Pig prices in 2002 have been close to the average cost of production. Following good returns in 2001 margins in pig production declined in 2002 despite some reduction in feed costs. This reduction was due to a substantial decline in pig price.

Supplies

EU

EU sow numbers in Dec. 2001 at 12,504m were up 0.5 per cent on the previous year. Within the EU there have been major changes in individual countries.

Table 4.1: Trends in breeding herd size in various EU countries
Country	No. Sows (000)	Change %
		2001/2000	2001/1999
Spain	2707	10.9	+11.4
Denmark	1348	0.3	+7.3
Italy	729	3.0	+5.3
Germany	2509	-0.7	-2.8
France	1360	-1.2	-7.3
Netherlands	1161	-8.7	-12.0
Total	12504	+0.5	-0.7

Source: Eurostat

Spain, Denmark and Italy show increased herd size. The Dutch herd has declined significantly as a result of environmental pressures and cessation schemes.

Initial forecasts by the Forecast Committee of the EU Pigmeat Standing Group were for a 2.4 per cent increase in pigmeat output in 2002 but this has since been adjusted down to 1.3 per cent. This represents annual production of 203m head.

UK

The June 2002 enumeration shows a total breeding herd of 554,000 sows/served gilts. The UK breeding herd has declined by 30 per cent since 1998. (Table 4.2)

Table 4.2: Trends in the UK pig breeding herd (000) (1998 - 2002)
Year (June)	No. Sows + Served Gilts
1998	795
1999	689
2000	610
2001	598
2002	554

Further reductions have not been ruled out.

Ireland

Pig slaughterings for 2002 are projected to be 4.33m head - up 1.9 per cent on 4.25m in 2001.

Table 4.3: Pig slaughterings¹ in Republic and Northern Ireland (1997 - 2002)
Year	Number (m)	No. Per Week
1997	4.299	82672
1998	4.506	86649
1999	4.614	88722
2000	4.310	82892
2001	4.191	80596
2002 (proj)	4.271	82125

Source: Bord Bia Market Monitor
Republic: ¹Licenced export premises only

The increased slaughterings in 2002 are as expected given the increase in sow numbers from 2000 to 2001 i.e. 5100 sows. (Table 4.4)

Table 4.4: Trends in sow numbers in Republic and Northern Ireland 1997- 2002 (000)
Year	Republic	N. Ireland	Total
1997	174.4	71.0	245.7
1998	170.2	66.9	237.1
1999	171.5	47.1	218.6
2000	159.2	41.8	201.0
2001	163.5	42.6	206.1
2002	160.7	40.2	200.9

Sources: CSO and DARDNI

Pig slaughterings in 2003 are expected to be 2.7 per cent lower than 2002 at 4.21m head. Based on total pig slaughterings and the size of the breeding herd in June of the previous year for the island the number sold per sow per year is, on average, 21 pigs. There are substantial exports and imports of pigmeat from and to Ireland. (Table 4.5).

Table 4.5: Pigmeat trade balance - 2001
	Tonnes (000)
Slaughterings	233
Exports	128
Imports	45
Consumption	150

On the island of Ireland 80 per cent of the total sow herd (sows + served gilts) are located in the Republic. (Table 4.6)

Table 4.6: Pig breeding herd in Republic and Northern Ireland 2001-2
		2000	2001	2002
No. Sows (000)	Republic	159.2	163.5	160.7
	N. Ireland	41.8	42.6	40.2
	Total	201.0	206.1	200.9
% Sows	Republic	79.2	79.3	80.0
% Sows	N. Ireland	20.8	20.7	20.0

Sources: Central Statistic Office,

Dept. of Agriculture N. Ireland.

Total pig slaughterings were 4.25m in 2001 (Table 4.7).

Table 4.7: Pig slaughterings in Republic and Northern Ireland - 2001
	000 head	%
Republic - licenced export	3197	75.2
local authority	60	1.4
Northern Ireland	994	23.4
Total	4251	100

Live exports to Northern Ireland for 2001 are estimated at 117,000 pigs. This assumes the same level of output per sow in both areas.

Pig slaughterings in 2002 are running 1.9 per cent higher than for the corresponding period in 2001.

Table 4.8: Pig slaughterings in Republic and Northern Ireland - 2002 (43 weeks)
	000 head	%
Republic - licenced export	2535	70.7
local authority (est)	52	1.5
Northern Ireland	998	27.8
Total	3584	100

Source: Bord Bia Market Monitor

Live exports to Northern Ireland have increased substantially since 2001. From January to October 2002 these have averaged at least 6000 pigs per week. This accelerated as a result of the sudden closure of the Glanbia slaughtering facility at Rooskey in May due to fire. This plant had been slaughtering just under 10,000 pigs per week. Pig slaughtering data for the Republic do not accurately reflect the actual level of pig output in the Republic because they do not take account of live exports to Northern Ireland.

Pig output in 2001 has been estimated at €350m. (Table 4.9).

Table 4.9: Agricultural Output 2001
	€m	%
Milk	35.5	1564
Cattle	28.3	1246
Pigs	7.9	350
Sheep	6.5	284
Poultry	3.4	151
Cereals	3.9	170
Other	14.5	638
Total	4403	100

Source: CSO

Net live exports to Northern Ireland were at least €12m in 2001. For 2002 this will be about €30m.

Consumption

Pigmeat consumption in Ireland and in the EU continues to increase. (Table 4.10)

Table 4.10: Per capita consumption of meat 1995 - 2000 (kg)
Meat	Ireland			EU
	1995	2000	1995		2000
Pigmeat Beef Poultrymeat Lamb	31.9 14.8 25.8 11.4	38.8 14.8 29.4 8.4	40.2 19.9 19.2 3.6		44.2 19.1 20.6 3.5

Source: FAO

Pigmeat consumption per capita in Ireland is greater than for any other meat. In the EU per capita consumption is greater than beef and poultry combined i.e. the second and third most important meats.

Prices

EU

The average EU price for the first 10 months of 2002 was 137.3c per kg. The average for 2001 was 167.3c per kg. Prices for 2002 are per cent lower than for the corresponding period of 2001.

Table 4.11: Average EU pigmeat price 2000-2002 and relative prices in selected countries
	2000	2001	2002*
EU Average Price (c per kg)	142.1	167.3	137.3
Price as % EU Average
Ireland	91.4	87.6	93.9
UK	110.8	95.5	110.3
Denmark	93.5	94.0	93.6
Netherlands	90.1	84.6	88.9
France	98.7	98.7	94.9
Germany	101.8	102.0	101.9
Spain	100.3	105.0	102.0

*January to October
Source: Bord Bia Market Monitor

In 2002 pig prices in Ireland have improved relative to the EU average. The average price in Ireland, Denmark and the Netherlands is well below the EU average price. All are pigmeat- exporting countries.

Ireland

In the first 10 months of 2002 the average price per kg deadweight has been 130.7c (Teagasc). The average for the year is likely to be 130c. This price represents a 12.3% reduction on 2001 price of 148.3c. (Table 4.12).

Table 4.12:Trends in the price of slaughter pigs: 1993 - 2002 (c per kg deadweight)
Year	Average Price (c)
1993	128.1
1994	127.8
1995	142.6
1996	164.0
1997	143.1
1998	113.5
1999	102.2
2000	129.5
2001	148.3
2002 (proj)	130.0

Source: Teagasc National Monitoring of Prices & Margins in Pig Production

The price for 2002 will be above the average for the last 5 years (124.7c per kg) but less than the average for the last 10 years (132.9c per kg).

Pig prices in Ireland have been 93.8 per cent of the EU average reported price for 2002. This compares with 87.6 per cent for 2001 and 91.4 per cent for 2000.

Costs

Feed Costs

Pig feed prices increased steadily from January 2000. The composite pig feed price reached €225.2 per tonne in June but has fallen to €213.9 per tonne for October 2002. This has lead to a reduction in the feed cost to 80 cent per kg deadweight in October 2002 from 84 cent in June 2002.

Table 4.13: Trends in pig feed prices and feed cost per kg deadweight 1997 - 2002
Year	Average Composite Feed Price €/tonne	Feed Cost Per Kg Deadweight (c)
1997	231	87.8
1998	216	80.8
1999	202	76.3
2000	207	79.8
2001	220	83.4
2002 est.	220	83.4

The reduction in pig feed price has been the result of a decrease in the price of the main feed ingredients. (Table 4.14). The effect of these changes in feed ingredient prices can be illustrated by the change in a finisher diet ingredient cost.

Table 4.14: Pig feed ingredient prices (1999 - 2002) € per tonne
Year	Barley	Wheat	Soya	Diet
1999	125	127	195	143.56
2000	121	129	263	159.72
2001	115	129	270	159.57
2002 (Jan-Oct)	116	120	258	153.21
Oct.2002	111	111	249	145.50

Common Costs

These are the non-feed costs which are common to almost all units.

The recording and reporting of all non-feed costs on many units is improving steadily but there is still room for improvement. The results from Pigsys for 2001 (Table 4.15) are likely to understate actual costs. The guideline costs shown are considered to be more likely to represent the true common costs.

Table 4.15: Common production costs (c per kg deadweight)
Cost	Guideline	Pigsys 2001
Healthcare	4	4.2
Heat, Power, Light	4	3.0
Transport	2	2.0
Artificial Insemination	1	-
Manure Handling	2	-
Labour + Management	15	13.6
Repairs	4	3.0
Phone/Office	1	0.7
Insurance	1	0.9
Stock Depreciation	2	0.5
Miscellaneous	1	3.9
Total	37	31.8

Recorded costs are lower than the guidelines due to:

Cost or value of family labour and owner remuneration is frequently understated.
Lower stock depreciation costs apply when gilts are home-reared rather than purchased.
Manure handling and AI costs are included in Miscellaneous Costs for 2001. Manure handling costs are increasing.
The cost of repairs varies depending on the age of the unit.
Miscellaneous costs are frequently estimated and usually underestimated.

Herd Specific Costs

These costs do not apply on all units. Where they do apply there is considerable variation between units.

Table 4.16: Estimated herd specific production costs guidelines (c per kg dead weight)
Cost	c per kg
Building Depreciation	8
Interest	3
Environmental Charges	2
Total	13

Building depreciation is now being calculated based on the following breakdown of initial cost.

55% structure over 20 years
45% equipment over 10 years

Production costs are, at present, likely to be 130c per kg deadweight.

Outlook

Prices

Price prospects are influenced by many factors. These can be considered positive or negative.

Among the factors that would help maintain or increase prices are:

Continuing decline in UK pig supplies.
Reduced production in the Netherlands.
Lifting of the restriction on pork imports to Japan from March 31^st 2003. (Safeguard clause).
Clearance of backlog of Danish product built up due to the FMD outbreaks in 2001.
Reduced pig supplies in Ireland.
US production is forecast to decline by 1.5 per cent
A continued increase in pigmeat consumption.

The factors likely to negatively impact on prices include,

Reduced slaughtering capacity on the island in the absence of the Rooskey plant.
Continued expansion in the Danish and Spanish herds.
EU self-sufficiency is forecast to be about 107 per cent. The latest projections show a reduction of just 0.2 per cent for the year ending June 2003 compared with the corresponding period to June 2002 (Marche du Porc Breton)
Increased competition from South America (Brazil) on Russian and other markets.

Costs

While feed is declining as a percentage of total production costs it is still the most important cost at 60-65 per cent. Cereal and soya prices have declined. Feed prices will be lower than in 2002.

Sow productivity level have fallen on Irish farms in recent years (Table 4.17 ).

Table 4.17: Trends in sow productivity in Ireland 1996 - 2001
Year	No. Pigs Produced Per Sow Per Year
1996	22.1
1997	22.2
1998	22.1
1999	22.0
2000	21.6
2001	21.4

Unlike other countries (Denmark, France and Netherlands) there has been no sustained increase in litter size in Irish herds in recent years. Meanwhile the number of litters per sow per year has declined and mortality levels have increased slightly. This trend may well reflect the reduced availability of skilled and experienced personnel to work in pig production. A lack of investment in the years 1998-2000 when profit margins were low or non-existent also contributed with deficiencies in repairs and maintenance.

This decline in productivity will lead to an increase in production costs and reduce overall profit levels.

The absence of newly trained staff entering the industry and a shortage of skilled experienced personnel is also likely to lead to increased labour costs.

Investment in dry sow housing to effect the replacement of tether systems by the end of 2005 will add to costs if herd size is to be maintained.

Costs associated with compliance with environmental legislation are also likely to increase.

Conclusion

Profitability in 2002 has been very moderate. Feed costs are expected to be lower in 2003. Reduced feed costs will be partially offset by higher non-feed costs. Prospects for pig price are less certain. Prices in the first 6 months are unlikely to match those of 2002 (131c per kg).