You're trying to break even every day.
If you're losing €10 a week on each pig and selling a thousand, then you're losing €10,000 a week which is €500,000 a year.
You might put up with that for a while but then it's about how long the banks stay with you."
Conor O'Brien and his family farm a 2,300 sow pig farm in Mitchelstown, Co Cork. Immersed in the business of producing pigs, the O'Briens are just one of the 300 commercial pig farmers at the centre of the present crisis stemming from the out of control costs of animal feed.
In 2008, rising feed prices drove farmers dependent on imported grain and soya towards producing pigs at a loss before the situation inevitably righted itself.
But vulnerability remains endemic in Irish pig production - a sector which employs about 8,000 people and in output value is now third only to our beef and dairy exports.
Over one million tonnes of animal feed goes into producing Irish pigs every year and it's a business which must survive without subsidy.
After increasing productivity on farms through better genetics and management, profitability now seems dependent on climatic conditions, hedge fund betting and factors beyond Irish farmers' control.
In July 2010, the price of composite feed was €237 a tonne; this month it reached €348 a tonne.
As feed is 70% of production costs, it meant producing a pig went from 89 cent a kilo (c/kg) to 134c/kg.
But on the retail front, the pork and bacon is frequently sold as a loss leader, with supermarkets using offers to get consumers in the door.
"Pig meat is much dearer abroad, we're still at 90% of the European market price as there's smaller demand here and such a dominance of the shops," said Conor O'Brien.
"One problem is that there's too many supermarkets in Ireland. In Mitchelstown alone, there are five competing against each other. In a German town of the same size you'd barely see one supermarket."
Over the past five years, it's easy to track the decline in the retail price of pigmeat. "Pork is increasingly driven by supermarket promotions," said David Owens of Bord Bia.
"The average price per kilo is also dropping as beef and lamb get more expensive."
The price is also fairly low because there is intense competition in the processing sector.
While we export 60% of our output to Britain, when the domestic market is under pressure our processors don't have the same outlet that beef and lamb do so they end up competing with each other.
"Retailers also have a wide range of brands - there are maybe up to 20 rasher brands on a supermarket shelf, and you've private label growing as well which is putting those brands under pressure," said Owens.
Like everything in surplus, the fact that Europe is 110% self-sufficient in pig meat isn't helping the issue.
"It's like anything; until there's a scarcity, the price is not going to rise significantly," said Ciaran Carroll of Teagasc.
"We've seen a bit of a response in the market just now but feed costs are going to stay high."
While cyclical pressures are central to the pig and poultry sector, the heat being borne by Irish pig producers at present is "off the scale" said Ami Cahill of IFA.
"Even when you talk to the Danish guys and the people you think are less affected, they say on the scale of 1-10 in relation to other crises, this is beyond that."
North America's recent drought has driven up grain prices at a time when Irish farmers were already weathering a soya price rise from drought in the southern hemisphere during our winter months.
As this soya came into Ireland in early 2012 feed prices began to rise rapidly.
To add to their woes, Irish pig farmers are also facing a typical investment of €300,000 in the coming months to change sow stalls over to loose housing when the EU legislation comes into play in January next year.
While there is a 40% grant available under the TAMS scheme, many pig producers will struggle to get the additional finance from banks. Particularly galling is that many European countries and big pig producers, such as Spain and Denmark, will not remotely meet the EU ruling. Yet farmers here are bitterly struggling to comply.
So it's a perfect storm. You could argue the pig sector has seen it all before, but not all the elements happening to the same degree at the same time.
"It's been bad before but scale was not as big before. If you only had a few sows and cows you might be okay but now with the big self-contained units you are probably more exposed," said Conor O'Brien. So how many Irish pig farmers could we see leaving the system?
"Farmers are under incredible pressure, there's no doubt about that," said Ciaran Carroll.
"Some are looking at selling land maybe, talking to the banks ... in the past they would have got a loan but now the banks are reluctant to give it."
The maths make for worrying reading. Among the 300 or so commercial pig producers in Ireland, the average herd is 650 sows, using about 90 tonne of feed per week. In July 2010, a weekly feed bill of this size unit was €21,000. Now it's €31,000 per week; that's €520,000 per year.
During the same period, price has risen from €1.49 per kilo to €1.74 per kilo so weekly, the improvement on price is €4,000.
But when you offset the feed bill price, most farms are running a deficit of about €6,000 a week.
"A rise of 30c/kg to the farmer is what is needed - maybe 50 cent at retail level is all of what is needed to get everything covered,"said Conor O'Brien.
farmesjournal.ie
Source: Argentine Beef Packers S.A.
Back to News Headlines