Simon Grey, General Manager Europe
Farm gate pig prices across Europe have increased very slightly over the past few weeks. Based upon the laws of supply and demand, this must mean demand continues to outstrip supply. Pig farming is currently profitable. How long will this last?
Ours is a strange business. As farmers we can only control what we can control. We can invest if farms, equipment, genetics, vaccines and management and work for 11 months (from insemination to sale of a pig) but the final business outcome depends upon 2 things. The pig price and cost of feed – both of which are determined by national and global events.
Sustainability is a word almost everywhere today. In business to be sustainable the first requirement is profitability. Without profit there is no business. Without profit to reinvest in new more efficient technology’s there is no future.
Without profit to pay increasing salary demands there is no future. Already in agriculture in Europe the average age of people working is higher than for other industries, nearly 10% of the work force is of retirement age vs average for all industry of just over 2%. Without young people entering agriculture there is also no long term future!
We all remember the chaos caused by the coronavirus pandemic. We also remember health services being praised for their work during this time. Seems, in a time that obesity is seen as a major public health problem that as a race we have forgotten that without food we die! Farmers produce food, so I guess by definition are the original life savers. Remembering the chaos caused by a single virus, can you imagine global famine! These original life savers can work all year and actually lose money – effectively pay for the pleasure of going to work to feed people! No wonder the average age of farmers is increasing!!
Our biggest challenge in terms managing supply and demand and the effect this could have on profitability is the production time of 11-month conception to slaughter and then with only a 2-week window of opportunity to sell (to comply with weight range of most contracts). This means that matching supply and demand by speeding up or slowing down the production process – like many manufacturing plants can do, is impossible.
We can control a little the known effect of season by breeding more in the late summer, when in many climates we know production will suffer due to heat and shortening daylength. We can do this because it is a regular and repeating event.
Knowing what the demand is going to be in 11 months-time is of course impossible.
The definition of stupidity is keep doing the same thing and expecting the result to change!!
Seems as an industry following this definition – we know what we are!
What can we change? Profit to loss is due to supply and demand. The 11-month production cycle means we can’t do a lot about demand (we can kill live pigs to reduce – but we can’t suddenly produce more pigs). Maybe we can produce a better product and increase demand? Remember the definition of stupidity!!
Categorised in: Featured News, Global Markets
This post was written by Genesus