Simon Grey, General Manager Europe, Genesus Inc.

Sitting On a Time Bomb!

Today across Europe pig prices remain high and pig farmers are making money as are processors. Everyone is happy!!! We are in the good bit of the pig cycle!!!

There is even investment in farms, but mostly to comply with new legislation that is anti-gestation crates, anti-farrowing crates, anti-fully slatted floors, more space for pigs in nursery and finisher etc). The reality of this investment is it just adds to cost, it does nothing to increase production or the quality of the end product. Basically, it simply reduces profit and makes the pig business less sustainable! Of course there are parts of our industry that love this.

Anyone selling equipment or buildings, or accreditation schemes all love this type of legislation. For these companies it means farmers have to spend money on their products. Last week I was at the British Pig Fair. Lots of trade stands selling stuff to replace something the UK and EU governments have banned or are in the process of banning or talking about banning in the future!! In other words, products that replace products that worked…

Back to the time bomb. By definition a time bomb is set to go off at some time in the future. What do we know about the future. As humans we would say the only guarantee in the future is tax and death! This is of course true. However, as pig farmers we know something else! We know there is a pig cycle. We know that when the price is poor it will get better (this is what persuades us to carry on producing pigs for a loss at the bottom of the pig cycle). We also know the opposite is true. We know that in the future pig price will fall to the point whereas an industry we will be losing money. We know it’s coming; do we do anything about it?? I like to call this “Lemming Management” we accept we are going to walk off the cliff because we are lemmings and that’s what we do!

There is something else we know about pig production. From taking the decision to produce a pig to sell (selecting a new gilt or breeding a sow) it is an absolute minimum of 9 months in the future before that pig is sold and in most cases 10 to 11 months. This means as pig farmers we can’t simply turn the tap on and off to control current supply and demand and therefor profitability. The very reason the pig cycle exists in the first place.

So, if we know we can’t maintain profitability by managing supply and demand what other things can we do? The standard answer and practice here have always been to reduce cost by becoming more and more efficient. As an industry we have been very successful with this. In the UK for example in the past 25 years we have managed to maintain the same level of output (kg sold) whilst the sow herd has reduced from about 900,000 sows to 325,000 sows. An almost unbelievable improvement in 25 years (seen of course in many developed counties). Sadly, in the meantime the population has grown from 58 million to 67 million meaning more imported pork!

The problem with this lowering cost by increasing efficiency it has failed in terms of stopping the pig cycle and stopping farmers going bankrupt at the bottom of each pig cycle…The number of pig farmers falls year on year across Europe.

Our politicians and many retailers believe that animal welfare legislation is the answer, as the general population wants pigs to be kept in better conditions (which is perception not reality). Everywhere this has been done, and I use UK as an example as it was one of the first counties to ban gestation stalls, since 2000 pork consumption per capita has fallen about 15% (beef by 11% and lamb by 42%). In the same time period chicken consumption has increased by 30%. Improving perceived animal welfare has failed in terms of increasing pork consumption.

So, we can’t control supply and demand quickly enough to maintain profitability. The efficiency race has failed to stop the pig cycle and bankruptcies, the animal welfare change has failed to increase consumption, but has increased costs. Is there anything we can do to change the future?

Improve quality (what-ever that means)? Make more desirable product that people will pay more for? Is there any food or indeed and consumer product where the lowest quality product sells for exactly the same as the highest quality product?

Maybe, as most in the industry think, there is no such thing as better-quality pork and even if there was there is no way to sell it for more… I guess we have 2 choices, try it or just sit and wait for the time bomb to go off!! Seems we have nothing to lose by trying??

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This post was written by Genesus