European pig producers are on the crest of favourable exchange rates and enjoying the benefits of good profitability after several years in the doldrums. However, industry experts’ advise that producers should invest profits in improving their businesses to secure their production basis before expanding their herds.
The experts also agree that the EU pig industry is becoming even better placed to take advantage of opportunities in the marketplace. But, at least one observer warned against what he described as “high risk strategies” that could threaten future production, if the industry was hit by exotic diseases.
British Pig Executive (BPEX) director Mick Sloyan. Says: “Weak sterling and the rapid decline in the value of the Euro has made EU exporters much more competitive, with benefits in dollar terms for important EU pig meat export countries, such as Denmark and Germany.”
Market conditions favourable
BPEX International Manager Peter Hardwick, who has been involved in the global meat market for many years, believes the EU will continue to be a major player in the international pig meat market, because of its high levels of productivity, with efficient animals and good feed conversion rates, in spite of the restrictive environment and animal welfare rules.
“The biggest problem in the EU at the moment is labour costs, which pushes up the cost of production and makes us vulnerable to competition from countries such as Brazil, where pig production is now highly skilled and conducted on a large scale, especially if that country gets increased access to Europe under the MERCOSUR Talks on trade liberalisation,” says Hardwick.
However, Sloyan pointed out that the recent decline in US production had also helped to push prices up on the international market. At last things are looking up for European producers, who, he pointed out, have not had it easy as they struggled against disease outbreaks and tough new environmental regulations.
“First we saw input prices rocket, with resulting losses that made virtually all English pig farmers question their future in the business. But, within two years, we have seen pig prices at historically high sustained levels – and mood of the industry has changed.”
Production techniques changing
While there has been a reduction in the total EU pig breeding herd, Sloyan noted that productivity is still going up in many member states, because producers are squeezing more out of their pigs by ensuring they wean more pigs per sow per litter and by achieving higher slaughter weights.
The traditional picture of production is also changing in various countries, with a marked increase in the number of piglets and weaners being imported by Germany, mainly from the Netherlands and Denmark, where many producers have moved away from birth to slaughter production to specialise in producing piglets for live export.
“I would never have expected this to happen in Denmark, which is well known for its focus on finishing pigs and exporting pigmeat products around the world,” says Sloyan. “It is now supplying between 6 and 7 million piglets a year to Germany, where they are now specialising in finishing pigs.”
Agreeing this change in farming systems could have something to do with the country’s strict environment laws, he says “I have a feeling this is already placing a lot of pressure on the abattoirs in Denmark, because they cannot afford to operate below capacity for too long.”
While he recognised that as the country was producing about 25 million pigs a year and only exporting about 25% of them there were still plenty of pigs for the abattoirs and a lot of meat available for export, he felt it was worth watching the situation to see what happened there over the next few years.
UK pig farmers upgrading facilities
Turning to the UK, Sloyan said: “We are doing well here at the moment and it is very pleasing to see that farmers are investing their profits into modern facilities and new or refurbished buildings.”
“This will help us boost sustainable production increases, although we do need to up our game in the breeding herd, where we are still some way behind our European colleagues as far as litter sizes are concerned.”
Barney Kay, general manager of Britain’s National Pig Association, agreed that producers in England had been enjoying good profits for the past 18 months and were ploughing their money back into new accommodation and other facilities for their pigs before considering expansion.
“This investment in modern facilities and new technology comes on the back of work already done to overcome health problems in the UK and means we can look forward to improved productivity and catching up with the rest of Europe,” says Kay.
“Our big challenge now is to reduce our costs and boost production – and we have loads of room to improve,” he says. “Here in the UK we are producing about 21 pigs per sow per year, while our competitors on the Continent are up to 26 pigs per sow per year.”
“We also need to look for new opportunities to sell more pigmeat in the UK and grow the domestic market here beyond its current 50% self-sufficiency. I am sure we can do this, with the help of the processors.”
Germany’s bio-security gamble
Looking across to mainland Europe, Kay added that he was a bit concerned about the growth of the piglet population in Germany, because he felt having so many pigs together was a high-risk strategy that could backfire in the event of any outbreaks of exotic diseases.
“This is just a personal view, but I do hope the Germans are keeping a tight rein on bio-security measures in areas where there are large numbers of piglets and weaned animals,” he said.
Pig meat opportunities
However, Hardwick still sees huge opportunities for UK and other EU pig producers, especially in China and other parts of the Far East.
He pointed out that while China was increasing production rapidly, the demand for pig meat there was growing faster than its ability to produce it.
“For example, the volume of 5th quarter exports to the far East, including China, Hong Kong, Vietnam, the Philippines and so forth had increased by 300% between 2007 and 2009 to become the UK’s second largest export market after Germany, a traditional cull sows market.”
The Russian market was also still important, particularly for the export of breeding animals, but exporters often had difficulties finding their way around all the various regulations and rules governing pig meat exports to that country, Hardwick added.