Pork production costs have filled the news since the start of 2011 as producers in most parts of the world worry about the prospects for their profitability this year. For every producer, the basic problem remains the considerable extra expense now involved in feeding the pig after the sudden sharp price in grains and proteins during the second half of 2010.

Feeds are undoubtedly much more costly everywhere than a year ago. The situation in Europe was summarised recently when the agriculture ministry for the Flanders area of Belgium brought together pig industry representatives from throughout the European Union for a day of reflection on the issues and challenges facing the pork sector.


The meeting heard reports such as from Latvia of local feed costs increasing by more than 40% between June and September of 2010. Bulgarian delegates reported a 73% increase in the purchase price of feed wheat from July to October alongside a price rise of over 36% for feed maize in the same period. The cost of producing each kilogram of carcase weight on units in Britain was described as having been 13% higher in October than in July of 2010 and October’s cost was 21% above the average recorded for all of 2009. `

Presentations to the assembly in Belgium also included a reminder that, with pig supplies in Europe rather plentiful while demand has stayed flat, the prices for pigs received by the producer have even decreased despite the fast-rising production costs. Negative margins into 2011 were described by almost every delegate at the meeting. An estimate from Slovenia was that each pig marketed at the end of 2010 meant a loss of €14. Figure 1 shows how British production costs and pig prices have developed since the start of 2008 and their projected path until the middle of 2011.

Among the prognoses for 2011 from various European countries, an examination in Denmark concluded that a loss of €19 per slaughter pig should be expected in the early part of the year and Dutch analysts warned of financial pressures on many units nationally. One of the largest producers in Ireland announced his decision to quit the industry, estimating that a current price of €1.37-1.41 per kilogram for meat pigs compared with costs of production that had reach €1.65-1.70/kg even in the most efficient herds. Speculation in France was that one-third of producers in the Brittany region could be forced out of business before the second half of 2011.

The European Union’s administrative commission has reacted by releasing cereal intervention stocks to ease feed ingredient feed prices and it also has restored subsidies for storing pork until the market improves. At the same time, there is a general expectation in Europe of better pig prices ahead as fewer finishing pigs are marketed because breeding herds have been cutting back on sow numbers. A survey of producer representatives in EU member countries by Britain’s National Pig Association concluded that total EU-27 pork production in 2011 could be down by 800,000 metric tons or about 4%.


According to the British delegation to the reflection day in Belgium, the latest pressures on EU pigmeat prices and producer incomes have been broadly in line with the long-term cyclical pattern of supply and demand, even if exacerbated by the upsurge of the world cereal market again last year. Increases in grain prices up to the end of 2010 were severe, but still fell some way short of those in 2007/08. Further reassurance came in the first grain market review of 2011 issued by the International Grains Council when it said the outlook for northern hemisphere grain crops in 2011/12 appeared generally favorable.


Countries of North and South America that use mainly maize in their pig feeds featured in a production cost comparison presented to this year’s Banff Pork Seminar in Canada by a team from breeding company PIC. Its survey of national feed ingredient prices at the end of 2009 found US/Canadian price levels contrasted markedly with those of Mexico and Chile for corn and soybean meal inputs, as Table 1 shows, with Brazil somewhere between these extremes. But the overall assessment of production costs per live pig from larger and well-managed commercial enterprises still demonstrated almost identical totals for US and Brazilian conditions. Chilean costs came close to Canadian costs, while those in Mexico were marginally higher. Part of the explanation lies in the percentage of total cost represented by feed and the other key factors, the Banff presentation pointed out. Whereas feed in the US and Canada accounts for 65-66% of the overall cost of production, in South America its share typically rises to 74%. Partly attributable to climate, Canadian producers have a smaller portion of their cost in feed, but more in facilities and labour than the US and the South American countries.

From a European perspective the costings scene in pigs also is influenced by legislation. By one calculation, the need to comply with measures relating to animal welfare, the environment and food safety can add more than €15 to the European cost of producing 100 kilograms of carcass weight.

Feed, housing and legislative differences continue to make production costs higher in Europe than in Canada or Brazil, as the latest comparison from the InterPig group of European pig-sector economists has again confirmed. The data relate to 2009 (see Table 2) and demonstrate the return to more affordable cost levels that year after the previous grain price hike of 2007/08.

With the help of InterPig member Robert Hoste from the LEI economics institute in the Netherlands, our Table places the group’s 2009 costings alongside those from previous years and always on the common basis of Euro cents per kilogram of hot carcass weight. The extent of the difference according to hot and cold weights depends on the country, but is usually about 2%.

One of the main indications from the InterPig results in the Table must be that the European countries and their competitors in North and South America have all succeeded in controlling their costs over time, through greater productivity and efficiency. But there is also confirmation of the volatility with which costs can vary from one year to another - as we are being reminded again in 2011.