Producers urged to stay cool
Advice from the Danish industry's national organisation is that feed costs and market prices should balance out more evenly next year.
Danish pig producers are being advised by their national industry organisation that 2008 should be a better year for them financially, even if the economic situation at the end of 2007 has been the worst for 30 years because of soaring feed costs.
A note issued by Nicolaj Nørgaard, deputy director of Copenhagen-based Danske SvineProduktion (Danish Pig Production), said the organisation expected a better balance between feed costs and market prices for the pig sector in Denmark in 2008. However, it also warned that many producers nationally could be tempted to leave the industry before then rather than continuing to lose money.
The extent of their financial losses in the last part of 2007 was illustrated by an October calculation that the market price for pigs had hardly changed over a period during which the price of feed grains had almost doubled. With negative profitability affecting the finishing of market pigs, the price of weaners was slipping so that sow herds were also loss-making.
"This situation is very serious for the whole Danish pig industry," Mr Nørgaard commented. Some units were in the fortunate position of being able to use carry-over grain stocks until January, thus alleviating some of the current losses. But many producers were in the position of needing to draw on credit facilities until the market balance could be restored.
"It is my impression that many of our producers are well prepared for such a situation, with a reasonable level of capital asset value, an efficient production system and the real prospect of positive support from their financial partners. I am also confident that our industry's financial backers will also remain calm and be prepared to show patience through the current difficulties."
He also urged unit operators in Denmark to remain calm and to not take any precipitate action. "Once a decision has been made to close down production," he remarked, "re-starting if things improved would be a much more difficult proposition."