AHDB PORK WEBINAR: Getting through tough times: coping with low prices

Transcription

1 AHDB PORK WEBINAR: Getting through tough times: coping with low prices Presenting: Stephen Howarth, AHDB, Market Specialist Manager Ciaran Carroll, Teagasc, Head, Pig Development Dept Jonathan Eckley, AHDB, Export Trade Development Manager

2 Pig Market Outlook Another year to forget? Stephen Howarth, AHDB Pork 15 February 2016

3 Chart: GB average pig prices - DAPP, APP and SPP (all EU-spec) Source: AHDB Market Intelligence GB finished pig prices falling for over two years p/kg (deadweight) DAPP APP SPP 110 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16

4 Pig meat production rising for over a decade tonnes Pork Chart: UK annual pig meat production Source: Defra

5 and last year pork overtook beef tonnes Pork Beef/veal Chart: UK annual pig meat and beef/veal production Source: Defra

6 UK premium has decreased lately but still historically high p/kg dw UK EU 80 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 Chart: UK and EU pig reference prices (grade E) Source: EU Commission

7 Small rise in both imports and exports last year 1,000 Imports Exports tonnes (product weight) Offal Processed Sausages Bacon Pork Offal Processed Sausages Bacon Pork Offal Processed Sausages Bacon Pork Offal Processed Sausages Bacon Pork tonnes (product weight) Chart: UK pig meat imports and exports (product weight) Source: HMRC/AHDB

8 but lower import prices mean domestic prices have to compete p/kg Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chart: Unit price of UK pork imports Source: HMRC

9 Pig meat sales falling despite lower prices % change Value Volume Price Pork Bacon Sausages Sliced Cooked Meats (Ham/Pork) Chart: Year-on-year change in retail purchases of selected pig meat products, 12 weeks ended 3 Jan 2016 Source: Kantar Worldpanel

10 Production costs at 5-year low but pig prices even lower Average COP DAPP/APP p per kg Current price Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Chart: Estimated cost of pig production and average GB pig price (DAPP/APP) Source: AHDB Market Intelligence

11 Defra reported a stable breeding herd in year to June Maiden gilts Other sows Gilts in pig Sows in pig head Chart: UK pig breeding herd size Source: Defra

12 Productivity gains driving higher UK slaughterings +6 % change y-o-y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Chart: Actual and forecast year-on-year change in UK clean pig slaughterings Source: Defra(Actual), AHDB Market Intelligence (Forecasts)

13 More pork on UK market in more price pressure 000 tonnes change y-o-y Production Imports Exports Supplies for consumption Chart: Actual and forecast year-on-year change in UK pig meat supplies Source: Defra, HMRC, AHDB MI (actual), AHDB MI (forecasts)

14 Chart: Year-on-year change in EU pig and breeding sow numbers, June 2014-June 2015 (Dec 2014-Dec 2015 in green) Source: Eurostat EU breeding herd starting to decline in June 8% 4% 0% -4% -8% -12% Total pigs Breeding sows -16%

15 Chart: Year-on-year change in EU pig and breeding sow numbers, June 2014-June 2015 (Dec 2014-Dec 2015 in green) Source: Eurostat but bigger fall likely by December based on early results 8% 4% 0% -4% -8% -12% Total pigs Breeding sows -16%

16 GB pig price usually closely related to exchange rate Pig price: p/kg Deseasonalised pig price Euro exchange rate Exchange rate: / Chart: Deseasonalised GB pig price and : exchange rate Source: AHDB, European Central Bank

17 Feed prices still low but risk they may rise again 220 /tonne 200 Nearby contract May-16 contract Nov-16 contract Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Chart: UK LIFFE feed wheat futures nearby, May-16 and Nov-16 contract prices Source: HGCA

18 In summary Rising supply and subdued demand mean prices low in UK, EU and globally in 2015 Market conditions similar in 2016, so another difficult year in store Possibility of EU-led price recovery later in the year but pace and scale uncertain

19 Any Questions?

20 Reducing Production Costs AHDB Webinar 15 th Feb, 2016 Ciarán Carroll Head, Pig Development Department, Teagasc, Moorepark

21 Weathering the Storm Moderate feed price drops (4.5%) Declining pig price (11%) Very low margin-over-feed: 37 cent (28p) / kg dwt Minimum required margin-over-feed: 50 cent (39p) Estimated losses of over 36 ( 28) million in 2015

22 No control over market conditions or future supply of feed ingredients Focus on what you can control..inside the farm gate!

23 Analysis of Accurate Records PigSys, PigChamp, Agrosoft Benchmark Highlight problems, quantify production costs 43% do not know true production costs Saving of 53,000 ( 40,000) on 500 sow herd

24 Feed Costs 70% of production costs One teaspoon feed wasted/pig/year = 5% deterioration in FCE A 0.1 unit improvement in finisher Feed Conversion Efficiency (FCE) is worth 1.55 per pig or 2p per kg dwt

25 Feeding Strategies - Finishers 60% of feed costs Reduce wastage: Repair/replace broken feeders (12t/feeder/year) Adjust feeders regularly Proper stocking rates 4% reduction in feed wasted worth 1.55 per pig ( 19,000 for 500 sow herd)

26 Two finisher diets? High energy density diet from 32kg, lower density diet from about 60 kg 12 differential between a high and lower spec diet worth 0.64 per pig ( 8,000 per annum for a 500 sow herd)

27 Increase Slaughter Weights? Additional costs: feed + 10p/kg non-feed costs per kg increase in live weight Sale weight: 95 kg to 105; FCE increase 0.05 Additional kg carc: total cost 0.94/kg dwt Pig price of 1.09/kg dwt: net profit of 0.15/Kg dwt = 1.23 = 16,000 p.a. on 500 sow herd

28 Split Sex Selling? Up to ~85Kg LW, gilts and boars tend to have similar a FCE Each 10kg increment in slaughter weight above this weight, gilt FCE deteriorates faster Improvement in FCE of 0.1 at ave sale weight 104kg (e.g. gilts 99kg and boars 109kg) = 1.55 per pig = 19,000 (500 sow unit)

29 Feeding Strategies Creep/Link Over feeding? Use only a standard creep Feed a link diet instead? Work out a feed budget: target 3 kg creep and 5 kg link

30 Feeding Strategies Weaner Feed Feeding expensive weaner feed too long? Switch to a first stage finisher ration at 32 kg? Save over 1.55 per pig 19,000 per year on a 500 sow herd

31 Feeding Strategies Net Energy Using Digestible Energy (DE) to formulate diets? Net Energy (NE): more accurate feeding value Especially for high fibre ingredients Potential saving 1.55 per tonne ( 5,500 p.a. on a 500 sow herd)

32 Sow & Gilt Management Gilt pool: excess number of gilts? A gilt will consume about 210 kg feed Each excess/culled gilt: feed cost of 47 Target gilt pool of 12% of herd size

33 Sow & Gilt Management continued Sow Culling: remove non-productive sows! Cull sow income 2% of total sales income Continually assess sow performance Cull immediately, don t try to restore condition (FCE 7:1) Empty day costs extra empty days per litter = 27,000 per year on a 500 sow herd

34 Non-Feed Costs Labour Ave labour costs are now at 9-17p per kg dwt Does reduced labour = reduced productivity? Review washing policy e.g. Summer washing only? Substitute a full time person for casual?

35 Non-Feed Costs Loan Repayments Know your debt: banks, merchants, contractors, service providers Cash flow analysis: Establishes current position Identifies need for restructuring and amount involved Can assess long term viability

36 Loan Repayments continued Accurate records essential!! Combine your production performance with a sensitivity analysis highlights areas of greatest financial impact Where necessary meet your bank manager

37 Meeting the Bank Manager Take time to prepare! set of accounts, herd performance analysis and cash flow Gather relevant information: current market for pig meat and feed market indications for the months ahead Can you agree a moratorium on repayments? Interest only option for short period?

38 Meeting the Bank Manager continued... Extension to overdraft facility? If monthly losses are significant use a bridging loan rather than overdraft facility? Extend loan period to reduce monthly repayments? Amalgamate some existing loans to a single loan package? What s the cost?

39 Non-Feed Costs continued. Environmental/Manure Do you charge for your slurry? Charge or split costs with customer farmers? Pig manure has doubled in value ( 23 per 1000 gallons at 4.3% dry matter)

40 Non-Feed Costs Energy what s your energy bill? Cheap rate / night rate options? Replace tungsten bulbs with T5 or T8 fluorescent bulbs Heat Pads = 20% of electricity Check controllers and time of use Ventilation: are heat and ventilation working against each other? Clean dirty fans: can reduce energy use 20%

41 Other Things to Consider Get involved in Discussion Groups Adopt Research Findings

42 Summary Positive attitude Focus inside the farm gate Measure performance / benchmark Know your debt Identify focus areas for your farm Draw up plan.implement it! Monitor progress Close the gap

43 Any Questions

44 Jonathan Eckley Export Trade Development Manager AHDB Exports

45 Pig meat exports Optimise returns across the supply chain Adding value Sell product to most appropriate market Market access

46 Pig meat exports (e) 300, , /15 Pork +2.5% Offal +30.7% 200, , ,000 Offal Processed Bacon Sausages Total Pork 50, e

47 UK pig meat exports 28% of UK pork is exported 1/3 of UK exports shipped to Third Countries Asia focus - competitive market Lower world pork prices but rising import demand and trade Demand for pork with high welfare and environmental credentials

48 UK pork exports Jan to Nov ,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 -

49 UK pig offal exports Jan to Nov ,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Greater China Netherlands Denmark Philippines Ireland Korea, South Cote d Ivoire

50 China Population billion Economic growth 7.0% Middle-class population 300 million 200 million online shoppers Added value

51 A selection of priority markets Australia Taiwan Vietnam Korea Mexico

52 Key to export success Product quality Quality - Food safety Brand - Reputation Government relations In-Market Embassies (UKTI) Understand the culture History - Respect - Trust Long-term commitment

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54 Developing Export Markets Collaborates Helps maximise global opportunities

55 Thank You Jonathan Eckley AHDB Exports

56 Any Questions

57 Pulled Pork

58 Thank you Recording and presentation will be posted on the website. All feedback welcome Pork.ahdb.org.uk