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
Pig Market Outlook Another year to forget? Stephen Howarth, AHDB Pork 15 February 2016
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 170 160 p/kg (deadweight) 150 140 130 120 DAPP APP SPP 110 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16
Pig meat production rising for over a decade 950 900 850 000 tonnes 800 750 700 Pork 650 600 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Chart: UK annual pig meat production Source: Defra
and last year pork overtook beef 950 900 850 000 tonnes 800 750 700 Pork Beef/veal 650 600 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Chart: UK annual pig meat and beef/veal production Source: Defra
UK premium has decreased lately but still historically high p/kg dw 180 170 160 150 140 130 120 110 100 90 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
Small rise in both imports and exports last year 1,000 Imports Exports 300 000 tonnes (product weight) 900 800 700 600 500 400 300 200 100 Offal Processed Sausages Bacon Pork Offal Processed Sausages Bacon Pork Offal Processed Sausages Bacon Pork Offal Processed Sausages Bacon Pork 250 200 150 100 50 000 tonnes (product weight) 0 2014 2015 2014 2015 0 Chart: UK pig meat imports and exports (product weight) Source: HMRC/AHDB
but lower import prices mean domestic prices have to compete p/kg 230 220 210 200 190 180 170 160 150 2013 2014 2015 140 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chart: Unit price of UK pork imports Source: HMRC
Pig meat sales falling despite lower prices 0-2 -4 % change -6-8 -10-12 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
Production costs at 5-year low but pig prices even lower 180 170 Average COP DAPP/APP 160 150 p per kg 140 130 120 110 Current price Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 2014 2015 Chart: Estimated cost of pig production and average GB pig price (DAPP/APP) Source: AHDB Market Intelligence
Defra reported a stable breeding herd in year to June 1000 900 800 700 600 Maiden gilts Other sows Gilts in pig Sows in pig 500 000 head 400 300 200 100 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Chart: UK pig breeding herd size Source: Defra
Productivity gains driving higher UK slaughterings +6 % change y-o-y +5 +4 +3 +2 +1 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year 2014 2015 2016 2017 Chart: Actual and forecast year-on-year change in UK clean pig slaughterings Source: Defra(Actual), AHDB Market Intelligence (Forecasts)
More pork on UK market in 2016 - more price pressure 000 tonnes change y-o-y +60 +50 +40 +30 2014 2015 2016 +20 +10 0 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)
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%
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%
GB pig price usually closely related to exchange rate Pig price: p/kg 180 170 160 150 140 130 120 110 100 90 80 70 Deseasonalised pig price Euro exchange rate 1.00 0.95 0.90 0.85 0.80 0.75 0.70 0.65 0.60 0.55 Exchange rate: / 60 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 0.50 Chart: Deseasonalised GB pig price and : exchange rate Source: AHDB, European Central Bank
Feed prices still low but risk they may rise again 220 /tonne 200 Nearby contract May-16 contract Nov-16 contract 180 160 140 120 100 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
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
Any Questions?
Reducing Production Costs AHDB Webinar 15 th Feb, 2016 Ciarán Carroll Head, Pig Development Department, Teagasc, Moorepark
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
No control over market conditions or future supply of feed ingredients Focus on what you can control..inside the farm gate!
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
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
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)
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)
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
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)
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
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
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)
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
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 2.30 10 extra empty days per litter = 27,000 per year on a 500 sow herd
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?
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
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
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?
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?
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)
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%
Other Things to Consider Get involved in Discussion Groups Adopt Research Findings
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
Any Questions
Jonathan Eckley Export Trade Development Manager AHDB Exports
Pig meat exports Optimise returns across the supply chain Adding value Sell product to most appropriate market Market access
Pig meat exports 2002-2015(e) 300,000 250,000 2014/15 Pork +2.5% Offal +30.7% 200,000 150,000 100,000 Offal Processed Bacon Sausages Total Pork 50,000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 e
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
UK pork exports Jan to Nov 2015 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 -
UK pig offal exports Jan to Nov 2015 40,000 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
China Population - 1.4 billion Economic growth 7.0% Middle-class population 300 million 200 million online shoppers Added value
A selection of priority markets Australia Taiwan Vietnam Korea Mexico
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
Developing Export Markets Collaborates Helps maximise global opportunities
Thank You Jonathan Eckley AHDB Exports jonathan.eckley@ahdb.rg.uk
Any Questions
Pulled Pork
Thank you Recording and presentation will be posted on the website. All feedback welcome Pork.ahdb.org.uk