Pig farmers are subject to the ‘pig cycle’, a key element of agricultural economics. It goes something like this: pigs are unsubsidised – the government doesn’t ‘help’ producers by buying surpluses or fixing prices in any other way, for example, so, when there’s not much pork around prices are good – good prices attract people into the industry, and so more pigs become available on the market which means that customers can shop around for the cheapest, which drives pigmeat prices down – lower prices mean that producers make less money from their pigs, and in an industry with very low margins (difference between the cost of producing something and how much you are paid for it) low prices easily force people to sell up – which in turn leads to reduced supply and therefore increasing prices which again attract people back into pigs. Classically this cycle has peaks and troughs every three to five years. Those that can weather the troughs are the farm businesses that will survive long term, and longer term survival means one is more likely to make money out of pigs. There are three ways of achieving this ‘cycle-proof’ business: large numbers; specialist breeding; small-scale marketing or large scale ‘integration’. Let’s consider each in turn.

The larger your farm the more likely you are to survive the troughs of the pig cycle, as low margins will be spread over large numbers, and large profits well invested will help the business survive the loss making phases that wouldn’t be possible with fewer animals. Large numbers mean that capital investments are spread wider and are therefore lower per animal sold, which increase the margin per animal sold, particularly important when pork prices are depressed. Large numbers (herds of 500 sows and more) also mean better buying power and therefore cheaper per pig inputs (labour, feed, medicines, equipment, straw and so on). You are more likely to stay afloat with lots of pigs, as long as you invest profits wisely against the lean times.

The guys that breed replacement breeding pigs will always make money, supplying extra stock when people are doing well, and having stock to replace those that go out of business – all the time being able to sell breeding animals at a premium. During a slump in the late eighties / early nineties I went bust over a four year period by simply supplying pigmeat into a depressed market from under-performing sows, whilst my partner, working alongside with a ‘multiplication’ (sow breeding) unit broke even in eighteen months.

If you have a small scale operation, then marketing your own product is the key to survival and profit – you control your product, can butcher / process and supply customers at a premium price, and will be able to do so when conventional markets are paying peanuts. By tapping into a particular ‘niche’ (rare breed pork for example), playing the ‘local’ card, and using Farmers Markets, the small producer can command the kind of premium prices that enable him to survive where others will fail. Equally, the large (thousands of sows) integrators control all aspects of production, from ‘field to fork’ – they have maintenance departments, own their own feed mills and transport fleets, and have slaughter facilities in their business portfolio – they will always be able to weather the storm.

If you’re outside of this bunch of producers (and fewer and fewer farmers are), then you’ll never make money in this business: low margins per pig and a volatile market will see to that. The first time we had pigs for sale from our restocked unit, there was no market for our pigs anywhere in the country, so we had to feed them for another week, and then accept a price of £1.22 per kilo knowing that our cost of production is nearer £1.50! Such is the reality of life in the pig game!



Source by Andrew Carter