The English pig industry - Environment, Food and Rural Affairs Committee Contents


Memorandum submitted by Laurence Gould Partnership Limited (Pigs 10)

1.  SUMMARY

  1.1  Budgets were prepared for an organic pig breeding and finishing system to provide a basis for considering the options for survival under the current market conditions.

  1.2  The budgets were based upon a 300 sow breeding herd selling organic finished pigs certified by the Soil Association.

  1.3  Organic production has been encouraged by DEFRA in recent years.

  1.4  The two significant problems faced by enterprises in this sector are:

    —  Significant increase in organic feed price—37% in the last 12 months.

    —  Dramatic reduction in demand for organic pork—assume as a result of rapid change in market with consumers moving away from premium products with less money to spend.

  1.5  Potentially a move to conventional free range pig production could allow enterprises to continue.

  1.6  To allow this to happen rapidly it is necessary to be able to move to the conventional free range system without the land losing its organic status. This will allow organic pig enterprises to adapt to the current market conditions. The organic regulations currently do not allow this and in order for this to happen a derogation would need to be granted by DEFRA. The alternatives are to lose significant amounts of money or to cease production.

2.  INTRODUCTION

  2.1  I am a director of Laurence Gould Partnership Limited based in our South West office. Laurence Gould are independent farm management advisors established for over 40 years working mainly for farmers assisting with the development and profitability of their businesses.

  2.2  I have been asked to prepare budgets and comment on ways forward for an organic pig enterprise. I have used this as a basis to consider options for the future and the problems facing organic pig producers.

  2.3  Budgets were prepared for a system based upon 300 breeding sows with finished pigs sold at approximately 75kg deadweight to Soil Association standards.

  2.4  Outdoor organic pig enterprises form part of an organic arable rotation. A 300 sow unit typically utilises between 25 to 40 hectares rotated annually.

3.  CURRENT POSITION AND STATE OF ORGANIC PIG INDUSTRY

  3.1  The business investigated has been profitable and had the benefit of a fixed price feed contract to 31 August 2008.

  3.2  The pigs were being sold at 240p per kg deadweight through to the start of September 2008.

  3.3  Feed prices have increased rapidly in the last 12 months with a shortage of supplies particularly in the organic sector. From 1 September 2008 the change in feed price will increase the forecast cost of production by 52.7p/kg deadweight (£189,830 per annum).

  3.4  The budget for the year ending 30 September 2009 shows the breakeven price for organic pigs sold to be 270.7p kg deadweight.

  3.5  At the end of July 2008 it was considered that there was scope for the finished organic price to rise to cover the increased feed costs and return a small profit.

  3.6  In early August it became clear that the organic pig price was not going to increase from the 240p per kg deadweight in the short term.

  3.7  On the 2 September 2008 the enterprise was told that their organic pigs were not wanted and that the price would be 140p per kg deadweight with immediate affect.

  3.8  At 140p per kg deadweight continuing to feed organically would result in a forecast loss of 130.7p per kg deadweight equivalent to £470,520 per annum.

  3.9  There will be situations where producers currently have sale contracts at above breakeven prices but these are expected to reduce.

  3.10  Clearly the significant increase in feed costs coupled with the rapid drop in demand has caused a major financial problem requiring rapid action to rectify.

4.  OPTIONS FOR THE FUTURE

  4.1  Options for the future development include:

    —  finding a replacement organic market;

    —  producing conventional free range pigs (non-organic); and

    —  ceasing production.

  4.2  Demand for organic production appears to have dropped dramatically and finding a replacement market for 90 pigs per week is not considered to be possible in the short term.

  4.3  Producing conventional free range pigs (non-organic) is considered to be the practical way forward in the current market. This is estimated to reduce the breakeven price from 270.7p per kg deadweight to 153.9p per kg deadweight. This option would have the advantage of continuing the enterprise at a near breakeven price and providing an opportunity to convert back to organic production at a later date (assuming that demand for organic pigs returns in the future).

  4.4  The enterprise has been built up over a number of years and stopping the enterprise is considered to be a waste of a potential opportunity for the future. To stop this enterprise would take approximately four to eight months depending upon opportunities to sell weaners. Breeding sows are likely to be culled and staff would be made redundant. Once stopped it is unlikely that this enterprise would be restarted (if organic demand increased) because of high initial setup costs and the time delay between setup and selling pigs.

5.  THE WAY FORWARD

  5.1  In order to progress it is important to be able to react rapidly to the current market conditions and convert to conventional free range production quickly.

  5.2  Currently the Soil Association have suggested that the following two potential options are available:

    —  Feeding the growing and finishing pigs conventionally with a limit of 120 days on organic land. This is not considered to be a solution with too short a time scale to be practical.

    —  Removing the land used for pigs from organic production creates a problem in that the enterprise is part of an arable rotation. Taking land out of organic production would then necessitate a two year conversion period back to organic after the pigs were rotated on. The crops grown in this period would not be organic (for which there is currently a very high demand). This could also lead to problems in the post harvest handling and storage of grain (keeping crops separate). There would be issues with the Organic Entry Level Scheme on the land. This is not considered to be a practical solution at this stage.

  5.3  Allowing conventional free range pig production on organic land would provide a practical solution to allow the continuation of this enterprise. Currently the organic regulations do not allow this. In order for this to be allowed it is understood that a derogation would be needed from DEFRA.

6.  CONCLUSION

  6.1  The only practical way for the organic pig enterprise investigated to continue is for DEFRA to grant a derogation to allow the use of organic land for conventional free range pig production until market conditions change significantly.

Mark Shepheard

Director

September 2008





 
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