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Danish Industry Facing Difficult Economic Times

by 5m Editor
2 January 2009, at 12:00am

Danish pig producers could see a turn around from the losses of the last two years with profits in 2009, writes ThePigSite senior editor Chris Harris.

The turn around is expected despite the present difficulties forced on the industry by the global credit crisis.

According to Fin Udesen, the economic department manager from the Danish Meat Association the Danish producer prices including bonus payments should reach DKK12 (Danish Krone) per kilo next year. This follows prices of DKK10.20 this year and DKK9.07 this year.

Mr Udesen said that last year producers were seeing a loss of DKK108 per weaner pig. This year the loss has been DKK59 per weaner but next year, he said he hoped the operating result would be positive at DKK16 per weaner.

The main cause of the losses has been the high input costs over the last two years.

Mr Udesen said that Danish production costs, just as most in Europe, were much higher than those in Brazil, the USA and Canada.

In Europe, figures for June this year show that Sweden has the highest costs at €1.88 per kg, with the Germany following at €1.83 per kg and the UK at €1.80 per kg. Denmark's costs were €1.67 on a similar level to the Netherlands at €1.65, with France and Spain in between at €1.71 and €1.72.

However, production costs for the USA, Brazil and Canada are considerably lower at €1.13, €1.16 and €1.23 respectively.

Cost v Price (DKK per kg Carcase)

June 2008 Production Cost

"There has been a big gap between costs and prices paid over the last two years," he said.

"The Danish industry has also some very big problems having to compete with Brazil, the USA and Canada.

"But one of the reasons we are strong in Denmark, is because we have such good production."

He said that the Danish industry has the highest production rates in the world, with average litter sizes of 13.8 piglets and the best 25 per cent of the producers with 145.4 piglets per litter.

"This allows us to produce pigs of between 80kg and 81kg for slaughter at a reasonable cost of production," he said.

However, he said that the number of sows in the Danish herd was back to what it was 10 years ago and the trend for dropping numbers is reflected in all the herds across Europe.

Sow Numbers in Denmark ('000)

One of the major problems facing the industry at the present time is the loss of investment money to push the industry forward.

Mr Udesen said that $1,000 billion had vanished from the money markets and this had produced a complete loss of credit facilities.

"It is a lot tougher now than it was earlier in the year," he said.

"There are differences between banks as some are under more pressure than others."

He said that some banks in Denmark have not been allowed to take on new customers and this had restricted cash flow for the industry.

"We hope there will be a better cash flow in 2009," he said.

He said that against this economic backcloth, the European pig industry is seeing consumption falling.

"Pork consumption will be down by about two per cent across the whole of Europe in 2009," Mr Udesen said.

However, he added that it was also difficult to predict whether it would be precisely two, three or four per cent as prices could also be lower.

He added that with the American dollar increasing in value, it was good news for the Danish pig meat industry because it would make them more competitive internationally.

And he anticipated that Denmark could make export inroads in Japan and Asia.

In the long run, however, he added that the forecast is for pork consumption to rise in general.

The general economic malaise will see a slow down in production - possibly reduced by four or five per cent and the recovery is expected to be slow with a large number of producers leaving the industry.

The number that could leave from the Danish industry could be as much as 10-15 per cent, Mr Udesen said, all largely due to the change in EU legislation coming into effect in 2013, when stalls and tethers will be banned across Europe. In all up to 6,000 producers could leave the industry.

The farms with less than 500 sows will just disappear, he said leaving only the larger producers in the market.

"You can produce pigs cheaper if you have farms of 1,000 or 2,000 sows," he said.

Since 1975 the number of producers had fall in Denmark from around 80,000 to just a few thousand.

Pig Producers in Denmark

He said that compared to 2007 figures, pig production could be down by as much as 1 million head, in Denmark.

Pig Production in Denmark

However, one bright part of the trade will be a rise in the export of weaners to Germany. This year Denmark exported 5.2 million weaners to Germany.

He added that the Danish industry has a strong base on which to build and with relatively new facilities on the farms across the country the industry can become more efficient particularly as more young people are entering the industry and taking on the management of the larger operations.

Alongside growing sizes of piglet litters and new and larger facilities, the Danish industry is also tackling the contentious issue of slurry disposal with new initiatives that address the environmental issues.

And the bonus for the farmers is that there is now money to be made in slurry for use as fertiliser.

The industry's strong base is also supported by the close cooperation between the producer and the processor, with integration between the producers and their cooperative slaughterhouse.


December 2008