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Worst conditions for 30 years, but some hope ahead, say Danes

by 5m Editor
5 October 2007, at 7:51am

DENMARK - Soaring feed prices are causing Danish pig producers heavy losses, says the Danish Pig Production (DPP). The current economic situation is the worst for 30 years, although DPP is calling on its members to remain calm and ride the storm.

During the past few months feed prices have almost doubled, yet there has been little change in the market price for pigs. And next week, prices for weaners are expected to fall by DKK 16 per pig - a consequence of escalating feed costs on the profitability of producing finished pigs.

Estimates also suggest that finished pig prices will fall by DKK 0.20 per kg, making the ratio between feed costs and the market return the poorest for almost since the mid 1970's.

However, some producers will be able to carry-over grain stocks until January, and this may alleviate some of the current losses.

"I fear, however, that the situation may tempt many producers to leave the industry, rather than continue to lose money," said Nicolaj Nørgaard, DPP's Deputy Director.

Phenomenon
The rapid increase in feed prices is an international phenomenon, mainly caused by poor harvests in key grain producing countries, as well as increasing demand for crops for biofuel production. At the same time, there is a relatively large supply of pigmeat available globally. It's a worldwide issue and the entire European pig sector is suffering

However, DPP believes the outlook for 2008 may be more promising.

"The important thing now is to stay cool. We expect a better balance between feed costs and market prices during 2008," said Mr Nørgaard. And, he is urging producers to stick with pigs, because once a decision has been made to close down production, restarting would be a much more difficult.

DPP says that credit facilities will continue to be extremely important for pig producers for the foreseeable future.

"Depending on when the balance of the market is re-established, a number of pig farmers will have to draw on their credit facilities to some degree. Many of our members are well prepared for such a situation, with a reasonable level of capital asset value, an efficient production system and the real prospect of positive support from their financial partners," explained said Mr Nørgaard.

DPP remains confident in Denmark's financial backers, although is calling for patience and understanding to help producers, and the rest of the industry ride out the storm.

5m Editor