Troubled pig business leaders put on a brave face
Its perilous predicament is rife with stories of closures, and pig producers on the verge of bankruptcy.
The swine flu scare and dioxin fiasco seemed to heap misfortune on a sector already under pressure.
Recently, EU officials acknowledged that prospects for European pig farms have been “critical” since last autumn.
They said profitability was severely affected by higher feed prices, and Germany’s dioxin tainting scandal early in 2011.
Commission staff warn that the rise in pork exports will ease, but pigmeat consumption within Europe should improve.
It is understandable that some pig farmers are now more concerned about viability than potential or opportunities, said AIB Agri Adviser Pat Butterly at the recent Teagasc Pig Farmers’ Conference.
He said the traditional five-year cycle of high and low pig prices has been compounded by increased volatility in feed prices, which account for 70% of production costs.
This has caused cash flow difficulties over the past year, and acute pain for many farmers who built up extended credit days with feed merchants. But pig farmers have been better than most at building up financial buffers in the good years in anticipation of the lean years, noted Mr Butterly.
Yet for all that, there is hope, and industry representatives were in bullish form at a west Cork event recently.
The O’Donovan Rossa Autumn School theme was “Food for Recovery: Turning the Economic Tide”.
This prompted IFA pig committee chairman Tim Cullinane to dwell on the positive — that his industry is more adaptable to changing markets, if only because it has always been adrift in the market place without the strong EU market support found in other farm enterprises.
“That is the one positive thing,” he said. “The dairy industry will also have to stand on its own two feet soon, that’s something we’ve been doing for years, so it is an advantage from that point of view.”
“We are the one sector that doesn’t get any form of subsidy from Europe, so we’re really depending on the world market and the price of pig meat.
“We’ve come through a pretty serious downturn in the industry over the past year and a half.”
“The two things that affect pig production are the price of grain and the price of pig meat. We all know where the price of grain has been for the last year and a half, It’s up about 40%, and this is impinging seriously on the margins of pig producers, and that has caused major hardship for them in the last 12 months.”
He spoke of expanding international markets. “China is growing rapidly at the moment. The Chinese people traditionally would have consumed cheaper cuts of pig meat, what we would nearly describe here as offal, but as those economies are growing, and people are getting more affluent, they’re actually consuming more expensive cuts of meat.”
In the meantime, what can be done about grain prices? “I don’t think that there’s a lot we can do about grain prices at the moment,” said Cullinane. “There is one thing that is causing concern, though. What has crept into the market in the last number of years is speculation.
“What’s happening is that hedge funds have moved away from financials into commodities such as grain, and it is disturbing because it’s distorting the grain price.
“The other issue is that the price of pig meat hasn’t really moved forward in the last 20 years. You can see where the prices of beef and lamb have increased substantially, so a price increase has to come in pig meat, to compensate for the price inflation of grain.”
Cullinane points the finger at retail groups for keeping pig meat prices low, by systematically using white meats as loss leaders, making 50% discounts commonplace, thereby forcing down prices paid to pig farmers, and cheapening the product in consumers’ eyes.
James Taylor of the Truly Irish brand said that creating value in the eyes of the consumer is crucial for the growth of pig farming.
When the dioxin scandal hit, it exposed many ‘Irish’ brands as foreign imports, which stayed on the shelves while producers of Irish pig meat looked on in dismay.
Previously, 140 Irish pig farmers had got together and were successful in finding markets in Germany, which lifted prices for all Irish pig farmers.
Then, 100 of them formed the “Truly Irish” brand.
It was a communal effort straight out of the co-operative era of the 1950s, with all farmers taking a share in the investment and in the subsequent returns.
It’s surprisingly effective, in a world where the consumer is sometimes suspicious of what larger companies want to sell them, and turns to foods with a clear healthy eating identity.
“It’s the only way forward,” said Taylor. “The value is in the brand. That’s why we don’t even kill pigs. We don’t process pigs. We subcontract our processing, and we subcontract our killing. We don’t need to build a plant. That’s why people feared us at the start, because we take pigs off them.
“ We want to increase pig numbers, make the factories bigger, make the processing plants bigger. There’s no need for us to be looking for €1m grants to pump into a factory that will close in maybe a year.”
Michael McAuliffe, a pig farmer from north Kerry, is the Truly Irish managing director.
“At a wedding or a social gathering of some sort, people would ask me, ‘What do you do?’ and I’d say ‘I produce pork’. They’d say, ‘What have you done to Irish pork? It doesn’t taste like it used to. The quality is so bad.’ I became extremely frustrated, because I knew that I produced a premium product, but between me producing it and it being processed and sold in a shop, the quality got lost along the way.
“So I decided that there was only one way out of this. I thought that we need to get farmers together and create our own brand.” This was achieved, without recourse to banks or subsidies.
MAURICE O’BRIEN has a pig farm near Mitchelstown, Co Cork.
He shows a chart that paints a clear picture of where the pig industry is today.
“In 2006, the feed costs alone, excluding all other costs, to produce a kilo of pig meat were 79c. In 2011, they are 114c. We have a docket from November 1989 showing a sale price of 190c/kilo, whereas 22 years later, the average is about 150c/kilo.”
O’Brien laments the closing of the Galtee plant in Mitchelstown as a retrograde step, because it was an important infrastructural link in the supply chain to large markets abroad, and a lifeblood source for pig farmers in the area.
“When the Mitchelstown plant was knocked, it had a US sales licence. It was an extremely modern plant, and it was knocked with the intention of putting apartments and shops there.
“That plant would cost €100 million to replace today, so it simply won’t be built.”
How is a pig producer like Maurice O’Brien surviving in this bleak world, when so many around him are closing?
“Well, we can’t get out, so all that’s left is hard work. You’ve to get the best out of the feed, to feed the pig at the point where they need it most.
“New computer programs allow you to apply certain diets that change as the pig gets older. It’s a matter of cutting costs from the feeding point of view, using the latest technology available.”
JIM O’CONNOR of Ireland’s largest pig meat company, Rosderra Irish Meats Group, has worked his way through virtually all levels of the meat industry in Ireland. He is, therefore, in a good position to oversee how things have evolved and future possibilities.
“I worked with all the meats over the last 26 years, and I finished up in pig meat,” said O’Connor. “I got into pig meat and I liked it. I went over into beef, and it seemed to be a totally different kind of industry.
“I actually think that the overall health of the pig meat industry is pretty good. We’re in a growth surge at the moment, pig production is up. We’re actually slaughtering more animals. It’s given us economies of scale that we didn’t have years ago, and allowed us to compete better in an international market.
“We’re seen very much as a supplier of artisan-like meat products, but we have good volumes of those products now, and we’re getting better at producing for those markets.”
What about the identity of the Irish pork product? Is it being sold as a commodity into a big global pool of pork? “The ‘Irishness’ of the pork in the international markets is down to plant identification numbers. If we go to China or Japan and they see ‘EC356’ on the boxes, they automatically know where that comes from. When our company was changing our name from Glanbia to Rosderra Irish Meats, we had to go through rigorous controls to keep the same numbers, because we saw the value of those numbers on international markets.”
The product the company sells goes to meat processors overseas, not consumers. How ‘Irish’ the product seems when it hits the shops is outside his control and, ultimately, his concern. He sees the way forward as gearing up the industry and self-reliance: “We need to be more self-sufficient in terms of producing grain. We need a bigger grain crop in Ireland. There’s a huge link between the milling, the farmer, the likes of us, and the processor. That’s the good thing about the Irish pork industry, it’s 100% Irish owned. The money keeps circulating back into rural communities.”
