Future contributions of the pig industry to the Irish economy are at risk due to ongoing competitiveness challenges, a new report has warned.
Pig industry activity employs 4,098 people and supports a further 4,036 jobs, while annually contributing nearly €1.5bn to Ireland’s economy, according to the report prepared by PwC and commissioned by Kiernan Milling.
“The pig industry within Ireland, as across Europe, is facing significant competitive challenges due to a range of factors including rising feed and energy costs and reduced pigmeat prices,” the report reads.
“In Ireland, these factors are creating an existential crisis due to a perfect storm from the combined effects of Brexit, Covid-19, and the war in Ukraine.
“The combined effect of these factors is negatively impacting pig farmer margins and operating profits, with many accumulating month-on-month losses.”
The PwC report highlights that despite there being just 230 pig farmers in Ireland, pig farmers directly generate over €500m in annual output and are the second-largest source of meat and livestock exports.
Total pigmeat exports, including value-added pork products, were worth €932m in 2021.
However, despite this, pig farmers have faced “unprecedent market challenges” over the past year, with a combination of falling EU pigmeat prices since the middle of June 2021, and rising feed and energy costs, the report explains.
“Outbreaks of African swine fever in major exporting countries, including Belgium and Germany, have further affected EU export levels, with pigmeat supply now exceeding demand in Europe.
“Chinese demand, which had previously underpinned the EU pigmeat export market, has been slow to recover due to ongoing Covid-19 challenges and AFS concerns.”
Along with these factors, the Ukraine war has led to increased energy costs across Europe, and also, key components of pig feed including barley, wheat, maize, and soya have also doubled in price since last summer, according to the PwC analysis.
Feed costs amount to around 75% of pig farmer overheads, the report noted.
“Feed costs have risen 42% since September 2021. Irish pig farmers already faced higher feed costs compared to their EU compatriots, due to additional shipping fees.
“Covid-19 has created labour shortages, contributing to low slaughter rates in the industry with knock-on impacts for pig farmers who must now feed their herds for longer than normal.
“In November 2021 EU pigmeat prices fell to ~€1.28c/kg, reminiscent of prices last seen in April 2016.
“Irish pigmeat prices fell to ~€1.42 c/kg in March 2022, at a time when pig farmers required prices of €1.90 to break-even.” The report said that pig farmers operating a 600-sow farm are forecast to incur average monthly losses of €44,000 with the industry facing a potential loss of €127m in 2022.
“The enduring nature of this challenge has seen 10% of pig farmers exit the sector with a further 20% at risk, putting future economic contributions at risk if the prevailing competitiveness challenge does not improve,” the report states.
While the report recognises that the sector has welcomed Government support provided to date, this support “has the potential to mitigate 16% of total losses expected to be incurred by pig farmers in 2022”.
The €7m Pig Exceptional Payment Scheme and the recent announcement of the €13m EU exceptional aid adjustment package for pig farmers are “both important acknowledgements by the Government of the unprecedented challenges and international factors affecting the sector”.
“However, the respective payments of €20,000 [exceptional payment scheme] and €70,000 (EU adjustment aid) per farmer are overshadowed by the substantial monthly losses of €50,000-€62,000 [per 600-sow farm] being experienced by pig farmers between January to May of this year,” the report said.
“Pig farmers are also still awaiting clarity on the form and timing of the €70,000 EU adjustment aid payment.
“Pig farmers have been advised to avail of Government-assisted lending facilities to mitigate cashflow difficulties.
“However, along with challenges in receiving approval for such loans, increasing levels of debt amongst pig farmers and future repayment costs has the potential to hamper the financial recovery of those in the sector.” The report said that further funding at scale will be required to “help mitigate the financial losses that are continuing to accrue within the industry”.
Irish Farmers’ Association pigs committee chairman Roy Gallie has said the report highlights a sector “that is on the brink of collapse”.
“The PwC analysis confirms just how dire a position the pig sector is in at the moment,” he said. “The month of May showed no let-up with the average pig farmer losing €44 for every pig they sold last month.”
As pig farmers descended on a number of processors’ sites this week in the latest of a series of protests in recent months, Mr Gallie told the Irish Examiner that there is little hope in sight that pig farmers will break even.
He said there won’t be “some sort of understanding and a solution” until there is full “clarity and transparency” in the food chain.
“You can’t have a food chain with one or two links haemorrhaging money all over the place - it just doesn’t work,” he said.
Noting that this isn’t a “normal supply and demand situation”, in which the market would eventually “rectify itself”, he described it as being “quite difficult, because it’s quite unprecedented, and the scale of it is unprecedented”.
“And the reaction from it is going to be very difficult, to make sure that you’ve all got enough meat on your shelves to give you something to eat.”
He said farmers are asking for help from the processors and retailers.
The report states the EU State Aid Temporary Framework, in the context of Covid-19, or a pig stability fund, could provide a template for sector support at scale.
In March this year, the IFA, Meat Industry Ireland, and the Irish Grain and Feed Association jointly proposed the establishment of a pig stability fund.
This joint proposal was submitted to the Government for a €100m State and pig farmer-funded rescue plan to protect both the short and long-term viability of the pig farming sector.
