Signals for high feed profit on green, or not?

Last year, a feed profit of €1.620 per sow and €120 per fattening pig present was recorded as a sector average. This after a deep dip in feed profit in the previous years 2021 and 2022, with an average feed profit of approximately €400 per sow and €60 per fattening pig present per year. 

The year 2024 also started with good market prices. The principles for feed profits for budgets have recently been reformulated. These have been set for the long term at €762 per sow and €89 per fattening pig present. So all signals are green, or not?

If we look back at the principles for feed profit in budgets from ten years ago, in 2014 a feed profit was still estimated at less than €500 per sow and €75 per fattening pig present. In 2024, the starting point in feed profit for sow farming in a budget has therefore increased by more than 50% compared to 2014. For fattening pig farming, this increase in budgeted feed profit was limited to barely 20% in ten years. A green or orange signal for part of the sector?

Rising costs
Naturally, costs in pig farming have also risen sharply over the past ten years. Consider, for example, labor costs and construction costs. Construction costs in sow farming increased by more than 50% during this period. This is therefore in line with the increase in feed profit estimated per sow in 2024 compared to 2014. Construction costs in fattening pig farming even increased by 60% in this period, considerably more than the increase of just under 20% in feed profit per present. fattening pig is budgeted for in 2024 compared to 2014. This has a major effect on the financeability of investment plans in fattening pig farming. So there is no sign of green signals, rather a sign of slowdown or even standstill for this part of the sector.

Reserves for bad years
Back to last year's and this year's market. Historically high feed profits can make us careless. Our memory is often short. In 2021 and 2022 there was little confidence in the future of pig farming. We now seem to be used to high piglet prices and fattening pig prices, perhaps with the thought that a repeat of below-average market conditions is not possible. But: the past will repeat itself and we must prepare for that. In the off-peak years 2021 and 2022, the feed profit for both years was €700 per sow and €50 per fattening pig present lower than the long-term starting point. While in the past we used buffers for bad years of €250 to €350 per sow, it is now a good idea to consider a desired reserve of up to €700 per sow and €50 per fattening pig present, in order to achieve a sustainable outcome on our own. bridge the price gap. A reserve can consist of savings, room on the current account, keeping creditors in order or assets that can be released. 

Some Beter Leven market concepts now work with a price system in which the cost price determines part of the selling price for piglets and fattening pigs. This is a good guarantee that additional requirements and measures in housing or food, which lead to an increase in the cost price, will be reimbursed by the market. At the same time, this removes the need to impose this through legislation and prevents companies from having to compete with countries where these additional requirements do not apply. In a period of above-average feed profits, the added value of these concepts is sometimes lost. 

New cabinet
The new cabinet of PVV, VVD, NSC and BBB has taken office. Many pig farmers have confidence in this. Yet part of the coalition did not always vote and argue in favor of our sector. The creation of this cabinet was a process of trial and error. The voter has spoken and opted for a different sound. In the past, some of this noise has been painful, hurtful, unifying and a cause for division in society. Now we have to see whether scars from the past will not continue to cause lasting pain. A dysfunctional cabinet or a rapid fall with new elections will cause disappointment and delays in necessary steps in the Netherlands and our sector.

Because in parts the signals are red. Few or no permits are issued for necessary business development, even though there has been a decrease in ammonia and odor emissions. The necessary step from means regulations to goal regulations in the licensing is made with too small intermediate steps. Legal cold feet prevent politicians from showing a straight back when granting permits. Growing companies are often excluded from tax incentive schemes for investments in pig farming using the sustainable livestock farming benchmark (VAMIL and MIA). The critical comment that company size says nothing about the environmental impact or animal welfare on the company was not heard by the 'old' policy. Business development at these companies provides the necessary innovation power in the sector to gain and maintain speed. 

Decisiveness and courage
In the short term, the signals appear to be green with good feed profits in the sector. In order not to receive red signals after this, politicians must show decisiveness and courage in granting permits and encouraging innovation. The pig farming industry itself must learn from the past, become resilient to below-average market conditions and demonstrate unity, with the conviction that for a larger proportion of companies the future lies in market concepts with added value.

Frank Steenbreaker

Frank Steenbreker is senior Business Advisor Pig Farming at ABAB Accountants and Advisors. From an economic perspective, in his columns he regularly sheds light on entrepreneurial dilemmas in pig farming.

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.