Who benefits most from 12 million pigs?

For whom is the limit of 12 million pigs in our country more important: for pig farmers or for those entering the yard? However you get used to it, in terms of animal numbers the interests of these two groups intersect, because where one often aims for more pigs, the other is sometimes better off with fewer animals. 

Since April 2008, Statistics Netherlands has counted more than 12 million animals for each pig population count. The most recent peak was in the pig herd in April 2015 when the CBS census recorded 12,6 million pigs. Between the period April 2014 and April 2015, the number of pigs in the Netherlands increased by almost 400.000 animals. Coincidence or not, exactly in that period the Dutch pig price dropped from above 1,70 euros to below 1,20 euros per kilo.

Of course, the disappearance of Russia was the reason that the pig market in Europe ended up in a downward spiral at the time, but the pig supply also played a role. The offer was always too cumbersome and too broad to offer serious resistance. Slaughterhouses didn't have to make any effort to get the pigs hooked and they had the freedom to significantly reduce the quotations. Only with a wide range are slaughterhouses in a position to turn such knobs.   

A few weeks ago I took an interesting course at the Wageningen Economic Institute (WUR), the former LEI. During the course, one of the larger pig farmers in the Netherlands gave an explanation of his company and doing business in the market. The thrust of his story was to think from margins and not so much from animal numbers. 'The limit of 12 million is absolutely not sacred', he said literally. 'Those 12 million pigs don't belong to anyone. Not mine, but not yours either.'

The financing of a pig farm was also part of this course and this was provided by Rabobank. During the calculation case, the economic situation of an average pig farm with 500 sows was central. A company that could not operate profitably with average piglet prices. It is up to us, the students, to come up with solutions to make this company profitable. The first thought that came to my mind was to keep more sows. Surprisingly, when the case was calculated afterwards, the opposite turned out to be true. This company was better off going back to 300 sows rather than scaling up to say 1000 sows. Fewer costs were better than additional revenue. By extension, the entrepreneur would ultimately only work for the interest, with all the associated risks. 

The only question is: which advisor advises a pig farmer to reduce animal numbers? An average yard trespasser will probably never prescribe such advice. The feed suppliers, for example, think in tons and prefer to supply as much feed as possible. Genetic companies are also generally unwilling to downsize. They think in straws. Fewer sows simply means fewer straws and therefore less customers. Ditto for food. 

Despite the fact that the periphery has motivated expansion for years, primary pig farming is more solid in terms of pricing when there are fewer pigs in the Netherlands. Pig farming probably also scores better on the manure market and from a social point of view, but that is an aside.

Of course I understand that the situations differ considerably per company and that in practice switching back is not one, two, three. It is difficult to determine where the ideal balance, in terms of animal numbers, ultimately lies. Probably closer to 11 than 12 million pigs.  

Wouter Job

Wouter Baan is editor-in-chief of Boerenbusiness and Food Business. He also closely follows the raw materials markets and focuses on animal proteins such as dairy and meat. He regularly interviews leaders from the agricultural sector and the food world.

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