News Pigs
'Liquidity of the pig farm is tight, but there is perspective'
Although pig farms are going through a difficult period and production will shrink by 10% to 20% in the coming years, there is prospects in the pig sector for entrepreneurs who continue. That writes the bank ABN Amro in a report on pig farming. In the short term, however, the outlook is bleak and additional financing is sometimes required, says Director of Agricultural Companies Pierre Berntsen.
An improving Chinese pork production and the consequences of the corona crisis have put the sector on edge. Selling prices have been under pressure for almost two years, which means that liquidity is currently 'draining quite hard from companies', Berntsen said in an explanation of the report published this morning. He also takes into account that there will be no improvement in the coming period either.
Liquidity issues
Whether additional financing can be provided is and remains company-specific. "The differences between farms are very large, the most pain is with the sow farms. Over 2021, breeders realized an average deficit of €250 per average sow present. However, we also see major differences in this group. the buffer of 2019. That partly determines whether liquidity problems arise or not."
Berntsen does not want to make any statements about how much or which part of the companies currently need additional financing. This is partly due to the fact that pig farms financed by ABN Amro are not representative of the pig sector as a whole. "But there is certainly concern about the liquidity development."
'Pig ultimate recycled animal'
The current difficult situation in which pig farmers find themselves does not mean that there is no perspective. The bank calls the pig the 'ultimate recycle animal' and states that already 47% of pig feed consists of residual and by-products from the food industry. This gives the pig the capacity to reduce human food waste by converting these products into high-quality animal proteins. Because, in addition to animal welfare, environmental and climate impact are increasingly a point of attention for consumers, it is an opportunity for pig farming to use this strong point of the pig.
Responding to consumer demand and creating added value by participating in concepts is, according to ABN Amro, one of the two possible routes that a pig farmer can roughly follow. However, it is still possible to opt for a revenue model in which low costs and the production of generic products, intended for the world market, among others, are central. Entrepreneurs who focus on this strategy will have to build strong buffers to be able to absorb volatile global market situations in the current account and, moreover, have to take into account tightening laws and regulations.
Steve Wissink
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