I’m dreading the day I get the phone call from a supplier or my bank to say that’s it, it’s time to pull the pin, and we can’t keep working with you. Be under no illusion that unless things change fast, I’ll be gone and so too will the Irish pig industry.”

Those were the words of Tipperary pig farmer Michael Monagle when I visited his farm last Thursday evening. Over the last 40 years, Michael has built what was a hugely successful business based around good management, efficiency and scale.

Walking around his pig farm you know that it’s a really well-run business. New sheds and new concrete would suggest a profit-making enterprise. However, looks can be deceiving and sitting down with Michael in the farm office, he explains how dire the situation has got for himself and the rest of the 270 pig farmers in the country.

Some have weeks left in business, some have months, some are gone, while others have no option but to work with banks as current assets won’t cover current borrowings on many farms.

Michael started off in the 1980s with nothing. He worked his way up, seized opportunities where he saw them and built his business to where it is today. He took risks and made good decisions along the way.

“Pigs are a cyclical business. Everybody knows that and when you are dealing with livestock you will always see peaks and troughs but I have never seen anything like this before,” Michael said.

Production cost crisis

The current pig sale value for an 88kg carcase at €1.72/kg is €151.36. That means the calculated current loss per pig stands at €67.76. This is even higher for farms that have invested heavily over the last few years and interest and depreciation is as high as 20c/kg on some farms.

If we take an average herd of 600 sows (and 28 pigs/sow) this herd is producing 1,400 pigs per month, so the average loss for a typical 600-sow pig farm is €94,864/month or €158 per sow per month.

The above calculations are based on a composite feed cost of €532.98/t.

The current pig production cost (for an 88kg carcase) is €2.49/kg (€219.12/pig). Feed costs make up a massive proportion of this with feed costing €1.87/kg. This figure is calculated by taking the average composite price/tonne (€532.98) x 308kg consumed per pig coming to a total of €164.16 (for an 88kg carcase).

Based on current spot prices for feed, a composite feed cost of €529.51/tonne will apply from September 2022 to April 2023, but that price is based on pig farmers moving now to forward purchase feed. This was impossible for many to lock into, as market prices soared and many have unfortunately ended up paying more as the months have gone by.

Michael says: “We have the dearest feed in Europe (because of our deficit in cereals), so price is based on mainland Europe prices plus shipping and handling costs. Due to a considerable increase in these costs, this puts our feed cost €60/t or 21c/kg extra on production cost over other European competitors.”

Energy and all related production costs will cost significantly more than at present as we go through 2022, so currently the best-case scenario for pig farmers for the back end of 2022 and the beginning of 2023 (eight months) will be feed at €1.85/kg and all other costs at approximately €0.63/kg – a total of €2.48/kg.

It’s important to remember that this is only a break-even figure so more is needed to recover and service losses already incurred on farms.

What needs to happen?

Michael’s views of what needs to happen are very simple. His firm belief is that the solution lies with the processors and retailers.

“It’s hard to comprehend how we only get €1.72/kg to €1.75/kg for a pig at the factory when beef is trading at €5.50/kg and €7/kg for lamb. It’s also unbelievable that the farmer who rears the pig (from birth to bacon) is only receiving 12% to 13% of the final value.

Processors and retailers who have it for a matter of days, share 87% to 88% – how can this be right?” Michael asks.

It’s clear to see that the current situation is completely unsustainable and people who have given their whole life to this business are reluctantly giving up. Pig farmers have now been losing money since last July or August and every week the losses grow bigger. Since January, on average, farmers have been losing €50 for every pig out the gate.

About 40% of pig farmers in Ireland are home millers and the other 60% are supplied by compounders.

According to Michael, those feed mills supplying the industry have been very fair throughout the escalation of commodity prices and should be commended for this.

He says: “They could have valued their stock much higher, but didn’t as they were very aware of the hardship on the ground. Unfortunately, now they have this huge replacement cost coming at them, and so will have no choice but to pass it back to the farmer.”

He also says commodity prices are not going to reduce significantly in the medium term, not because of the war, but because they had reached record levels before that, kicking off in October 2020 as supply wasn’t meeting demand.

He says: “At harvest 2020 you could secure wheat for €180/t, in March 2022 (before the war) it had risen to €330/t and now it’s hitting €450/t.

Out of the 144,000 breeding sows in the country, there are verified reductions of 12,500 already, with upwards on another 10,000 under consideration over the next few weeks, but it won’t stop there, according to Michael.

He says: “This isn’t a business you get out of easily because of the high investment in infrastructure and working capital, so decisions like this are desperate. I don’t think people realise how close we are to having no Irish pork or bacon on shop shelves. I can’t explain to you the enormous mental toll it is taking on farmers and their families. It’s just not right.”