Grain prices concern pork producers

September 12, 2007

Grain prices concern pork producers

Pork producers have real concerns over recent grain price predictions. The latest analysis shows that the bottom line has all but disappeared for those putting pork, bacon and ham on New Zealanders' plates.

"This is a very difficult time for producers" says Colin Kay, Pork Industry Board Director and producer running 900 sows in Manawatu. The predicted price rises come on top of a number of financial pressures that have been mounting on producers. "Like all businesses pork producers have been facing constant cost rises; compliance costs, labour, fuel, and interest rates have all contributed to place producers under financial pressure".

The grain price is the final straw so to speak for producers. Feed costs make up around 60-70% of pork production costs and the price rises being talked about will cause production costs to rise dramatically. Kay acknowledges that world price rises are impacting on the New Zealand market.

"Certainly the rising prices internationally driven by both protein and biofuels demand is also fuelling prices here. At the sort of prices being talked about though, pork production will simply be unsustainable, already some producers are seriously questioning whether they'll be able to carry on next season.

"Looking 12 months out the US grain futures are starting to soften and domestically seed sales and estimates of ground going into grain suggest realistic prices are well below those being bandied about". The question is whether this levelling off will come soon enough for some producers.

With pork producers using approximately 160,000 tonnes of grain a year "we are a key stakeholder in New Zealand's arable sector" says Kay. Grain growers and pork producers really needed to sit down and chart the future ahead together. Being in the main domestically focused, we both need to make a dollar to stay in business and we're highly reliant on each other.

Therefore we really need to take a partnership approach that looks at long-term sustainability not short-term gains. This means both parties being willing to enter into contracts that leaves something on the table for the other. While many grain growers had held off signing contracts, pork producers were very keen to get pen to paper to have some certainty about where they were going.

Kay says though, that others in the value chain will have to bear a share of the increasing production costs. "Ultimately we are going to have to see the schedule payments to producers rise to account for the extra costs and that will mean that retail prices for pork and pork products will have to rise. However pork will still be a very good value meat even with significant retail price rises.

Consumers have indicated to us very clearly that 100% New Zealand pork is their preference, they will have to play their part in keeping the local industry going by paying a bit more at the counter. They can be assured that we will do our part to become more efficient too but we won't be compromising the safety, production ethics, freshness and taste on New Zealand pork".

Released by: New Zealand Pork Industry Board

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