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Rising feed costs hit livestock producers

Published on 1 September, 2008, Last updated at 05:57 GMT

Cereal farmers have benefited from record grain prices this year, but livestock farmers tell a different story.

While meat and dairy prices have risen under the influence of changing diets in countries such as China and India, they have failed to keep pace with grain, partly because of fierce competition from massive farms in Argentina and Brazil.

Also, the soaring cost of grains has meant that feed for animals, usually low-quality grain, has also become more expensive.

"The price of meat is not keeping pace with inputs," says Teresa Wickham of the Red Meat Industry Forum.

"Prices have risen, but farmers have to accept a market price that may or may not cover their cost of production," adds Richard Lowe, chief executive of the English Beef and Lamb Executive.

The farm-gate price for pig meat has risen this year by about a quarter to nearly £1.37 per kg deadweight, according to Eblex. But rising feed and energy costs have increased the price of production to £1.40-£1.50 per kg. Eblex estimates that "the vast majority" of beef farmers are losing money. In July, the National Beef Association said that beef prices were £2.45-£2.70 per kilo.

Most sheep farmers also lose money, according to Eblex, in spite of the July price of £2.90 per kg deadweight being about 10 per cent higher than last year.

Meat prices will have to rise further to maintain livestock production numbers, Mr Lowe says. The national herd has shrunk in recent years, owing both to the difficult economics and disease outbreaks. The National Farmers' Union warns that 40,000 cattle could be lost this year from the increasing incidence of bovine tuberculosis. Last summer, cattle numbers in England were down 2.5 per cent on 2006 to 5.6m.

Britain's outdoor pig herd - once among the world's largest - has become an endangered species thanks to spiralling feed prices and government restrictions, farmers say. Numbers were down 2.8 per cent last year to 3.9m in England.

The UK is the only European country to keep large numbers of the animals in fields rather than pens, but this is becoming increasingly uneconomic as the cost of feed rises.

"Around half of our costs are feed," says Barney Kay of the National Pig Assocation, "and we have not been able to pass those on."

The price of feed almost doubled between January 2007 and mid-2008 before falling back slightly. Also, UK producers often have higher costs than European Union competitors as the government banned the use of tethers and metal stalls in 1998 on animal welfare grounds.

Organic farmers are facing a particular problem in sourcing feed. Organic feeds are now at an 80 per cent premium to non-organic, compared with 30 per cent a year ago, according to John Round, who runs Elmore Back Farm in Gloucestershire. But the retail price premium for organic milk products has fallen from 45 per cent in 1997 to 15 per cent today.

Dairy farmers have benefitted from slightly higher milk prices agreed by supermarkets this year, but Mr Round warns the downward pressure has taken its toll.

"The price of milk has been too low for too long," he says. "Supermarkets are trying to minimise price increases for consumers, but they've got to realise in three years they might not have much of any industry left to squeeze."


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