Lower feed costs in 2023 drive margins rebound

In 2023, falling pig feed costs, driven by lower oilseed and grain prices, improved margins for pig producers, particularly in Great Britain. Looking ahead, global grain production is expected to rise, potentially keeping feed prices under pressure, while stable soybean production and strong rapeseed demand may influence future cost trends.

Key takeaways

• Feed cost improvements: Pig feed costs fell in 2023, now averaging 63% of production costs, with Great Britain (GB) seeing a 15% reduction and the European Union (EU) a 4.13% drop, leading to improved industry margins.
• Key market factors: Lower raw material costs, driven by increased global oilseed and grain production, helped ease feed price pressures and supported producer recovery.
• Outlook: Global grain production is expected to increase, keeping maize prices under pressure, while stable soybean production and potential United States (US) planting declines could impact supply.

In 2022 the pig industry was hit with a multitude of issues, we saw pig feed costs contributing to 70% of production costs and shortages of labour in abattoirs. This year pressures have eased and feed costs now average at 63% of production costs for the InterPig countries.

Table 1. InterPig feed price £ per tonne

Source: InterPig

The price of pig feed fell in 2023 across selected countries and was welcomed by the pig industry. It was the main driver for improved margins, however, changes in feed costs varied significantly by country. Pig producers in GB saw reductions of just over 15% (£371.25/t and £356.71/t respectively) on average across the three feed type groups, EU costs dropped by 4.13% (£320/t). A much more positive picture across the selected countries.

It has been illustrated that raw material costs that go into ration can be used to understand price direction going forward. In 2023 these raw material costs came down. The main driver of these reductions comes from falling oilseed and grain prices as markets had accounted for the Russia-Ukraine war and began to be driven by wider fundamentals instead of geopolitics. In addition, oilseeds saw higher levels of production, in South America (+8.0MT Brazil, Argentina +21.0MT) and rapeseed in EU (+964kt YoY). This was coupled with downward pressure on UK feed wheat prices because of low quality milling crops. This built into reducing domestic supply feed pressure on GB and global producers.

Table 2. InterPig % change in price 2022 to 2023

Source: InterPig

Gross margin compares a company’s gross profit to its revenue, a higher gross margin means more capital is retained. Figure 1 considers costs of goods sold for producers including feed and is compared against revenue taken by the business. In 2022, margins were down tremendously and negative in the case of GB producers – running at a loss. The turn around in performance for 2023 should not be understated, especially for GB producers, who welcomed the improvement as they recovered from the losses absorbed the previous year. As stated previously this improvement can be attributed to the reduction in feed costs and easing of supply chain issues.

Figure 1. Gross margin ratio (%) across the InterPig countries

Source: InterPig

Looking forward

Two of the key feed inputs are soybeans and feed wheat and global planting trends impact prices in the UK. As stated in our outlook for 2025, global grain production is expected to rise by 64 Mt in 2023/24, driven by higher maize output in the US and Argentina, though uncertainty remains over Brazil’s 127 Mt maize crop. Despite geopolitical risks, larger global maize stocks continue to pressure prices.

For soybeans, production is projected to remain stable for 2024 and 2025, though a potential decline in US planted area could tighten supply. Soybean futures remain steady, while Paris rapeseed futures (Nov 2025) trade at a £40/t discount to May-25, reflecting strong current demand. The USDA Agricultural Outlook Forum in February 2025 will provide key insights into spring crop forecasts, shaping feed wheat and soybean price trends for 2025.

The data used for this analysis is historical and shows analysis of feed costs for the InterPig countries throughout 2023. The most recent domestic cost of production analysis for Q4 2024 showed the estimated cost of production was 197p/kg deadweight, which was an increase of 7p compared to Q3 2024. The main reason for this increase in feed costs.