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Is There Something Rotten in the State of Denmark?

15 May 2012

ANALYSIS - Is there something rotten in the state of Denmark? According to the Pig Research Centre, Danish Agriculture and Food Council a war of attrition is taking place between the pig producers and the bankers, writes Chris Harris.

Writing in the Pig Research Centre's annual report, the chairman Lindhardt B. Nielsen and director Nicolaj Norgaard said that the European industry has rarely been looking so hard for reductions in production while prices have been rising so high.

However, they have hit out at the banking sector for propping up unprofitable farms in the hope that better days will be around the corner.

Instead, they say, it would have been better for the industry - and even the bankers - if the non-profitable farms had been shut down earlier.

The research centre says that the average Danish pig farm has been in the red for the last five years, something the industry in Denmark has never experienced before.

While feed prices have been at the heart of the straitened times for Danish pig producers, the research centre also sees losses on market speculation as another reason the farmers have found difficulties.

"Hedging has become an important and necessary discipline in the pig industry," Lindhardt B. Nielsen and Nicolaj Norgaard say in the annual report.

There is also concern in the industry because the producers are finding that credit facilities and a willing ness to invest have been limited since the start of the global financial crisis in 2008.

The research centre says that investment in the industry is a third of its normal level and Mr Nielsen and Mr Norgaard say that this is a situation that is unsustainable in the long run.

However, the bright spot for the Danish industry is that weaner exports have remained high and as confidence came back to the pig slaughter sector, the export of finishing pigs fell away over the last year.

Denmark saw some of the highest prices in Europe and this combined with high productivity has helped the Danish producer to do less badly than some others in Europe.

According to Mr Nielsen and Mr Norgaard, many of the obstacles that had been in the way to allow pig farmers in Denmark to adapt their farms to the new group housing that will be needed when the stall ban comes into effect in 2013, have been removed.

Farmers can adapt their present buildings and have full production in these facilities, but if they want to increase their production then they will still need to obtain environmental approval. Getting this approval through the local authorities and the Environmental Board of Appeal can be a long and difficult process.

The centre said that the concept of "animal load" - a form of quota system - could also have a great impact on the industry both in its development and also economically and it has called on the authorities to handle the plan professionally and fairly.

However, the leaders of the research centre also said that, at the same time, the industry has to fight to stay in the lead by accepting and adopting new technologies on the farm.

Chris Harris

Chris Harris



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