Letter From Europe: Denmark's target: 30 pigs sold per sow in five years

Monday, March 31, 2008

One reason Danish producers are outstripping their European counterparts - and pleasing their bankers in the process - may be the country's tough inheritance laws

by NORMAN DUNN

While the hog sector in most of Europe struggles to produce 20 slaughter pigs per year from each breeding sow, the Danes already manage 25 and are confident that 30 will soon be the accepted average. This outlook is pleasing Danish bankers just as much as the hog producers. Read on to find out why!

Martin Andersson is proud of Denmark's work in breeding a national hybrid sow which regularly weans more than 11 piglets per litter, which produces an average 25 slaughter hogs each year - and increases this by an extra hog every year through genetic progress. "Realistically, this should bring us to 30 slaughter hogs per sow in five years," he predicts.

But this marketing manager for Denmark's swine organisation, Danish Pig Production, admits that the real success is to be found out on the farms. "The genetic potential for higher production can be found in many countries. But what we've got are farmers prepared to invest substantially in the most efficient buildings and equipment, and stockmen and women on the ground trained to put that extra effort into piglet survival."

By way of comparison, hog breeders in the Netherlands now average 23 slaughter hogs per sow annually, with 22 for Ireland, just short of 20 in Britain and 19 in Germany.

Of course, these are simply averages. In every country, there are top farmers who can match and maybe even better the excellent Danish output. But averages are what count on a national basis and Martin Andersson has an interesting theory as to why his countrymen and women are hogs ahead in the European league.

"Mainly responsible are Denmark's inheritance laws," he feels. "When a farm is left to a member of the family, there's no simple handing over to son or daughter - the sort of no-strings-attached inheritance that could happen in Britain, for instance."

Andersson explains that in Denmark the recipient of the farm has to borrow money and pay the market value of the farm to the parents or the rest of the family. And, apart from a small reduction in price within a family, there's no way out of this breathtaking challenge for every young farmer starting up in Denmark. I've met fond fathers who have tried to slip the farm across to a favourite family member for rather less than the going market value. What happens in every case is that the tax authorities step in and charge the young farmer the full difference between market and "family price."

How does this help hog farmers become more efficient, though? Joachim Spitz is a farm adviser along the borderlands between Denmark and Germany and he says that the huge borrowings now involved mean there's no room for anything less than absolutely top performance. "The banks know this and they make sure that their borrowers are top performers themselves in terms of fundamental training. To the bankers, practical experience and success in hog production for a young farmer tends to be even more important than academic success," he adds.

We're talking about farmland now selling for the equivalent of $30,000 per acre. And just to show that the banks have plenty of confidence in Danish hog producers, even after they've parted with this kind of money for a farm, Joachim Spitz says investment in new swine barns is also shooting up. "Even in 2006, most younger farmers were thinking along the lines of starting 500- to 1,000-sow units," he recalls. "Now, the average new complex is for 1,500 or even 2,000 sows."

Helping these young farmers get off to a great start is the growing demand for young hogs from German feeders. The Danes' production efficiency means that they can sell fast-growing 35-kilogram liveweight weaners and ship them 100-200 kilometres south with a breakeven price of $14 per piglet less than producers in the Netherlands or in Germany itself.

Andersson says that this trade sold four million Danish weaners to German feeders last year. "The real market in Germany, though, is for eight million weaners - and producing these young pigs is the best way for young farmers to get started in Denmark. There's not so much investment in buildings as when a feeding unit has to be built at the same time," he adds.

Spitz repeats that it's this high borrowing that has made Danish pig production great. "Someone who has inherited the land and buildings with very low borrowings often hasn't got the pressure to squeeze 110 per cent out of the business. But our boys have to secure the sort of performance that helps a big sow unit pay its way - and leaves a little on the side for further expansion!"

Weaner prices this February in Denmark were at the equivalent of $48 for a 35-kilogram animal. For hog feeders, the margin after variable costs was just $10 per slaughter hog at 81-kilogram slaughterweight. Feed price is running at $0.34 per kilogram and bank interest currently is at three to five per cent for long-term loans.

That final figure is without a doubt the reason why Danish hog farmers are still thinking of expansion! BF

Norman Dunn writes about European agriculture from Germany.