Did the Cows Cry and the Pigs Laugh?... Livestock Farms, Joy and Sorrow Divided by Production Costs

[Financial News] The fortunes of livestock farms diverged depending on whether they raised cattle or pigs. This is because farms raising livestock with increased production costs face a heavier burden. Since the increase in production costs does not necessarily lead to an increase in the 'farm price', which is the price at which farms sell to the market, some farms may face difficulties in management.
 According to the '2024 Livestock Production Cost Survey' by Statistics Korea on the 27th, the production costs of calves, beef cattle, and milk increased, while the production costs of Hanwoo beef cattle, fattening pigs, eggs, and broilers decreased.
 The production cost of calves increased by 2.5% compared to the previous year to 5,092,000 won per head due to a decline in reproduction rates. Beef cattle (excluding Hanwoo and dairy cows) saw a 4.5% increase to 856,000 won per 100 kg due to increased costs of purchasing calves. Milk rose by 1.5% to 1,018 won per liter due to increases in labor and capital service costs.
 On the other hand, the production costs of some items decreased due to reduced feed costs. Hanwoo beef cattle decreased by 1.1% compared to the previous year to 1,276,000 won per 100 kg. Fattening pigs decreased by 1.2% to 366,000 won per 100 kg, eggs fell by 5.0% to 1,285 won per 10 eggs, and broilers decreased by 6.2% to 1,464 won per kg.
 The problem is that even if production costs rise, the farm price does not necessarily increase. The farm price is determined by a complex mix of factors such as supply and demand, economic conditions, and distribution stages, rather than by production costs alone. Farms cannot arbitrarily raise their selling prices in the market just because production costs have risen. Farms raising items like calves and beef cattle, whose production costs have increased, may face difficulties in management due to decreased profitability.
 A Statistics Korea official explained, "Livestock production costs include livestock purchase costs, feed costs, utility costs, as well as self-labor costs, capital service costs, and land service costs," adding, "Consumer prices are determined by various factors at each distribution stage such as auctions, wholesale, and retail, making it difficult for production cost increases to directly lead to consumer price increases." The official continued, "However, the rise in farm prices for eggs and the increase in auction prices for beef cattle have increased net profits for farms, and the rise in farm prices has also partially affected consumer price increases."
 The livestock industry pointed out the large gap between farm prices and consumer prices and emphasized the need for distribution efficiency. Seo Young-seok, head of policy at the National Hanwoo Association, said, "Just because calf prices rise doesn't necessarily mean farm profitability improves. Fattening farms have less room to reduce production costs," adding, "The association or self-help funds support distribution companies through discount sales to allow consumers to purchase meat cheaply, but there are limits. In terms of price, farms are in a situation where they rely heavily on distribution companies."
 Meanwhile, livestock prices are fluctuating. According to Statistics Korea, livestock consumer prices recorded △7.3% in 2020 △12.7% in 2021 △6.0% in 2022 △-2.2% in 2023 △0.7% in 2024. Looking at recent monthly trends, agricultural, livestock, and fishery consumer prices showed stability at 1.5% last April, but livestock prices showed a relatively high increase of 4.8%. Livestock consumer prices have been on a continuous rise since June 2023 (-0.8%).

junjun@fnnews.com Choi Yong-jun Reporter