Assessing Cost-Profit Situation and Return of Investment in Case of Establishing and Operating a Piglet Production System in Hungary

Szántó, László – Szűcs, István – Szőllősi, László

Keywords: pig industry, piglet, model calculation, investment analysis, case study, D24, M11, Q12

Due to the genetic basis, the housing and feeding technology and the scale of economies, there are high unit costs in the Hungarian pig fattening sector in international comparison. In Hungary, the technological level is also a key issue, because the Hungarian pig producer farms are lagging behind the developed European competitors.
The aim of this study is to present the production and economic indicators of a pig farm specialized in piglet production as a case study in the current economic environment. The authors made an economic calculation (deterministic simulation model) based on primary data collection and they modelled the real and financial processes of the farm, too. Instead of the company's accounting records, the authors used the technological parameters and assigned their unit prices to natural expenses. Data collection was based on data for the period 2017-2019 including production and technology parameters, input and output prices as well as the unit costs.
The presented pig farm, established as a result of a greenfield investment, specializes in the production of piglet and has outstanding production indicators (litters/sow/year, pigs weaned/sow/year and labour efficiency) also in international comparison, owing to this, this farm has a favourable profitability. The profit per sow is 74 thousand HUF and the cost-profitability is 19.7%. This is the reason why the investment shows an appropriate return (IRR=8.6%) which seems to be even better for the companies, due to the current support policy and financing environment. The generalization of the obtained results is limited due to the case study nature of the study. However, results confirm the need to establish similarly capital-intensive, large-scale, internationally modern farms in Hungary to improve the efficiency and international competitiveness. To achieve this goal, proper genetics, feeding technology and expertise are required.

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