An Analysis of the Profitability of Hungarian Pig Farms

Hegedűsné Baranyai, Nóra – Ábel, Ildikó

Keywords: pig sector, revenue-proportional profitability, production value profitability, labour profitability, net liabilities, Q12

The objective of the study is to analyse the profitability of pig farms. As the subject of the investigation, differences in the profitability of pig farms were surveyed in accordance with different business forms, large regions and size categories.
The significant decline in pig breeding is due to the sharp decline in the number and production of individual pig farms. Small farms have been affected by the tightened domestic and international market potential, and low profitability to a greater extent. In Hungary, the number of small pig farms is much higher than large farms; however, their average land use and numbers of porkers and sows fall behind.
The financial settlement of area-based subsidies in the following fiscal year makes the financial positions of individual farmers more difficult. Corporate farms are able to realise more net income per livestock unit, they have higher operating costs, thus they realise less pre-tax profit per livestock unit than individual farms. Individual farms have lower personnel expenses because they use a considerable amount of unpaid labour. The revenue-proportional and labour profitability indices reached higher values for individual farms in the period of the analysis, which is a consequence of low operating costs.
We found that farms with a stock of over 150 animals can obtain higher purchase prices and agricultural subsidies, and thus higher income; however, their operating costs are also significant. Owing to their low operating costs, small farms have higher profitability indices per livestock unit than large farms, but - because of their small size - their total revenues are much lower. Thus it is doubtful whether they are able to compete for market positions with farms with high output capacity. Owing to their small forage production areas, they are more vulnerable to fluctuating feed prices. They have difficulties in enforcing their rights with respect to the collection of their receivables.
Our analyses have revealed that there are significant differences in the regional locations of pig population. In terms of pig breeding, the large region of the Great Plain and Northern are the most significant. In the last three years studied, the net liabilities were negative in both regions, which shows that farmers were not able to recover their receivables efficiently, one reason of which is the crisis being experienced in the manufacturing industry. We see the possible solution in horizontal and vertical integration, but experience has shown that farmers are not always willing to do so due to a lack of confidence and interest.