Financial Modelling of a Hungarian Pig Integration

Marczin, Tamás – Balogh, Péter – Nagy, Lajos

Keywords: integration, pork industry, competitiveness, pig, G1, Q13, Q14

The present study aims to present the financial benefits of integration in the context of a successful large-scale pig farm in Hungary, which can be clearly measured in the management of a given year. It can be stated that the competitiveness of the agricultural sectors is heavily influenced by the predictability of the financial circuits of production and the elimination of economic events which are difficult to predict. In the pig breeding sector, the above conditions play a particularly important role as they are a demanding sector of current assets, where even a shorter income disruption or extra cost can lead to production difficulties, or in the case of smaller producers, to insolvency. Recognizing this problem, several leading pig breeding countries have advanced their integration to a level that covers the entire product chain, from feedstock to meat processing. As a result, producers can achieve significant cost savings through the purchase of raw materials and on the other hand can accurately plan their income after selling the final product. The above example is less observable in the pig sector in the country, but it is important to mention that there are cooperatives where these methods are used. These usually take the form of a reduction in payment deadlines or an organized distribution of the final product, which generates additional revenue for producers.
In order to measure the success of the methods applied in Hungary, in the present study, a cash flow model was set up, based on the management data of a 600 sow breeding farm for the open market and one of the leading Hungarian integration. On the expenditure side, it is important to highlight the rate at which costs are incurred, which can be occur weekly. The data thus obtained can be compared with different efficiency calculations.
The analysis of the results showed that the integration model proved to be more successful because of higher values in terms of revenue and efficiency. It is important to note, however, that these benefits can be achieved with minimal expense, but can generate an annual gain of several million forints in the management of a farm or plant of this size.

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