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Pig industry is facing another price fall crisis
PIG farmers fear another wave of bankruptcies and voluntary exits next year, because of wheat prices soaring to 2007-08 levels. And the poultry business is also expressing deep concern.
Stewart Houston of Ripon, chairman of the British Pig Executive, sent a BPEX report on the problem to all supermarkets this week.
Unless they listened, he said, prices would once again be driven below costs for too long for many producers to survive.
In 2007, the report recalls, "the industry really was teetering on the brink of collapse".
It sums up: "We launched a make-or-break campaign, Pigs Are Worth It!, promoting English production. Research showed that consumers were willing to pay extra for quality-assured pork and pork products.
"Retailers responded to the campaign, which was credited with saving many producers from going out of business: the DAPP (deadweight average pig price) rose from about 110p/kg to more than 140p/kg. During 2009, the industry returned to profit.
"Today, the fear exists that the British economy may slip into double-dip recession. For pig farmers, that prospect is already a reality. Grainmarket increases pushed feed costs up by 30 per cent – literally overnight – and they are still rising. Producers are again losing money on every pig produced.
"The latest hike in feed costs has hit at the same time that retailers are putting the processing sector under considerable price pressure.
"We need all parts of the supply chain to demonstrate that lessons have been learned from previous crises."
Wheat has risen sharply to more than 170 per tonne, its highest level since April 2008, and the futures market indicates it will stay at that level well into 2011. That is more than 60 up on a year ago.
The hike has pushed up alternative feeds too, worldwide, and will eventually translate into higher meat prices. But Mr Houston said this week: "The trouble is, there is plenty of pork in the chain. By the time the buyers have to pay more, our farmers could be out of business.
"The DAPP is currently 138p/kg and there is every likelihood it will fall further.
"At 138p/kg, British producers are already losing 8 per pig."
Asda said: "We recognise rises in input costs have affected farmers and these are part of ongoing commercial discussions."
Morrisons said: "Morrisons source 100 per cent fresh British pork and are committed to buying directly from farmers and working with them to help identify solutions that can build long term viability in the industry."
A Morrisons supplier, Joe Dewhirst, who runs a 6,000-sow business near Driffield with his brother, Rick, said it was better than most supermarkets, especially in its commitment to British sourcing, but he still faced the kind of price shortfall Mr Houston was talking about.
He said: "We are relatively large and we will hang on in there but I know people are getting out of production right now."
Poultry sector feels pressure
THE poultry business is also particularly vulnerable to feed prices, although its investment cycles are shorter than those of pork, so it can react to events more quickly.
NFU poultry board chairman Charles Bourns said this week: "Feed is costing farmers an extra 5p per dozen eggs, and over 12p per chicken.
"Retailers look to farmers to invest in ever-improving supply chains, but this deal comes with some responsibility for them to ensure their suppliers are making a fair margin."
CW 27/11/10
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