March 10, 2011

UK pork retailers and processors gain while pig farmers lose

UK pork retailers and processors are making big earnings from pork and pork products, whereas pig farmers are experiencing dramatic and unsustainable losses, according to a new report from BPEX.

British pig producers amassed losses of GBP35 million (US$56.7 million) in the 12 weeks to 23 January 2011. Within the same period, the processing sector's profits are estimated at GBP100 million (US$162.1 million) while retailers enjoyed combined profits of GBP192 million (US$311.2 million) from pork and pork product sales.

The industry's production costs have risen dramatically since last summer as the price of feed has doubled. This has coincided with a fall in the price paid for a finished pig.

BPEX Head of Marketing, Chris Lamb, said "The report clearly illustrates that while pig farmers are operating at a loss, the rest of the supply chain is making huge profits."

"The sustainability of the pig industry is under severe threat. Unacceptable as it may seem, the prospect of losing huge numbers of pig farmers, who can no longer afford to produce pigs, is very real. The supply chain needs to act now."

The solution, according to BPEX, requires three straightforward actions from processors and retailers. Both processors and retailers need to increase the DAPP to a sustainable level, support high welfare and high quality pork, such as Red Tractor, and adopt total supply chain co-operation.

The report laid out exactly what pig farmers need to return to profit. To cover production costs, pig farmers would need the DAPP to rise from GBP135/kilogramme (US$219/kilogramme) to around GBP164/kilogramme (US$266/kilogramme). To be sustainable, a reasonable profit margin still needs to be added.

The report also highlighted the fact that while the overall facings of British pork in supermarkets have remained constant over the past five year period, there has been a noticeable fall in the past year in the share of facings.