National Pig Association warns retailers on costs

The National Pig Association (NPA) has written an open letter to the trade, which is published as an advertisement in the trade press this week.

The open letter follows a series of private letters from NPA chairman Stewart Houston addressed to the major multiple retailers, urging them to remind their pork buyers of the importance of supporting British pigmeat production. Houston was prompted to write to retailers after the cost of pig feed – which accounts for 50% of total production costs – had risen 30% almost overnight.

The increase has hit about 80% of pig farmers who are again struggling to realise a profit on production. Current buying prices, as measured by the Deadweight Average Pig Price (DAPP), show the producers are already losing £5 on every pig they sell.

The DAPP has been falling steadily over the past few weeks. In July this year, the DAPP stood at 155p/kg; last week it had fallen to 143p/kg. For every 2p fall in the DAPP, producers lose an additional £2 per pig.

The pig industry has been operating at a loss in almost every year over the past decade. The situation came to head in 2007 when a sharp increase in world commodity prices pushed up feed costs and the industry faced wipe-out. As an industry, pig producers were losing £6 every second – £3.5m a week

It launched a campaign promoting the high welfare standards of British production. Research undertaken at the time showed that consumers were willing to pay extra for quality-assured pork and pork products.

The industry launched its ‘Pigs Are Worth It’ campaign, urging retailers to pay a fair price to farmers and to ensure that processors passed the increase back down the supply chain.

Retailers responded to the high-profile, 18-month campaign which was credited with saving many producers from going out of business: the DAPP rose from about 110p/kg to more than 140p/kg.

During 2009, the industry returned to profit, helping to claw back some of the sustained losses, but also enabling producers to invest in more efficient systems.

The latest hike in feed costs has hit at the same time that retailers are putting the processing sector under considerable price pressure. This has had a knock-on effect of depressing prices paid to producers (as indicated by the falling DAPP) and is also sucking in an increase in cheaper imports.

This has prompted Houston to write to all major retailers, calling for all parts of the supply chain to demonstrate that the lessons of the 2007-08 crisis have been learned, reminding them of the outcomes of the Government-sponsored Pig Meat Industry Supply Chain Task Force and stressing the importance of supporting British pigmeat production.

The NPA has stopped short of launching a new campaign officially, but acknowledges that the situation may be as bad as in 2007 and that producers will be galvanised into a 'Pigs Are Still Worth It' campaign.

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