Bpex report slams profit gap

The shocking disparity between the profitability of UK pig producers and the rest of the chain has been outlined in a hard-hitting report by Bpex, which has called for a 20% increase in the DAPP to around 170p/kg.

The research, which was released to tie in with a rally at the House of Commons yesterday (Thursday), reveals that UK pig producers lost £35m in the 12 weeks to the end of January 2011. Conversely, processors made profits of an estimated £100m and retailers are understood to have made £192m in the same time frame.

Producers, which have been hit by a double whammy of increasing costs and the falling DAPP and are now losing £21 per every pig, want an improved dialogue with retailers in an effort to avert a worsening crisis. As well as an approximate 33p/kg increase in the DAPP, the Bpex report also calls for more retailer support of high-welfare Red Tractor pork.

In the special report, Stewart Houston, chairman of Bpex, stated: “The UK pig industry has contracted significantly over the past 12 years and further contraction would seriously damage the country’s ability to provide consumers with the high-welfare, quality-assured pork they prefer.

“The current plight of the pig industry is not unique to the UK. Right across the EU, pig producers are experiencing similar problems and, with the additional cost burdens they face in meeting new welfare legislation that comes into force across the EU next year, their challenges are arguably even more daunting than those of UK producers.

“It may well be that the option to import cheaper pork produced to less demanding welfare standards will no longer be available to UK retailers and processors.”

He added: “There is not much we — individually as farmers or collectively as Bpex — can do to influence world commodity prices and the cost of feed. That’s beyond our control. However, we will do everything we can to secure a fair price for the pigs we produce to exemplary quality and animal welfare standards.”

Chris Lamb, consumer marketing manager at Bpex, told MTJ: “There is something drastically wrong with the figures when you work out that British pig producers made a loss of £35m in the 12 weeks to the end of January — and yet processors made profits in the region of £100m and retailers achieved £192m.

“But retailers shouldn’t be fooled into thinking this is just a UK problem. They might not be able to source imports from abroad, or Europe, in the coming months, as people simply leave the industry.”

The debate on pig prices came as it was revealed that UK food prices have increased by 4.9% — a figure City analysts suggested had been boosted by retailers attempting to raise margins and blame the rise on inflation. An analyst at UBS, the Swiss investment bank, said: “The UK food retail system is demonstrably passing on higher prices than the food retail systems of other countries.”