Report raises fears of a pig sector exodus as prices crash

Pigs from Simon Watchorn's herd at Earsham, near Bungay.

Pigs from Simon Watchorn's herd at Earsham, near Bungay. - Credit: Nick Butcher

Fears have been raised that pig producers could be forced to sell their herds and quit the sector after a crash in prices left their industry at crisis point.

The average price paid to farmers for their pigs has slumped by a third since late 2013, according to a report issued by AHDB Pork, a division of the levy-payers' organisation the Agriculture and Horticulture Development Board.

But the falling price has accelerated in the last 12 weeks, losing 13p/kg, or around £11 per head – bringing it to an eight-year low.

As a result, many pig producers are operating below the cost of production and there is thought to be an increasing risk some will decide to leave the industry, affecting the level of UK pork available to the market.

Simon Watchorn, who is losing money on his 600-sow herd of outdoor-reared pigs at Park Farm near Bungay, is a member of the AHDB Pork board.

'I think crisis is the right word,' he said. 'I am deeply worried. The prices have fallen off a cliff since the new year.

'I am not sure there is a straightforward answer to a question like this. The easy answer is to say there are cheap imports. Historically the price has been cheap on the continent compared to ours, but that gap has narrowed from 40p to less than 20p per kilo in the last year. So I think it is the 'threat' of cheap imports.

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'Productivity has gone up with the same number of sows. At the end of January the average slaughter weight was 84.25kg and that is the best the UK has ever had. If you kill 190,000 pigs a week and the slaughter weight goes up by a kilo, that's another 190,000kg of meat on the market every week. It's simple maths.

'I wouldn't mind so much if we had not seen a fall in consumption at the same time. We are trying desperately to increase consumption, but the only other solution is to reduce the supply, and to do that people need to go out of business, or pack up producing pork.'

The ongoing price decline coincides with a reduction in domestic demand for pork, which industry analysts attribute to a switch in consumer tastes towards more convenience-based foods, where pork does not feature as strongly as meats such as chicken or beef.

The AHDB's Pulled Pork advertising campaign, part of a long-term plan to rejuvenate the 'dated and jaded' image of fresh pork among younger consumers, has claimed some successes in improving sales of shoulder joints.

And the report says there are also opportunities in export markets, where volumes have grown slightly, especially with global export partners such as China.

Mr Watchorn said: 'Sales of pork are not good and we don't fully understand why. We are producing a great product, everyone says they like it, but they are not picking it up from supermarket shelves.

'The Pulled Pork campaign has made a difference and it did improve sales, but the decline has been going on for 18 months. I think there is a perception that pork is not versatile, and that is completely wrong You can do anything with pork that you can do with chicken. We are not strongly represented in the processed meal trade, unlike chicken and beef.'

The report says there is so far little sign of any 'herd rationalisation' in the UK, as the falling cost of production has helped to cushion some of the price falls in 2015.

However, it says pig prices are now at a level which is lower than average producer cash costs, so 'we are likely to start to see producers leaving the market and breeding herds becoming rationalised'.

Why are pig prices falling?

The declining prices paid for pig meat is due to factors including increased productivity creating over-supply, a diminishing domestic demand, the threat of competition from cheap imports.

Stephen Howarth, AHDB Pork's market specialist manager, said: 'The report has been produced against a backdrop where production continues to rise as efficiency and productivity improve and record weights are being seen.

'This all leads to more pig meat on the market. At the same time, demand for pork has dropped, even though the price is falling. UK pork is having to battle hard against cheaper EU imports, exacerbated by the weakness of the euro against sterling and a supply glut on the continent due to increased production and closure of trading routes to major export partners.'

Retailers' perspective

Bungay pig farmer Simon Watchorn said despite the alarming decline in the price paid to producers, the retail price of pork had not changed on supermarket shelves.

He said: 'I think it needs to be said that the UK supermarkets who said they would stock 100pc British pork have done so.

'But if the retail price stays the same someone else up the food chain must be making the money. There is enough money in the system, if the retail price is divided sensibly, for everybody in the chain to be OK – but that is not happening at the moment.'

Andrew Opie, director of food and sustainability for the British Retail Consortium, which represents most of the major supermarkets, said: 'Pig price and pork price are not in direct correlation as pig prices rely on export markets for the bits of the pig we don't like – that is depressed, as is the current overall market for pork. Secondly, those figures rarely pick up for promotions in store.

'Pig prices are currently poor but that is due to a number of factors including oversupply, a weak euro and a tough export market which impact on farmers but are outside the control of retailers. However, retailers continue to support British pig farmers through price promotion and marketing in store to try and increase sales.'