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June 18
Pig crisis is only just starting
Feed wheat was £100 a year ago, then it rose to £200. Now it has dropped back to £150. This poses a problem for the industry, which is faced with the task of explaining to retailers, processors and consumers why producers’ costs will not fall back proportionately.
Soya averaged £170 a tonne in the year to September but is currently trading at £285 a tonne and is expected to go to at least £290 a tonne, probably even higher. Other ingredients have also shot up.
• Fat blend has increased from £300 to £595, which adds an extra £9 to a tonne of pig feed.
• Phosphate has increased from £198 to £600, adding another £4.
• Methionine has increased from £1,500 to £3,486, which adds a further £4.70.
• Vitamin E has increased from £2.50 a kilo to £16, adding £2 to a tonne of feed.
The overall effect on pig production in Britain is that most producers will be paying half as much again for their feed in the next few months, which is why retail prices, and the percentage paid back to producers by processors, needs to increase.
Throughout the industry’s survival campaign so far, producers have highlighted the £200 increase in the cost of wheat.
What has not been explained — because up to now it hasn’t been necessary — is that any producer who has had to pay the full £200 is no longer with us.
Nearly all producers have faced swingeing increases in feed costs since last August, but most have had fixed term contracts for some feed ingredients, for some of the time.
But most feed contracts will be ending between now and autumn, which means producers are faced with having to lock into the next six or twelve months at higher prices.
As has been reported on this page in recent weeks, around 80 percent of producers would normally have locked into 100 percent of their feed requirements for next year by now.
But because they cannot see any point in committing to a loss, so far only 20 percent (if that) have locked in. Wheat has come down to c.£150 but producers say they need to see it at c.£130 before they will make their move.
This means, in effect, that the real pig industry crisis is only just beginning, and if the pig price doesn’t move forward quickly and substantially, the ten percent sow herd reduction predicted by BPEX will be greater.
Industry campaigners say that retailers need to understand that although feed costs make up about 65pc of pig production costs, wheat makes up only 45pc of a typical pig diet.
Other ingredients include barley (c.20pc), soya (c.15pc) and vitamins and minerals (c.20pc).
“We need to explain that the wheat price may be lower in the coming year but the pig feed price will be unchanged, if not higher, compared to the last nine months,” said Andrew Knowles, of BPEX today.
“Retailers must not expect that the industry can now accept a reduction in the pig price.”
The aim of the Pigs Are Worth It campaign continues to be to seek a rise in prices not as a result of shortage of supply caused by producers quitting, but as a result of the supply chain recognising the costs of raw materials has increased. These costs are likely to remain at at least current level for some time to come.
Last autumn, at a meeting in East Angia, processor John Norris said he had never seen higher costs of production influence the retail price, so there would have to be a reduction in output before the market responded and prices increased sufficiently.
“The fact is that we are now at that point - not just in the United Kingdom but in most of mainland Europe as well,” observed producer Chris Fogden last week.
This is not to say the Pigs Are Worth It campaign has been in vain. Speaking at the same meeting last autumn, BPEX chief executive Mick Sloyan acknowledged that getting better prices ahead of supply shortages was never going to be easy. “But let’s not just admit defeat and leave it to the market. Let’s have a crack at changing their minds in the first place,” he said at the time.
The Pigs Are Worth It campaign has successfully created an environment where prices have risen without (so far) creating consumer resistance. But perhaps its greatest challenge lies ahead...
Agricultural Wages Board outcome 'out of step with economic realities'
NFU has expressed disappointment at the outcome of the Agricultural Wages Board over the conditions underpinning the 2008 Agricultural Wages Order, which it feels is out of step with the economic environment in which the sector operates.
The decision by the AWB will lead to a four percent increase in the statutory pay rate for Grade One workers and a 4.3 percent increase in the statutory rates for workers covered by Grades Two to Six.
There were a number of side issues agreed on by both parties, the most significant being the recognition of the Team Leader category within the grade structure, as a further sign of the commitment of the industry to support career development.
NFU employment spokesman Bob Fiddaman said: “We are disappointed and believe the final decision does not reflect the level of increases being granted in other areas of the economy or the economic situation of the sector.
“The imposition of an agreement that not only sets Grade 1 remuneration above National Minimum Wage levels, but also grants a pay award significantly higher than the average pay growth in the economy, calls into further question the very existence of the board.”
As a result of the increases, the new statutory minimum rates are:
· Grade One: £5.74 per hour
· Grade Two: £6.26 per hour
· Grade Three: £6.89 per hour
· Grade Four: £7.39 per hour
· Grade Five: £7.83 per hour
· Grade Six: £8.45 per hour
After two days of negotiations, the parties failed to reach an agreement and the final decision was the result of a vote of the independent members of the board.
“The overall cost to the industry remains difficult to quantify at this stage but is estimated to be in the region of £60 million, depending on the extent to which the increases impact on wages already above requirements,” said Mr Fiddaman.
The new AWO will come into force on October 1 2008.
Minister applauds British pig industry
"We must support the pig industry’s campaign. I am sure that all Honourable Members will do so, because it produces a fine product and its animal welfare is good." — Jonathan Shaw, Defra minister.
Agriculture and the environment
Meeting the world’s growing demand for food and protecting the United Kingdom’s environment must go hand in hand, according to the NFU’s submission to the Environment Audit Committee. The committee, which is assessing the government’s target to halt the loss of United Kingdom biodiversity by 2010, heard the NFU make the case for a new balance between productive agriculture and wildlife protection, as well as farmers’ concern about climate change and invasive non-native species.
One of Britain's finest farming industries
"British pig farmers produce some of the world's best pork – and they need our support now more than ever before," says Natalie Mitchell, senior meat buyer at Waitrose.
"It would be an absolute travesty if Britain were to lose one of its finest farming industries at a time when Britain is sourcing large quantities of bacon from abroad."
Waitrose has been backing the industry's survival campaign and announced this week it plans to ban all foreign pork and bacon by the end of the year.
BPEX statement
The following BPEX statement has been issued, following criticisms of some industry standards by the animal rights group Animal Aid.
"We are concerned that allegations of cruelty should be made about English pig farms. We have obtained the names and addresses of the farms involved and have commissioned independent inspections as a matter of urgency as provided for under the farm assurance schemes which underpin the Quality Standard Mark. British pig farmers are justifiably proud of their welfare standards which are among the highest in Europe. We will be contacting Animal Aid to discuss this matter further once the results of the independent inspections are known."
• Meryl Ward will respond to criticisms of pig industry husbandry tonight on Look North at 6.30pm and Calendar at 6pm. Those who are outside the transmission areas of these regional programmes will be able to see the footage on playback by visiting the relevant websites later.
June 17
Animal rights group raids pig farms
Tomorrow, a daily newspaper will report that Animal Aid, which claims to be the United Kingdom’s largest animal rights group, has been covertly filming on a number of intensive pig units, including units in Lincolnshire and Yorkshire. Ever since the industry launched its British Pigs Are Worth It campaign, Animal Aid has alleged that conditions on some pig units are "a world away from those featured in the campaign". In Animal Aid-speak farrowing units are squalid and sows are trapped inside metal crates with no room to turn around or take a step forward. Tomorrow’s report in the Press can be expected to highlight barren slatted floors, an alleged dependence on medicines, and the use of inorganic toys instead of manipulable material. According to Animal Aid, "While pig farmers bemoan their lot and beg the public to ‘Save our Bacon’, pigs are suffering untold horrors on British pig farms. The images presented by the industry do not remotely resemble the conditions we have witnessed in the years we have been investigating pig farms.”
Cattle up, pigs down
Cattle futures rose to their highest in over two decades in the States yesterday, as the surging cost of corn renewed concern that feedlots will reduce the number of animals available for beef production.
Pigs fell back slightly but are still 30 percent higher this year. The price was expected to fall because of increasing production costs and over-supply, but high exports and rising consumer demand for pork, which is cheaper than beef, have so far confounded the predictions of economists.
Soya price crisis will hit this year
The European Union’s zero tolerance policy on GMs will start to bite later this year, causing the price of soya to soar to unprecedented levels.
A report by a group of European food industry lobbying organisations draws a parallel with rice, where small traces of an unapproved GM variety in imports is estimated to have caused a 90-95pc drop in imports of United States rice, costing the rice milling industry £40m-£88m in the past 20 months.
The report forecasts the presence in the United States soya crop of GMOs not yet authorised in Europe will cause disruption before the end of the year. Crushers will be hit first.
Shipments of soya from the United States containing traces of the variety Round-Up Ready 2 will be refused. North American suppliers will turn away from the European market, forcing crushers to look for alternative sources, probably from Argentina and Brazil.
They may also have to look for other sources of oil, such as rapeseed oil, which would add £120m to their raw material costs.
Two months ago Brussels promised to find a ‘technical solution’ by summer to the issue of low-level presence of non-approved GMOs in feed.
Brussels has since explained that its words should not be taken to mean that it really will find a technical solution by summer.
It is not expected Roundup Ready 2 soya bean will be approved in Europe for several years.
Not everyone agrees with the proposition that soya prices in Europe will hit unprecedented levels if United States soya is no longer available. There have been counter claims that the world is "swimming in soya".
June 16
NFU calls for beef and lamb increases
NFU is calling for further increases in farmgate prices for beef and lamb to safeguard long term sustainability of the sectors. This follows the release of the latest Eblex business pointers report which shows that beef finisher units faced a 17 percent rise in costs in the year ending March 2008. In the same period sheep breeding flocks saw sales drop by 12-13 percent.
Vion signs agreement to buy Grampian
Vion has done the deal with Grampian. The takeover, which will be submitted to the competition authorities, sees the Dutch company strengthen its presence in Britain, where it is already active in the fresh pork, bacon and sausage markets.
Grampian will be integrated into a new Vion division - Vion UK. This division will be managed from the United Kingdom and led by Ton Christiaanse who will be appointed chief executive.
Peter Barr CBE (pictured), formerly chairman of the Meat and Livestock Commission, will be appointed non-executive chairman of the board of Vion UK.
Vion is one of Europe's largest food companies. In Britain it has four businesses:
• Key Country Foods is a retail bacon processor.
• J & J Tranfield (where it is a majority shareholder) is a manufacturer and supplier of pizza and sausages.
• Vion Food UK Ltd sells bacon, fresh pork, beef and convenience products.
• Oerlemans Foods sells frozen vegetables, potato products and fruit.
Vion produces high-quality foods and ingredients for humans and animals. The group consists of three divisions: Ingredients, Fresh Meat and Convenience. Annual turnover is more than £13.5 billion. There are 18,000 employees worldwide.
Vion is a non-listed company and has a single agricultural shareholder: the Dutch Southern Agricultural and Horticultural Farmers Union, which has 18,000 members. Head office is in Son en Breugel in the Netherlands.
"Together with Grampian's management we want to further intensify the cooperation with our retail clients by investing in Grampian, sharing knowledge and developing partnerships," said Daan van Doorn, Vion chairman.
Grampian Country Food Group Ltd was founded in Scotland in 1980 and has developed into one of the nation's leading food companies, supplying the major multiples with chicken, pork, beef and lamb. It employs 17,500 staff (of which 4,500 are in Thailand), with an annual turnover of £1.7 billion.
Cash for training
BPEX Ltd has just secured funding from Yorkshire Forward to help with staff development in the Yorkshire and Humber pig industry. The funding will provide support to the industry whilst they continue to build on existing skills and knowledge.
With pig production still withstanding heavy losses, investing in staff development is not on the top of producers' lists, but BPEX hopes this funding will help to continue to support this important area business.
According to Tess Howe, BPEX skills development manager: "Stockmen who have attended some of the training workshops we have run across the country have really benefited and appreciated the fact that attending them contributes to a recognised qualification. Equally, the number of companies engaging in management level training is encouraging, as they realise this is an area that will help raise unit productivity whilst improving staff motivation and retention."
If you are interested in staff development, need support in ongoing programmes or provide to training events, BPEX may be able to help. Call or email Tess Howe, 07779 321078.
June 15
Denmark’s loss is Germany’s gain
Trade in live pigs to Germany dropped 12 percent in the first quarter of this year, compared with a year ago, mainly because fewer slaughter pigs pigs are being sent from Holland. However imports of live weaners from Denmark have increased, partially offsetting the drop. The live pig trade with Holland could recover later this year; Germany’s processing costs are cheaper than Holland’s. Many of the three million slaughter pigs imported from the Netherlands each year are shipped back as meat.
June 14
Porkwatch results for May
British share of pigmeat on retailers shelves remains fairly static. Around three-quarters of pork is home-produced which, against a background of tightening supply, can be seen as a positive. Bacon and ham shares have nudged forward in recent months but still refuse to break the 40pc barrier. The best overall movers this time are Aldi (Quality Standard Mark pork), Budgens (Quality Standard Mark bacon and sausage) and M&S (bacon, ham and sausage).
Saints and sinners — fresh pork
Based on percentage of British facings
EXCELLENT 1. Budgens, Waitrose, M&S, GOOD
2. Co-op
3. Morrisons
4. Sainsbury’s, BELOW AVERAGE
5. Tesco
6. Asda, POOR 7. Netto
8. Somerfield, DISMAL 9. Aldi
10. Lidl
Saints and sinners — bacon
Based on percentage of British facings
ABOVE AVERAGE 1. Budgens
2. Waitrose
3. M&S
4. Tesco
5. Co-op
6. Sainsbury’s, BELOW AVERAGE 7. Morrisons
8. Asda
9. Somerfield
10.Netto
Saints and sinners - ham
Based on percentage of British facings
ABOVE AVERAGE 1. Budgens
2. Waitrose
3. Sainsbury’s
4. M&S, BELOW AVERAGE 5. Tesco
6. Somerfield
7. Asda
8. Co-op
9. Aldi
10. Lidl
11. Netto
Saints and sinners - sausages
Based on percentage of British facings EXCELLENT 1. Budgens, ABOVE AVERAGE 2. M&S
3. Waitrose
4. Sainsbury’s, BELOW AVERAGE 5. Tesco
6. Co-op
7. Somerfield
8. Asda
9. Morrisons
10. Netto
11. Lidl
12. Aldi
Waitrose, M&S, Budgens Budgens have seen positive movements in Quality Standard Mark use on bacon (77pc) and sausages (54pc) whilst retaining their overall support in all categories. M&S are at 100pc on pork, but are showing record gains in British shares of bacon (69pc), ham (68pc) and sausage (94pc). Waitrose continue to be consistently high.
Morrisons Fresh pork successes continue and whilst there are few movements in the other products it is hoped these will increase in future months as the Spalding plant comes on line and is expanded.
Sainsbury's Overall the British situation is static, but increases in facings of Quality Standard Mark continue on pork and sausages.
Co-op Despite assurances of continued support for British, Porkwatch auditors have recorded drops of pork (83pc) and bacon (39pc) identified as British. Whilst use of the Quality Standard Mark on pork is still excellent, and it is not being suggested that products are not British, the identification of British is being omitted.
Tesco A slight improvement in pork but a continued decline in bacon. Within this, levels for Quality Standard Mark are following the same trend.
Asda An erosion of British share of pork can be seen, to 70pc, which is slightly below the market average. On bacon there is a slight fall in British, but a slight increase in use of the Quality Standard Mark. Ham sees a slight rise in British as a result of the launch of a new standard-plus range of regional British products.
Somerfield Apart from a slight resurgence on sausages there is little progress and as previously reported an imminent sale would be good for the pig industry.
Hard discounters (Aldi, Lidl, Netto) Aldi has recorded a 68pc British figure for the first time with 77pc of this using the Quality Standard Mark, a big breakthrough. For Lidl the share of sausage identified as British continues to fall, to 30pc. Last period’s success on pork in Netto has been lost with share of British returning to 41pc, but growth can be seen in sausages, up to 39pc.
l NPA Trade Directory l Mechanical data l National Pig Association l Defra l BBC weather l
l Environment Agency l Food Standards Agency l Quality Meat Scotland l Scottish Executive l
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