African Swine Fever: UK pig industry demands answers on low prices
As EU prices rise on the back of African Swine Fever (ASF) in China, UK producers wanted answers on why the price they received was lagging behind.
Alex Black
Pig processors have been accused of artificially keeping the UK pig price low as European prices surge ahead of the UK on the back of increased demand from China.
UK prices usually run about 10 or 15p/kg above EU levels, with British standards leading to a premium on price. But European prices have jumped on the back of the declines in Chinese production from African Swine Fever (ASF), overtaking the UK price.
The standard pig price (SPP) started to increase last week but remains below last year and crucially, below the EU price.
And the National Pig Association (NPA) was demanding answers and transparency from the processors as to why they had not seen price rises. Dr Zoe Davies said members were ‘very frustrated and angry’.
Due to industry consolidation, the majority of the industry was in the hands of three processors, and as they owned their own pigs Dr Davies said they should understand the challenges producers were facing.
“They feel like processors have abandoned them and it looks like it is deliberate,” she said.
Contracts
Dr Davies said as many contracts used an element of the SPP in their pricing it seemed they were taking advantage of this to keep prices low.
She gave the example of November and December last year, when processors were rolling over pigs, leading them to fall out of specification. The producer was then paid less, plus some retrospective payments for compensation, which were not recorded in the SPP.
She added producers were powerless to ‘play the market’ as they needed cash and processors held the power.
Retailers had been expecting the processors to come and tell them they needed to pay more, as their European suppliers had already done so, but they had only just done so. She also questioned why they had not been proactive in offering the food service British origin, as European prices rose.
Dr Davies called for more transparency from the industry so producers had a better understanding of how it operated.
Scotland
NFU Scotland Pigs Chair Jamie Wylie said: “Pig prices are lower in the UK due to high numbers of pigs available to abattoirs following low numbers of pigs taken over the winter period. There have been a number of breakdowns in abattoirs in the UK which perpetuated this.
“Pig numbers on farm should be back to relatively normal now meaning supply has tightened so price should be on the increase. That was certainly the case last week.
“The other thing which has been reported to have caused a depressed price is stockpiling for an unknown Brexit.
“Abattoirs had been killing and cold storing more pork than they needed in the period before the official Brexit deadline. While this helped remove pigs from farm it also kept the price down.
“The UK is about 50 per cent self-sufficient in pork so a no deal could potentially mean short term shortages in pork for consumers. There have been reports that some abattoirs have been renting extra cold storage space to ensure a continued supply in the case of a no deal Brexit.”
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Stockpiled pork compounding price woes
Pork in storage could be responsible for some of the delay, with the UK industry having stockpiled European imports in preparation for Brexit.
AHDB lead analyst for livestock Duncan Wyatt suggested as the Chinese had begun to demand more, the industry was working off the storage volume.
He added it was also somewhat down to the way prices were calculated with the SPP in contract prices.
“You would hope that the UK price cannot stay below the EU price. It does not make any sense, at some point we will catch up," said Mr Wyatt.
He added the SPP had increased 1p/kg on the week ending April 27 as the other elements in contracts pushed the price up.
Mr Wyatt said: “It should start to feed through, the outlook is positive."
Nick Allen, British Meat Processors Association, said he was in no doubt the price would start to follow Europe.
Mr Allen said: “There is a Brexit factor, people have had more pork in stock.”
He said there was also the impact of shorter weeks with the bank holidays.
Mr Allen added it was important the retailers acknowledged the situation and accepted prices may have to increase.
“They need to get an understanding this is not the normal up and down blips, it is absolutely massive,” he said.
He added it would have a worldwide impact on the entire protein market, not just meat, highlighting China’s demand for soya would drop which could reduce pig feed prices.
There were also ripples further afield with recent warnings of shortages of blood thinning drug heparin, which was made out of pig intestine.
’Shortcomings in pig pricing’
Andy McGowan, chief executive of Scottish Pig Producers procurement co-operative, said the present situation had exposed some shortcomings in the way the SPP was made up.
“We need to sort this out so that it gives a more accurate reflection of the market.
There are a number of arrangements on bonuses and penalties which are not reflected in the SPP,” he said.
Mr McGowan also pointed to an EU Directive coming into force now which should ensure better price transparency.
He added: "To be fair to processors there was some confusion over the original Brexit date on March 29 with some stockpiling going on to make sure there were adequate UK supplies if imports were blocked. These stocks should now be cleared."
He felt it was inevitable that UK prices would rise and that it was impossible to buck the trend.
Global impacts on UK pig producers
Changes in the prime pork market have highlighted the complexity of the red meat markets and how international trade, animal health and consumer demand relate, according to Quality Meat Scotland.
Stuart Ashworth, QMS director of economic services, highlighted the impact of ASF in Eastern Europe which led to Russia banning imports in 2014 and heavy culling in affected areas.
“While alternative non-EU markets were found for most of the product that previously went to Russia, there was some oversupply in Europe,” he said, adding this had resulted in prices dropping across the EU.
China and Asia were the destinations for much of the product, but increasing Chinese production reduced its requirement for imports.
China
However, the Chinese outbreak has now changed the complexion of the market once again, said Mr Ashworth.
This had already hit international prices, with EU pigmeat exports to China increasing by 13 per cent in January and February leading to the rise in prices, although this had not been reflected in Scotland and the rest of the UK.
The UK was also affected by being a major importer of European product but the UK price was now beginning to respond.
However, a further challenge was consumer demand for pork products.
While Kantar Worldpanel data suggested modest growth in the quantity of pork products purchased, this was driven by growth in lower value costs, such as shoulder roasts and bellies, at the expense of the higher value cuts.
“This situation is limiting the ability of processors to pay more to primary producers,” said Mr Ashworth.
He added the situation had shown the destabilising impact disease caused locally and globally, adding taking all the measures possible to prevent diseases like ASF entering the country was vital.
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