28 August 1998

Prices disguise poor pig values

By Philip Clarke

RETAILERS are failing to pass on the dramatic drop in pig values to their customers, blaming rising labour and packaging costs for shop prices not much different to those of 12 months ago.

Figures published by the Meat and Livestock Commission reveal that retail prices are just 12% lower than they were when the market peaked in June last year. Over the same period, producer prices have slumped by a massive 55%.

"There is a world of difference between what a farmer gets and what a retailer pays," said a spokeswoman for the British Retail Consortium.

"Supermarkets would never buy a whole carcass, but only certain cuts. It is an unfair comparison." The fact the gap was widening reflected the rising cost of getting product on the shelf, including labour, packaging, labelling and promotion.

The extent of retail price falls depends on the cut, with loin chops typically 18% less at £4.20/kg, boneless legs 15% lower at £3.67/kg and boneless shoulders 11% down at £3.10/kg. Loin steaks are the most expensive cut at £5.31/kg this week – ten times the spot price for slaughtered pigs.

"Normally the gap between producer and retail prices hovers between 250% and 300%," says Signet consultant Derek Wells. "But last week it went over 400% for the first time."

He dismisses retailer claims that packaging and labour costs justify the gap. "I could make exactly the same argument from the producer side. True, feed prices have fallen. But other variable costs, labour costs and fixed costs have all increased – especially with the change to loose housing systems."

Meanwhile, UK farmers have not benefited from the increase in export subsidies announced in Brussels at the start of this month. While other member states have seen prices stabilise, UK values dropped another 10p/kg dw during August.

However, there is growing concern on the continent over the recent devaluation of the Russian rouble, which will hamper the competitiveness of EU exports. Last year Russia accounted for 30% of all Third Country trade. Following problems in the Japanese market, that was expected to rise to 50% this year, according to Karsten Flemin, of Danske Slagterier in Copenhagen.

The effects have already been seen in the German market, where prices have slipped about 7p/kg in the past ten days.

"This will be reflected in the rest of Europe in the next few weeks," predicts Mr Flemin.

&#8226 Brussels has turned down Irish requests for private storage aid to help take surplus meat off the market. The commission fears the move would put further pressure on the trade when product comes out of stores. &#42