11 June 1999

Bad year for pigs takes shine off dairy profits

IMPROVED profitability in the dairy sector was more than outweighed by a disastrous year for pigs, contributing to a net decline in profits for UK food and distribution giant, Unigate.

Fresh foods, which includes the companys Malton bacon business, saw operating profits slump by 18% to £60m on slightly reduced sales of £1.23bn in the year to March 31.

Unigate blames overproduction of pigs throughout Europe and the loss of the Asian and Russian market. "This resulted in a period when the market price of pigs fell below the contracted price paid by Malton, costing the company about £5m in the first half of the year," it says.

Profits were further impacted by the loss of revenue from bone and offal sales, while operations were also disrupted by the serious fire at the Ballymoney plant in Northern Ireland.

The company anticipates further pressure in the pig business for the next six months, and this week threatened to import more pigmeat from the continent if UK prices continued to strengthen.

Unigate also suffered in its St Ivel chilled food sector, where tough competition led to increased marketing expenditure.

But the dairy sector flourished, with profits up 6.4% to £43m on 9% lower turnover of £529m. "In liquid milk, a slight fall in volume was offset by a reduction in costs. The rate of decline in doorstep sales again improved, additional business was secured from supermarkets and the butter/powder business performed well."

Overall group operating profit fell 4% to £133m on unchanged sales of £2.3bn.

&#8226 Suggestions that Unigate may turn to the Continent for cheaper pigs have been condemned by NFU president, Ben Gill. In a meeting with farm minister, Nick Brown, he said such a move would be very damaging to UK pig producers. "It is essential that buyers continue to support the high quality and welfare standards that UK pigmeat offers, and that the public is demanding." &#42

Banker says Scots outlook rising, but SAC begs to differ

By Allan Wright

CONFLICTING views on the health of Scottish agriculture emerged this week.

A leading banker claimed that after two years of falling incomes, rising debt and depressed prices, the outlook was beginning to improve.

But a Scottish Agricultural College report on farming in Lanarkshire painted a picture of serious decline and social deprivation. It is the fourth regional report from the college and all have told the same story. The file on Lanarkshire warns of future job losses and the collapse of many farm businesses. Profits had fallen by a half in one year and two-thirds of farms in the north of the country made less than £10,000 in the past year.

North Lanarkshire council officials have forecast a steep rise in the number of farming families claiming family income support.

But Lloyds TSB agricultural manager in Scotland, Donald MacRae, says falling interest rates, rising output prices and stable costs over the past nine months indicate the beginning of a recovery in farming fortunes.

"Farm businesses are benefiting from a sharp reduction in the cost of borrowing and from the current low level of retail price inflation. All the indicators are positive, albeit that prices are recovering from very depressed levels," he writes in the banks latest agricultural economic bulletin.

Mr MacRae reckons world price prospects for farm produce are set to rise and quotes Organisation for Economic Co-operation and Development figures to support the argument. The OECD forecast is for the butter price in 2004 to be a third higher than in 1992, with an 18% rise for milk powder and a 5% increase for beef and veal.

Grain prices are expected to recover to 1992 levels within the next five years with pigmeat the only commodity failing to catch up.

"Scottish farmers will feel the benefits of the predicted changes in world product prices. The UK joining the euro would also have a significant effect on input prices, particularly machinery." &#42

Irish wary of GB meat label action

TARGETED action by British farmers against supermarket distribution depots, to encourage their loyalty to home-produced food, has played a significant part in keeping Irish beef out of the market, according to Irish farming journalist, Matt Dempsey.

Speaking at the Royal Bath and West Show, he added that Irish farmers viewed "with some trepidation" British efforts for clearer labelling of meat.

Another concern was the likely increase in intensive cereal-fed beef in Britain once the Calf Processing Aid Scheme ended.

Mr Dempsey suggested that the k350-k400 a cow subsidies in future would be used to wind down EU beef prices to within 20% of the world price. Beef producers with excessive costs, or those not eligible for EU subsidies, would need to re-examine their enterprises.

Sheep farmers should also prepare for tougher times after CAP reform. Prices would be dragged down by cheaper beef, while ewe premium would not fully compensate. &#42

Richardson off board

NORFOLK farmer and FW columnist David Richardson has been forced off the board of Sentry plc, where he has been a non-executive director since 1994.

The company was given a days notice by one of its main shareholders, Loveden Holdings, that it was intending to vote against three items, one involving the auditors, KPMG, and two on the issue of shares. But half an hour before the AGM, this was extended to include the re-elections of Mr Richardson and finance director, Steve Farrar.

It is understood that Mr Richardsons position on the board was laid on the line as a result of poor trading figures by Sentry Farming, which showed an operating loss of £1.067m for 1998.

"I took the brunt of a collapse in prices, terrible weather, and farming contracts that were signed up three years ago," Mr Richardson told farmers weekly. He was made aware of the move only 10 minutes before the meeting started.

Mr Farrar and KPMG survived the acrimonious shareholder confrontation. &#42