Farm assurance helps maintain UK pig price premium
UK pigmeat values have continued to improve despite recent falls in EU mainland pig prices.
The latest Deadweight Average Pig Price (DAPP) stands at 171.49p/kg, a rise of more than 10% compared with its value a year ago, which for a 78kg deadweight pig is worth about £12.50 a head.
Over the same period, feed costs have fallen sharply with average ex-farm spot prices for feed wheat published by Farmers Weekly at £154.10/t. In early October 2012, ex-farm feed wheat was trading at £190/t.
UK pig pricing systems have also undergone a major overhaul with only two processors – Tulip and Gills – still announcing what are known as weekly “shout prices”.
Cranswick, Karro and Woodheads have all switched to alternative pricing systems, many of which include spot and DAPP elements rather than the single weekly announced self-set shout price.
As a result, pigmeat contract pricing systems have become more proactive rather than reactive, with producers hoping this will lead to stronger competition between plants all looking to meet rising demand for UK-produced, farm-assured pigmeat.
Supply chain auditing
Following the horsemeat scandal at the start of this year, retailers are looking for more UK produce providing this comes with Red Tractor or Freedom Food accreditation and can be accurately audited throughout the pig supply chain.
Origin testing
Recent improvements in isotope testing methods allow the origin of pigmeat to be traced on a country-by-country basis. This was highlighted when a BBC news reporter made a trial purchase of pork chops labelled as British pork, bought at random from a Tesco Salford outlet.
A new testing system introduced by the British Pig Executive (BPEX) – Stable Isotope Ratio Analysis (SIRA) – to double-check the authenticity of pork labelled British revealed that this product was highly unlikely to have come from the UK and had been incorrectly labelled.
Although this mislabelling may have been due to human error, new isotope technology means that precision in-depth auditing can take place on all meat products to determine their source.
The National Pig Association (NPA) and BPEX have campaigned for many years for clearer point of sale labelling (see right) and also for the need for UK pig producers to receive a premium price to reflect the significantly higher welfare standards and associated production costs than those throughout much of mainland Europe.
The need for the UK premium to remain comes at a time when EU mainland pigmeat prices have been in decline, falling from a peak of 153p/kg in equivalent sterling terms in late July to 146.5p/kg today.
This trend is confirmed by sharp falls in prices quoted for cull sows by UK export abattoirs. Sow prices have dropped by 15p/kg since July, but some stability may now be returning to the EU mainland pigmeat market where breeding herd sizes are reported to be falling.
German and Spanish herds make up about 40% of EU pig numbers and have seen falls of between 5% and 7% in the past year. EU pig output is forecast to fall by about 3% this year, caused to some extent by the 1 January 2013 stall and tether ban affecting some more marginal units. Continental producers who have converted to loose housing are not expecting to see a significant drop in overall productivity.
Tight supply
Supplies of UK pigs remain tight at a time when imports have reduced and the English breeding herd was down by 1.4% in June compared with 12 months earlier. World cereal production is set to rise by almost 8% this season.
Larger numbers of Freedom Food-standard weaner and slaughter pigs are also having the effect of increasing average prices due to the significant premiums being paid for high-welfare pigmeat production.
With an estimated 40% of all UK pigs now produced on outdoor breeding systems, most of which are operated to Freedom Food standards, premiums paid for high welfare pigmeat should feed through to higher weaner and slaughter pig average prices to the benefit of UK producers as a whole.
Premium prices of up to 10p/kg are available for Freedom Food finishers. Weaner values have also moved ahead reflecting higher price levels. The latest Agricultural and Horticultural Development Board (AHDB) 30kg ex-farm weaner average now quoted at £54.26 a head, a rise of £14.50 a head compared with prices in October 2012.
Providing that a viable balance can be maintained between feed costs and pig prices, and with signs of falling European mainland production levels, UK pig producers should be facing a period of greater stability.
There should be a return to profitability within the industry for the remainder of this year, especially if retailers are prepared to continue to source significant volumes of UK farm-assured pigmeat rather than switching to cheaper imported replacements.