Pig price gap continues to widen

THE GAP between farm gate and retail pigmeat prices is getting wider, according to a study from the Meat and Livestock Commission.

Covering the year to December, it shows that while the per kilo price for pigmeat has slipped, retail price have increased by 6.3%.

In December 2003 the GB Euro Deadweight Adjusted Pig Price (DAPP) averaged 101.7p/kg, but a year later the DAPP average was 2.5% down at 99.2p. 

Most spot and contract pigs are sold on prices closely linked to the DAPP, and this provides a ready overall industry price indicator for the periods in question.

Despite this fall in producer values, the average retail price of eight sample pigmeat cuts and products rose by 6.3% over the same period.

The widening farm-gate-to-retail price spread is mainly due to the increasing volume of imported meat, which is undercutting the domestic market.
Imports of fresh and frozen pork for the first nine months of 2004 rose by 5%, and are now believed to account for over 60% of domestic consumption.

And because of the relatively small size of the UK industry – the domestic herd accounts for just 3.9% of the EU pig population – most of the benefit of retail price rises seems to have been passed to importers.

Further downward pressure on UK pig prices is expected from EU producers, who have seen prices fall since Christmas.

Many UK producers are already struggling to achieve cost of production figures of less than 100p/kg.

The last time that UK pig prices rose above 104p/kg was in 1997 when they averaged 111p/kg. Since then, annual returns have averaged 78-94p/kg, and prices have not risen above 103p.

If the EU price slide continues, UK processors and manufacturers could switch to greater volumes of cheaper imports, snuffing out hopes of a significant UK price recovery until spring.

Falls in producer prices will also lead to a further widening of the farm gate/retail gap unless retailers are also prepared to cut their prices to stimulate consumer demand.