The EU Reference pig prices, published by AHDB Pork on a weekly basis, overstate the UK price by 5-6/kg, relative to the industry’s EU competitors, analysis suggests.
The levy body has now confirmed suspicions, voiced by National Pig Association chairman Richard Lister in last month’s Pig World, that the European Commission’s price comparison is misleading and does UK farmers no favours.
The mid-October EU Reference prices (see below) suggested the UK price was lagging just 1p/kg behind the average EU price. In reality, it appears, the gap is more likely to be 6-7p/kg.
AHDB Pork is currently carrying out work to understand all the differences in the way UK and EU prices are set.
Its specialist marketing manager Stephen Howarth said the he main issue when comparing prices across EU countries is that the reference prices are ‘gross prices’, before deductions or retrospective bonuses.
Deductions and bonuses
In some countries, such as the UK, significant amounts can be taken off the price received by producers, such as for transport, meat inspection, classification and levies. In other countries, some or all of these are paid for by processors.
Furthermore, in countries, like Denmark and France, many producers receive annual bonuses from processors, which do not show in the weekly price.
Initial analysis suggests the reference price comparison appears to overstate the GB premium (or understate the deficit) by around 2-3p, Mr Howarth said.
But this is not the full story. The GB/UK price includes premium pigs, mainly outdoor-bred, which face much less competition from EU pork than ‘standard’ indoor-bred pigs. Based on comparisons between the APP and SPP, these premium pigs will inflate the reference price by around 3p, on average.
This suggests the UK reference price should be reduced by around another 3p, meaning, overall, it should be an estimated 5-6p/kg lower ‘to provide a more valid like-for-like comparison’.
Mr Howarth said: “This estimate will be refined further once we have completed further analysis.
“Nevertheless, it would mean that for 2016 to date, GB and EU prices were roughly on a par, on average, and since June, EU prices have been even further ahead of GB ones than indicated by the reference prices.”
Since June, AHDB has been reporting that UK pig prices have fallen behind the EU average price. This represented a significant change from last year when UK prices averaged almost 30p/kg higher than EU levels.
In reality, the 2015 premium for UK pigmeat was more likely to be in the region of 24-25p/kg, when the differences in the way prices are calculated are taken into account.
EU reference prices, October 17 (p/kg)
EU average 143.48