Danish Crown is to pay its producers in Denmark the equivalent of an extra 7p a kg to encourage them to supply pigs onto the domestic market rather selling them on, for finishing in Germany.
The move, which was agreed by Danish Crown’s management last night (November 2), is set to apply to prices right through to 2021.
Describing the development as an “ambitious promise” to its suppliers, the company said the new pricing strategy will increase the “settlement price” paid to producers by a further DKK 0.60/kg (7p/kg) compared to an EU index of settlement prices, adding that it had already exceeded that price by more than DKK 0.20 (2p) in the past year.
“The new strategy is to enable Danish Crown to increase future earnings, for the sake of the company’s owners (farmer members),” said Danish Crown’s chairman, Erik Bredholt. “We want a stronger, more profitable and focused company which, between now and 2021, will be able to pay settlement prices that are an additional DKK 0.60 per kg above the EU index.”
In future, therefore, Danish Crown’s settlement price will be benchmarked at all times against a basket of pig prices from the other four large pig producing and pig exporting countries in Europe, with the German pig price being given a weighting of 44%, while pig prices in Spain, France and the Netherlands will account for 28%, 17% and 14%, respectively.
“In the past, we have almost exclusively compared our prices with the prices paid in Germany, but looking at a single country does not, I feel, paint the right picture, neither for our owners nor the Danish Crown management,” said Mr Bredholt.
“One of the biggest challenges facing Danish Crown is the decline in the supply of slaughter animals in Denmark, where supplies are dropping by 2‐3% a year, a diminishing supply of slaughter animals which is basically a cost for the company.
“If we can guarantee a settlement price for pigs which makes it attractive for our cooperative owners to produce pigs in Denmark, I am convinced that we will see an increase in the supply of slaughter pigs and thus job creation at our slaughterhouses.”
The company added that it will reveal the “specific initiatives” that need to be implemented to realise its ambitious targets, on Wednesday next week, November 9, following the presentation of its new strategy to the group’s employees.
Headline image shows Danish Crown’s slaughterhouse in Ringsted, Denmark, which stopped evening shift working in August this year due to a “renewed decline in the supply of pigs for slaughter”.