The boss of one of the country’s leading pork processors has warned that demand for British pork must increase urgently in order to sustain current pig prices.
Recent weeks have seen British pork supplies becoming shorter as a result of the gradual depletion of the national sow herd, which fell by 18% in England in the year to June, a reduction of 50,000 sows, according to Defra’s latest Agricultural Survey. This trend is only likely to increase as we move towards Christmas, a reality reinforced by industry data.
However, at the same time, demand for British pork is weakening, with volumes of cheaper imported pork on the rise. AHDB data shows that, in the first seven months of 2022, UK pork imports were up by nearly 80,000 tonnes, around 20%, compared with 2021, albeit compared with a period when UK-EU was affected by new Brexit rules.
Pig prices continue to rise slowly – the SPP has finally breached £2/kg mark – and costs have come down from their early summer peak but remain high and, on average, above the pig price, according to AHDB estimates.
Karro Food Group chief executive Steve Ellis said this should not be taken as a sign that things are returning to normality. He revealed that Karro is set to ‘correct’ its weekly price, which it can no longer sustain.
Mr Ellis said the pig price has been supported ‘over and above the market level’ by processors and retailers for a number of months now, as parts of the supply chain have responded to the additional costs producers have faced.
However, the impact of that has been to increase the price of some British pork lines in store, which has prompted increasingly price-conscious consumers to seek out cheaper lines, which invariably means more imported EU pork products are being sold.
“If you look at the data, European imports have flooded the market, leading to a continued surplus of British pork, despite the contraction of the UK pig herd,” Mr Ellis said.
He described the price gap between UK and EU pork, particularly in relation to the UK’s three main importing competitors, Denmark, Germany and the Netherlands, as ‘massive’, even though it has closed in recent weeks.
“We have seen differences of 46p/kg – that is a 25% gap, whereas typically in the past the difference has been around 10-20p/kg,” Mr Ellis said.
“There has been a massive swing towards European pork because of this disparity in price. Kantar data shows retail pork is down 11% over the year to June, and imported pork has increased by more than 20%. So, if the UK-EU share of pork consumption was 50;50 in 2021, the rise in imports will have moved it to around 65:35 which, depending on a number of variables, suggests a 25% decline in demand for British pork .
“At the moment, the price differential is just too big, and the danger is that British pork is becoming uncompetitive. European prices are rising, but nowhere near enough to close the gap.”
He revealed that Karro was about to reduce its contribution price, which along with the SPP and the Weekly Tribune bacon price, determines what its producers receive. “With the real spot value of pigs well below the Tribune GB Spot Bacon average declared, Karro unfortunately will have to correct this, using their weekly price,” he said.
“So, the overriding message is that we have to sell more British pork, or the price will have to drop.”
With cost of production still a massive drain on the pig sector, the concern is that any price drop could accelerate the ongoing contraction of the industry.
Mr Ellis said pork buyers needed to take a long-term approach. “We can easily sell more British pork,” he said. “Consumers are voting with their wallets, and as the value tier is gaining market share, that is driving the switch between British and European pork and leaving too much British pork on the marketplace.
“But that’s a short-term strategy, which could backfire when you get to 20% British pork and we can no longer sustain the current number of abattoirs or industry infrastructure.
Better functioning supply chain
Mr Ellis has recently been a vocal advocate of reform to bring about a better functioning supply chain. He pointed out that while Defra has launched its review of the pork supply chain, it does not cover one of the major players within it – the retailers.
“That is a long-term process. The immediate priority is that we need to shift more British pork through the chain to maintain those prices and give producers real long-term hope for the future.
“At Karro, we are trying to find the solution to support farmers and deliver a viable industry in the long-term. It is in our best interests to have more British pigs going through our plants – that is also best for our farmers, retailers, consumers and, above all, the nation’s food security.
“But unless there is a fundamental shift in the amount of British pork sold, and less European pork is imported, the situation is not going to improve, particularly for independent producers.”
NPA chief executive Lizzie Wilson said: “The NPA is absolutely 100% behind the message that we need to move more British pork through the supply chain, starting with the big retailers who have the power to make the difference.
“We welcome the efforts made so far by some players in the chain to back British pig farmers and to invest in the pig price to support desperate producers.
“But demand for British pork is floundering in the face of pressure on shoppers pockets and cheaper imports – if this continues, the contraction we have seen in the sow herd in the space of a year will just continue.
“We urgently need to stem the bleeding. Consumers can help by actively seeking out high quality, high welfare, environmentally-friendly Red Tractor British pork – and we urge retailers, processors and buyers from the foodservice sector to prioritise British pork over imports, wherever possible.
“Pork is still very competitively priced and provides excellent value for money as budgets are increasingly being squeezed.”
Mrs Wilson also stressed that any price cuts for British pig producers now could be catastrophic at a time when costs remain sky high.
“Pig producers lost £50/pig in the second quarter of this year and have endured cumulative losses of £600m since late 2020. Price cuts now could be the final straw for many,” she said.