Pig Farming

Greg Knight Excerpts

Wednesday 23rd March 2011 Westminster Hall

[Mr Richard Bacon (South Norfolk) (Con)]

It is a great pleasure to serve under your chairmanship, Mr Bayley. I am delighted to have secured this debate, as we have reached a critical juncture in the British pig industry. I am also particularly pleased to see the Minister in his place, as I know that he is a friend and ally of Britain’s pig farmers and has taken a lot of trouble to understand the problems faced by the industry.

We should not underestimate the size of the industry. The value of pork retail sales in the UK is about £8.7 billion, outpacing chicken, beef or lamb. This is an important industry, but I am sorry to say that it is in trouble. Just three weeks ago, pig farmers from our constituencies and across the country flocked to Westminster to draw the Government’s attention to the plight of their industry. Many MPs will have signed the 16-foot sausage in Whitehall and heard the rousing rendition of the industry anthem “Stand By Your Ham”, all in support of the cry, “Pigs are still worth it!”

I say “still worth it” because the Minister and other colleagues with long memories may recall attending the 2008 “Pigs are worth it” rally. Like this month’s rally, the 2008 gathering was a response to a sharp increase in feed costs that left the industry on the brink of collapse. After the 2008 rally, led by the much-missed standard-bearer of the “Pigs are worth it” campaign, Winnie the pig, the industry returned to profit in 2009. That breathing space allowed farmers to recoup some of their losses and take the opportunity to invest in improvements to production and infrastructure.

Despite fluctuations in profit margins, the outlook remained positive, at least for a few months, until last August, when the industry was driven into crisis once more. The fleeting period of profitability was not long or profitable enough for pig farmers to recoup the severe losses that they sustained in 2007-08.

[Mr Greg Knight (East Yorkshire) (Con)]

I am grateful to my hon. Friend for giving way, and I congratulate him on securing the debate. Does he agree that one problem has been our loose labelling law? Many consumers wanting to support the British pig farmer by buying British pork have not always known when they were doing so, because it is possible to package pork reared overseas as British if it is merely processed here.

[Mr Bacon]

My right hon. Friend is correct. He might have seen my Food Labelling Regulations (Amendment) Bill, which is scheduled for Second Reading on 1 April. Should the Government wish to take this opportunity to announce that they will give it Government time, I would be only too pleased to hand it over to officials to be steered through the House. Yesterday, I was encouraged by a phone call from the Department for Environment, Food and Rural Affairs asking to see a copy. It is important to say that there has been some improvement in labelling in the pork sector, but I still believe and have always maintained that the only viable long-term answer is a mandatory regime. We already have mandatory regimes for many other foodstuffs; we should have one for pork and pork products as well.

The inexorable slide into loss-making as rising feed prices have affected the industry has begun to cripple pig farmers in this country once again. The price that pig farmers pay for feed has more than doubled since 2010. Feed costs are rising faster than during the crisis of 2008, and I am afraid that the omens for the future are not good. BPEX—the British Pig Executive, which is the industry body—estimates that feed, which is generally made up of a combination of wheat, barley and soya, remains the single largest cost for British pig producers and accounts for 77% of pig farmers’ costs, up from 60% in 2009. BPEX expects food costs to remain historically high this year, and possibly beyond.

That gloomy forecast is being borne out by recent movements on the international cereals market. The Food and Agriculture Organisation of the United Nations expects a tightening of the global cereal supply this year, driven by growing demand after the slump in world cereal production in 2010. According to the FAO, export prices of major grains have risen at least 70% since February last year, and global cereal stocks are expected to fall sharply due to a decline in supplies of wheat and coarse grains. Market uncertainty after the Japanese earthquake caused prices to fall from £214 a tonne in February to £170 a tonne last week, but as of last Friday, wheat prices had climbed back to £195 a tonne. As one might imagine, recent increases in the price of pig feed have had a severe impact on the cost of pig production, which has risen to £1.64 a kilogram.

However, although production costs continue to rise, the dead-weight average pig price—the price farmers receive for the pigs they produce—has fallen during the same period. In February, the DAPP stood at £1.35 a kilogram, 29p short of covering pig farmers’ costs and 12p a kilogram below the July 2010 price of £1.47 a kilogram.

Britain’s pig farmers started 2010 in a state of cautious optimism, their hope to rebuild based on the reasonably steady costs that they faced and their improved returns in 2009, but by September 2010 the industry had returned to making a loss, and by January 2011 the cost of production had risen by one third compared with 2007. According to BPEX, a farmer sending 200 pigs to slaughter in January this year stood to lose £4,500 in a single week. The pig industry is facing overall losses of £4 million a week, and farmers are estimated to be losing more than £21 on every pig produced.

Although the rising price of feed is undoubtedly a major factor in the pain being suffered by British pig farmers, it is far from being the only factor. The pressure on Britain’s pig industry caused by rising feed prices is being amplified by what can only be described as the decoupling of the supply chain. For a supply chain to work properly, manufacturers, processors and retailers must work collaboratively to bring down its costs effectively and sustainably. However, it is clear that the pressure of high feed costs is not being shared across the pigmeat supply chain. If anything, the reverse is the case. Feed manufacturers have passed on the rise in the cost of cereals to their customers—that is, pig farmers—but the costs of rising prices have stopped with farmers and are not being passed up the supply chain to producers and retailers.

The disconnect in the pigmeat supply chain can best be illustrated by the relative performance of its constituent parts in the 12 weeks up to the end of January 2011. In that period, British pig farmers suffered losses estimated at £35 million, which equates roughly to £416,000 every calendar day. However, over the same 12-week period, the processing sector made an estimated profit of £100 million, or just over £1 million a day. Retailers, including Britain’s supermarkets, which set much store by their support for British farmers, enjoyed combined profits of £192 million from pork and pork product sales, equivalent to daily profits of £2.3 million.

--- Later in debate ---

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

It is a pleasure to serve under your chairmanship, Mr Bayley. I congratulate my hon. Friend the Member for South Norfolk (Mr Bacon) on securing the debate. I hope he will not mind if I take his name in vain. Pigmeat is really important to this country and, dare I say it, there is never a better way to start the day than with a cup of tea and a bacon sandwich. I can hear people salivating around me as I mention that. The state of the industry has already been well described, and there have been numerous interventions from hon. Members about some of the points that I will try to present in a slightly different way in my speech. There is no doubt, however, that the industry needs some action from the Government. I will ask for clarity on actions that are already under way, and make some suggestions about the future.

In 1998, this country was 80% self-sufficient in producing enough pigmeat for our needs. This year we are at 48%, for reasons that have already been referred to: aspects of the animal welfare standards; the stall and tether and castration bans; and the dumping of cheap meat on our market, especially when we had the German dioxin feed scare. The current value chain has been well documented. I received my figures from one of my local farmers, Jimmy Butler of Blythburgh Pork, who has approximately 18,000 pigs at any one time, all of which are free range and very tasty. I had better not promote any more producers. He told me that farmers effectively end up losing £20 per pig. From the figures he gave me, the farming industry loses £4 million per week, while processors make £8 million, and retailers make £16 million, profit per week. There are various causes. We have already heard that the pricing that cannot be agreed with supermarkets, but there is also an issue about the price of feedstock. I appreciate that the Government cannot control that particular aspect of the input, but they can do something about the output prices in their proposed legislation for groceries and the inclusion of a draft adjudicator code for supermarkets. There is also the issue of welfare standards.

[Mr Knight]

My hon. Friend has introduced an important issue to the debate—the dioxin scare in Germany, which has caused a fall-off in demand for pork in that country. Is there a sign of hope in the fact that the lack of demand for pork in Germany is likely to be a very short-lived phenomenon, and will hopefully lead to prices being a little more buoyant in future than they have been this year?

[Dr Coffey]

My right hon. Friend makes a very good point. I hope that that will be the case and, going even further, that our British farmers will be able to exploit an export opportunity. It would be interesting to see Germans eating British sausages, rather than their own bratwurst, but why not? We have won on other fronts in Germany in the last century and I am sure that our pig farmers would be proud to go in and make sure that an English wurst—