Finished pig prices have made significant gains since March but, even so, still remain considerably below costs of production. The EU-Spec SPP rose by a further 1.15p per kg to 172.76p per kg in the week ending 14th May; some 22p per kg higher than a year ago. Prices have risen markedly (in the region of 30ppkg) since mid-March, but have still not been able to keep pace with the rising costs of inputs and remain well below costs of production. The AHDB will shortly be reviewing its latest quarterly costs of production, but at the end of April it was estimating it to be 223-236p per kg. Feed usually represents around 60% of the total cost of producing a kg of pork, but the results of the last quarter, (2021 Q4), indicate feed represented 70%. With feed costs continuing to rise this proportion will have increased further.
In a boost to pig farmers, a number of retailers have now responded to the National Pig Association’s calls to increase the price paid. Leading the way is the Co-op; the retailer is spending £19m on a new pricing model, moving away from the SPP in an effort to try and offer its farmers a fairer price. The new model will link the price to the cost of production, rather than the market price for pigs and it will be reviewed monthly to ensure it keeps pace with rising costs. Waitrose has also announced a £16m support package to help its pork suppliers cover their soaring costs of production. And Sainsbury’s has offered short-term support through a £2.8m investment for its pork producers, giving them the opportunity to align all pigs supplied to the retailer, including those not currently part of the model, to a fixed price for the 12-week period from March 13th to June 5th.
Tesco, the UK’s largest supermarket, has announced an enhanced payment plan that will see its suppliers increase payments to farmers by £6.6m until August. The retailer said it has been supporting the industry since the turn of the year and this will bring its support for farmers to a total of £10m since March 2022. It has also been taking more pigs to help clear the backlog of animals on British farm; according to the retailer it has taken an extra 32,000 pigs since January, and plans to take a further extra 22,000 in the months ahead.
Most of the large supermarkets have now acted in some way to inject more money into the supply chain. But it is clear to see, if the SPP is at 173p per kg and production costs are expected to now be over 230p per kg, more is still required. Indeed, following its latest commitment, the Co-op is urging the other retailers to do more. It says it ‘has a market share of 6%, but said its support outstrips any of the big four retailers combined, which have a combined market share of almost 70%’.