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Retail Profit - Producer Loss!

by 5m Editor
4 March 2011, at 10:09am

UK - Retailers and processors are making serious profits from pork and pork products, while at the same time pig farmers are facing crippling and unsustainable losses.

That is the key finding of a new report from BPEX, Profitability in the Pig Supply Chain.

  • In the 12 weeks to 23 January 2011, British pig producers amassed losses of 335 million
  • In the same period the processing sector’s profits are estimated at 3100 million
  • While retailers enjoyed combined profits of 3192 million from pork and pork product sales

The industry’s production costs have increased massively since last summer as the price of feed has doubled. This has coincided with a fall in the price paid for a finished pig (measured by the DAPP).

BPEX Head of Marketing Chris Lamb said, “The report clearly illustrates that while pig farmers are operating at a loss, the rest of the supply chain is making huge profits.

“The sustainability of the pig industry is under severe threat. Unacceptable as it may seem, the prospect of losing huge numbers of pig farmers, who can no longer afford to produce pigs, is very real. The supply chain needs to act – and act now.“

The solution, according to BPEX, requires three straightforward actions from processors and retailers:

  1. Increase the DAPP to a sustainable level
  2. Support high welfare, high quality pork, such as Red Tractor
  3. Adopt total supply chain co-operation

The report lays out exactly what pig farmers need to return to profit. To cover production costs, pig farmers would need the DAPP to rise from 135p/kg to around 164p/kg. To be sustainable a reasonable profit margin still needs to be added.

The report also uses data from Porkwatch, BPEX’s bi-monthly in-store audit of pork facings, to highlight the fact that while the overall facings of British pork in supermarkets have remained constant over the past five year period, there has been a noticeable fall in the past year in the share of facings.

You can download the report by clicking here.

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