House of Commons - The English pig industry - Environment, Food and Rural Affairs Committee

The English pig industry - Environment, Food and Rural Affairs Committee Contents

2 Background

Key factors affecting the pig industry in the last 10 years

7. Pig farm incomes have fluctuated over the last 10 years due to the movements in pig meat and feed prices.[8]According to the British Pig Executive (BPEX), the English pig sector subsidiary of the Agriculture and Horticulture Development Board,[9] most English pig farmers are currently producing pigs at a loss of around £7 per finished pig, but in November 2007 this loss was as high as £25 per pig.[10] Defra estimated that the average commercial farm had losses of £4,100 in the year ending February 2008.[11] In 2007, farmers were being paid approximately £1.10 per kg for a pig that cost them £1.44 per kg to produce.[12] Several farmers submitted evidence to the inquiry about their struggle to continue pig farming during the current perceived crisis in the industry. One pig farmer had given up farming altogether, another now relied on his arable farming to support the pig side of the business, and another relied on the poultry side of his business to support pig production.[13]

8. Most submissions to the inquiry agreed that the reduction in production of 36% between 1998 and 2007 was due to more than a trough in the cycle. Many argued the decline in production was indicative of a long-term erosion of the competitiveness of the industry. The following series of events were identified as having contributed to the steady deterioration of the pig industry:

The global slump in the pig meat prices in 1998 created a market where it is claimed that even the most efficient UK producers lost money;[14]
In 1999, the UK introduced a ban on tethers and close-confinement stalls for breeding sows. Pig World magazine estimated that the move from stalls to loose housing with straw cost the industry £323m.[15] BPEX claimed that this added 6.4p per kilo to the ongoing cost of production (although this cost is disputed by animal welfare groups);[16]
Outbreaks of Classical Swine Fever (CSF) (2000) and Foot and Mouth Disease (FMD) (2001) hit the industry hard, leading to movement restrictions and the closure of export markets;[17]
Overcrowding of pigs due to the movement restrictions in 2000/2001 is thought to have triggered outbreaks of Post Weaning Multisystemic Wasting disease (PMWS), Porcine Dermatitis Nephropathy Syndrome (PDNS) and Porcine circovirus type 2 (PCV2);[18]
A further outbreak of FMD in 2007 led to export restrictions, often of the part of the carcase known as the "fifth quarter",[19] to both the EU and the valuable non-EU markets in China. BPEX told the Committee that the loss of non-EU markets due to exotic disease (disease that is not usually found in the UK) can take years to re-establish,[20] and
2007 saw sharp increases in fuel prices and record increases in feed prices, which had a dramatic effect on the cost of pig production as feed represents more than 50% of the cost of producing a pig.[21] However, the market returns for pig meat failed to keep pace with the increase in production costs, leading to losses for farmers.[22]

9. The industry blamed these key factors for reducing profitability, which in turn led to reduced producer confidence and therefore reduced the level of reinvestment in production systems by pig producers.[23] The following additional ongoing challenges were also considered to be critical to the health of the industry:

Continued competition from cheaper imports within the EU. The English pig industry has lower, and less efficient, production than its EU counterparts and as a result, parts of the retail, hospitality and public sectors choose to buy the cheaper product from overseas producers;[24]
Food labelling of pig meat products has been described as ambiguous—consumers are not sure whether they are buying domestic pig meat.[25] Labelling often does not tell the consumer whether the meat was raised to British standards of welfare. The industry believes that more accurate and helpful labelling would enable the consumer to make more informed choices about the pig meat they wish to eat;[26]
The financial and administrative burden placed on the producer by environmental regulations, in particular the Integrated Pollution Prevention and Control Directive (IPPC), Waste, and Nitrates Directives;[27]
The efficient use of all parts of a pig to ensure a decent price is called "carcase balance"—however, it has been suggested that the English pig industry fails to fully utilise the carcase to the same degree of efficiency as its EU counterparts;[28]
Pig industry supply chains have been described as "fragmented […] and generally adversarial".[29] With few exceptions, the producer is at arm's length from the retailer and the lack of long-term contracts between producer, processor and retailer is blamed for unstable and opaque supply chains.
The preparedness of the industry for the ongoing threat of exotic disease outbreaks.

PREVIOUS GOVERNMENT FINANCIAL SUPPORT OF THE PIG INDUSTRY

10. The pig sector does not, and has not ever, received assistance from the Common Agricultural Policy. The only support available has been through intervention in the market and aid for private storage.[30] However, Rt. Hon Jane Kennedy MP, Minister of State for Farming and the Environment, told the Committee that the Department had a responsibility to "ensure a thriving agricultural industry across the UK".[31]

11. Limited government assistance was provided following the Prime Minister's summit with industry representatives in response to an outbreak of CSF in 2000. The Pig Industry Restructuring Scheme, with a grant of £37 million over three years, was announced as part of the Action Plan for Farming on 30 March 2000. Its aim was to help pig producers reduce breeding capacity, reduce costs, overcome any competitive disadvantage and restore long term viability.[32] There were two elements to the scheme, "Outgoers" and "Ongoers". Outgoers offered aid to those who wished to cease pig production and either leave the agriculture industry completely or continue in another form of agricultural production. Ongoers offered aid in the form of an interest rebate on borrowing related to pig production and a business plan to producers who wished to restructure their business to become viable in the longer term. The scheme closed to applicants in 2001 and all payments have been made. In its submission to the inquiry, the Government said that it would not assist the industry again as it had in 2000/01,[33] and that:

PREVIOUS SELECT COMMITTEE INQUIRY INTO THE PIG INDUSTRY

12. The Agriculture Committee, our predecessors before machinery of Government changes, looked at the pig industry in 1999 when the UK herd numbered about 8.1m pigs, with 780,000 breeding sows kept on approximately 14,000 farm holdings.[35] At this time the figure represented a high point in the pig cycle. The Committee concluded that the introduction of the ban on stalls and tethers in the UK ahead of the rest of the EU would weaken the competitive position of the UK industry and that the relevant Government Department, then the Ministry of Agriculture, Fisheries and Food, should consider appropriate and limited compensation for the changes necessary.[36] That Committee considered that the Government had been too quick to impose costs and burdens on UK agriculture without adequate consideration of the impact on its competitiveness and the financial implications of unilateral actions in the UK.[37]

13. The Agriculture Committee also concluded that processors, manufacturers and retailers made reasonable profits in a depressed and oversupplied market, whilst producers incurred heavy losses, and did not appear to take the long-term viability of the industry into account. The Committee recommended that retailers support the Government's efforts to provide higher standards of animal welfare by not buying cheaper imports or by demanding that imports meet the same welfare standards as UK reared meat.[38]

14. In 1999 the Agriculture Committee predicted that the early introduction in the UK of the ban on stalls and tethers, together with the lack of sufficient support from the retail sector for UK welfare standards, would have a detrimental effect on the English pig industry. Our predecessor Committee's fears appear to have been justified. Since 1999 the size of the English pig herd has reduced by 40%, production of English pig meat has decreased and imports of pig meat have risen rapidly. In the Minister's own words, it is the Government's responsibility to ensure a thriving agricultural industry, and yet Defra appears unable or unwilling to respond whilst the industry diminishes.

8 Competition Commission, Final Report:Market investigation into the supply of groceries in the UK, Appendix 9.5, p 2 Back

9 BPEX Ltd is a statutory body funded by a single levy with flexibility to use funds on a range of activities (within the constraints of State Aid rules). The levy is funded by producers and processors. BPEX Ltd has the task of increasing the competitiveness, efficiency and profitability of English pig levy payers and on driving demand for English pork and pig meat products in the UK and globally. Back

10 Ev 2 Back

11 Ev 68 Back

12 BPEX, The impact of feed costs on the British Pig Industry, September 2007, p 7 Back

13 Ev 6, 109, 115 Back

14 Ev 91 Back

15 Ev 99 Back

16 Ev 4 Back

17 Ev 2 Back

18 Ev 11, 91, 99 Back

19 "Fifth quarter" refers to the parts of the carcase which are not lean meat, e.g. head, lungs, hide, and offal. If it is not sold then disposal has to be paid for. Back