Feed prices

15. Many submissions argued that the recent dramatic increase in feed prices was the most significant factor in the current crisis in the industry. In the UK (and the rest of the EU) animal feed consists mainly of wheat, soya and some barley.[39] Feed accounts for almost half the price of producing a pig, and the rising price of feed commodities during 2006-2008 (in particular soya and wheat) caused pig production costs to soar. Wheat almost doubled in price between March 2007 and March 2008 due to two successive poor harvests in many parts of the world and the growing demand from India and China for wheat.[40] Soya production is falling as land is switched from soya to maize for biofuels.[41] Defra's submission said that the increase in global feed prices accounted for 2% of the decline in pig production in 2008 throughout the EU.[42]

16. Defra reports that since March 2008 cereal prices, and hence feed costs, have started to fall and the department believes that prospects for the global 2008 harvest are generally favourable for both maize and wheat. If pig prices remain the same and cereal prices stabilise or continue to fall through to February 2009, then Defra predicts that there will be a partial recovery in profitability for the pig industry in 2008-2009.[43]

17. Evidence to the Committee from farmers and BPEX suggested that during the recent increase in feed prices, the "farmgate prices", the price paid to farmers, did not increase at the same rate as retail prices. BPEX told us:

Average retail prices of pork and pork products have increased substantially over the last year, by 179p per kg or 37% (at August 2008 on the previous year). Over the same period the average pig price paid to farmers has increased by only 27p per kg.[44]

BPEX bases its retail figures on a weekly independent survey of retail prices in the four largest supermarkets which is carried out on behalf of BPEX.[45]

18. BPEX believes that the net profit margins are not being shared through the whole supply chain and that farmer and abattoir returns could be increased to more sustainable levels without a huge increase in retail prices for the consumer.[46] In 2007, farmers were being paid around £1.10 per kg for a pig that cost them £1.44 per kg to produce.[47] BPEX estimated that abattoirs were also losing £4 for every pig slaughtered.[48] Despite the fall in feed prices in early 2008, the figures provided by BPEX in September 2008 suggested that for every pig a farmer rears and sells, he is likely to lose £7.[49] The Pigs Are Worth It campaign (run by BPEX) has asked for supermarkets to pay an extra 34p per kg for pigs to help preserve British pig farming. The campaign claims that, if passed on to shoppers without any additional margin added to the price, it would only mean between 7p and 17p on the pack price of typical pork products.[50]

19. The British Retail Consortium (BRC) argued that during the time of rising feed prices, the producers had earned a larger proportion of the net profit than others in the supply chain. The BRC states that figures provided by the Office of National Statistics show that the average pig price paid to farmers had risen from 109.8p/kg in August 2007 to 137p/kg in August 2008 (an increase of 24.7%). BRC compared this to the increases over the same period of the retail price of bacon (7.4%) and pork loin (14.1%). BRC claim that this demonstrates that: "Retailers, through competition and promotion have kept the price increases to consumers to a minimum whilst not penalising farmers, a point that is demonstrated by the increase in their share of the final price".[51]

20. The Competition Commission looked at the increases in both farmgate and retail prices for pig meat in its report Market investigation into the supply of groceries in the UK. The Commission found that grocery retailers had not appeared to have increased their share of the retail price for pig meat over the period of sharp increases in feed. However, the report concluded that farmers were bearing the cost of higher production costs due to the increases in feed prices:

During 2007 the pig meat industry has been experiencing high feed prices as a result of high cereal prices. Defra has estimated that in 2007 this has added approximately 20% to the cost of production for the primary producer. In comparison, processor prices have only increased by 3% and retail prices by 4%. This has meant that the spread between the retail and the producer price has narrowed, but that primary producers are currently carrying more of the burden of increased production costs.[52]

21. Defra states that it had supported measures taken by the European Commission to increase the supply of feed grains and reduce prices. These measures included:

[S]uspending the duty on imports of third country cereals, re-selling the remaining intervention (public) stocks of grain and removing the requirement for farmers to keep land out of production for the 2008 and 2009 harvests […] We also support further reductions in market support in the on-going CAP Healthcheck.[53]

Defra states that, as a consequence of these measures, the production of EU cereals was forecast to be 16% higher than in 2007 and since the start of 2008, feed wheat prices had fallen by approximately 32%.[54]

22. The British Meat Processors Association (BMPA) told the Committee that the Government could reduce the pressure on the pig industry from fluctuating feed prices by pressing for swifter action on the use of GM feed in the European Union.[55] Mr Stewart Roberts, Chairman of the BMPA, questioned why it was possible to import products into the UK that had been fed on a diet of GM feed, but it was not possible to import GM feed to produce animals in the UK.[56] The BMPA also urged the EU to take a science-based approach to the issue of non-ruminant meat and bone meal as an alternative protein source to grain for pigs.[57] In its submission, Defra acknowledged the industry's concern that feed imports were affected by delays in the EU approval regime for GM products, and stated that it had encouraged the European Commission to find ways of speeding-up the approval regime without compromising on safety.[58]

23. However, concern was expressed by Friends of the Earth on the global environmental impact of the domestic pig industry and the sustainability of its use of soya from South America and its reliance on imported animal feeds.[59] Waitrose and FARM (a national organisation promoting sustainable farming in the UK) suggested that there was a need to improve domestic food security by investigating alternative feeds and farming systems to reduce the risk of relying on imported feeds.[60]

24. The recent increase in the price of animal feed had a severe impact on the cost of production for farmers, a burden that does not appear to be shared with retailers. The pig industry's reliance on imported feed, particularly soya, is an issue that Defra should address, particularly in the light of the current weakness of sterling. Defra should establish a working party with the industry to identify useful research on feed sources that could be undertaken to aid the sustainability of the industry.

Competitiveness

25. Although the demand for fresh pork in the UK has increased, UK pig meat production fell from 1.155 million tonnes in 1998 to 0.739 million tonnes in 2007.[61] There has been an increase in imports from the EU. Denmark, the Netherlands and Germany are the main EU importers of pig meat to the UK.[62] In 1998 the UK produced 84% of the pig meat that it consumed; now more than half of the pig meat eaten in the UK is imported.[63]

26. The need for imports to satisfy demand is exacerbated by the fact that British pigs cost more than their EU counterparts to produce. The BMPA said that the UK had the highest cost of production in the EU in 2006: 108.2p/kg compared with 91.3p for Denmark and 87.2p for the Netherlands.[64] Defra noted that UK production costs are 12% higher than the EU average.[65] The average daily live weight of UK pigs was at the lower half of the EU league table and the annual number of pigs weaned per sow was 21.4 compared to 25.9 in Denmark and 25.1 in the Netherlands.[66] BPEX pointed out that the latest figure for pigs weaned per sow had improved in recent years as a result of industry strategies (in 2004 pigs weaned per sow had been 18.84).[67] BPEX's Pig Health and Welfare Council, its health and welfare strategy, and research and development strategy aimed to tackle the issues of the lower efficiency and productivity of the English pig industry.[68]

27. The British Hospitality Association (BHA) claims that the UK is competitive with other EU countries in shoulder and belly pig meat, but pork loins and legs are 15-20% more expensive. Back bacon, which is consumed in large amounts in the UK, and preferred by customers to streaky bacon, is far more expensive if sourced from the UK.[69]

28. Farmers and BPEX blame higher welfare standards for the higher cost of production. The BMPA suggested that environmental regulations prevented pig units reaching their optimum production size and that they were also responsible for the difference in production costs. BPEX argued that EU producers did not seem to have the same pressure of legislation and inspections as their UK counterparts had.[70] The issue of abattoirs being closer to farms on the continent than they are in the UK was raised by John Godfrey, a pig farmer.[71]

29. According to Waitrose, some retailers, against the background of a ready supply of cheaper pig meat in the EU, have not been willing to increase prices paid to British producers to allow them to recover the costs of increased feed prices during recent years. Waitrose also noted that the UK had smaller processing factories than some other EU countries with large abattoir groups which also added to the costs of UK production. [72] Mr Duncan Sinclair, Agricultural Manager with Waitrose told the Committee: "I think it is an important consideration in terms of the economies of scale and the scale of the processing facilities and unit costs right through the whole process."[73]

30. The BMPA questioned whether there was room for both farmers and processors in an efficient pig industry. It thought that the UK had been slow to embrace the integration of farming and processing—an approach that appears to have been successful in other countries:[74]

[T]here is not enough profit for the farmer and the processor and if we continue that argument forward effectively you cannot have the two sustaining alongside each other in the long term.[75]

31. The Pig Veterinary Society suggested that the most effective response of pig farmers to the current problems they face is to:

(i) enlarge in scale, so that the size of slaughter agreements gives some bargaining power to the producer, (ii) purchase their own processing facilities, and (iii) develop niche markets with higher value-added returns. Progressive farmers will adopt one or all of these strategies and the PVS supports these trends—there is no value for our pigs or the industry in small, non-profitable farms battling into bankruptcy situations.[76]

32. The BMPA told the Committee that in the past the UK had "world-class efficient pig production" through the use of genetics, but "what has happened is that much of the rest of the world has caught up with us."[77] The BMPA warned that unless the UK industry became more efficient, there would continue to be a commercial pressure on processors from retailers and caterers to source cheaper products from outside the UK.[78]

33. How to improve the English pig industry's competitiveness with its EU counterparts is at the heart of the problem and needs to be tackled head on by producers and processors. As part of its responsibility to ensure a healthy agricultural sector, Defra must work with the industry to identify specific actions that can be taken to improve efficiency and productivity through existing health and welfare strategies, including research into genetics and pig productions systems. However, the pig industry must also consider the difficult question of whether integration of production and processing is necessary for it to compete with EU counterparts.

34. Evidence to the Committee identified several factors as affecting the competitiveness of the English pig industry. We examine these below.

WELFARE STANDARDS

^35. In 1999, the UK banned tethers and close-confinement stalls for breeding sows to improve pig welfare. The UK bans were introduced ahead of EU wide bans on tethers in 2006, and sow stalls expected in 2013 (keeping sows in close-confinement stalls for the first four weeks after service will still be allowed).[79] In addition to welfare legislation affecting the whole industry, 92% of British pig production falls under a voluntary pig farm assurance scheme. Farms in the scheme are inspected every three months by a veterinarian and annually by an independent inspector. The scheme sets out standards on pig husbandry, welfare, traceability and food safety that exceed UK legislation (e.g. castration of male pigs is prohibited).[80] Pig meat raised to the required levels of welfare under the scheme is awarded a Quality Assurance Standard mark. The UK is not alone in employing high welfare standards for pig production. Certain other EU Member States (Sweden, the Netherlands and Germany) have introduced national requirements that exceed the common minimum standards for pig welfare set by Council Directives 91/630/EEC and 2001/88/EC and Commission Directive 2001/93/EC.[81] Some UK retailers have contractually bound producers in other EU countries, such as Denmark, to raise pigs destined for the UK market to UK welfare standards.[82] BPEX told the Committee that as a result of their higher standards, UK farmers were paid more for pig meat than their EU counterparts, and in some cases supermarkets pay producers a premium for additional welfare standards, such as outdoor reared pig meat.[83]

36. Defra states that in 1991, when the unilateral ban on stalls and tethers by 1 January 1999 was agreed to, the cost to the UK pig industry was estimated at about £9 million.[84] However, Pig World estimates that the cost to the industry was approximately £323 million.[85] Defra acknowledges that the initial cost of conversion may have caused some difficulties for the UK pig industry, but has no analyses of the current impact of the UK ban on close-confinement stalls and tethers for breeding sows on production costs.[86] The Farm Animal Welfare Council, an independent advisory body,[87] recently put the capital costs of feeding systems and buildings at £400 to £700 per sow.[88] BPEX agree with this estimate.[89] Most submissions from farmers, and others like Waitrose, agreed that the cost of conversion to group housing has been difficult for them to bear. One farmer said that it cost £400,000 for her farm to meet the new legislation in 1999.[90]

37. In addition to the capital investment necessary to create larger sow accommodation (a doubling of space allowance per sow), additional straw storage and new feeding systems, farmers also incur ongoing higher operating costs from higher feed usage, additional labour, and reduced productivity as a result of less efficient feeding, reduced farrowing rates and smaller litter sizes.[91] BPEX estimated that running a stall system is 15% cheaper than running a loose housing system, with the higher welfare standards adding 6.4p per kg deadweight to the cost of pig meat.[92] BPEX also states that information from their Danish sources put the cost of Danish producers raising meat to UK welfare specifications, for export to the UK, at an additional 5-6p per kg.[93]

38. Some evidence to the Committee questioned the extent to which the higher welfare standards could be blamed for the ongoing higher costs of production compared to other EU countries. Compassion in World Farming claimed that moving from stalls to group housing adds just 2p per kg of pig meat.[94] The RSPCA argued that studies had shown that, contrary to BPEX's evidence, although there were initial capital costs for the farmers, there were no additional ongoing running costs from moving to group housing.[95] The RSPCA noted that Sweden, which has higher national welfare standards than the UK in many areas (e.g. greater space allowances, and a ban on the use of farrowing crates), has lower costs of production than in the UK.[96] BPEX claimed that the difference between Swedish and British production costs is only 2.4p/kg.[97] Less than 1% of imported pig meat to the UK comes from Sweden.[98]

39. In addition to the statutory welfare standards, BPEX said that UK farmers do not castrate their pigs for welfare reasons. The lack of castration meant that male pigs are not taken to such great weights as they are in other EU countries, causing lower productivity.[99] BPEX told the Committee that a ban on castration was high on the agenda in Europe.[100]

40. Whilst Defra noted the Farm Animal Welfare Council's conclusions on the effect of high welfare standards on the cost of production, the Department considered that factors other than welfare have a significant role in relative costs—physical performance of the herd, feed costs, land and labour costs.[101]

41. Some submissions have argued that after 2013 meat that does not meet EU welfare standards should be banned.[102] In its submission, Defra said that:

WTO rules do not allow members to restrict trade in products based solely on the method of production (e.g. on animal welfare grounds) and the UK adheres to the principle that developing countries should be granted equal access to our markets without having processing standards imposed. Developing countries in particular fear that animal welfare production standards will be used as an excuse for protectionism.[103]

42. BPEX raised with the Committee the issue of Government financial assistance for the cost of conversion to the use of open housing, and provided details of the assistance provided by Irish and French Governments to their farmers. In Ireland, this consisted of a 40% grant for capital investment in new or altering existing accommodation. There was a maximum grant per farm of €120,000. In France, the aid consisted of support of up to 20% of total eligible investment, with a ceiling of €15,000 per farm.[104] Defra had told BPEX that it could not be done in the UK.[105] When asked why UK farmers had not received similar help, Mr Duncan Prior, Policy Advisor, Livestock and Livestock Products, Defra, told the Committee that "this Government does not generally speaking feel that it has to use public money to pay people to meet their legal obligations."[106] In supplementary evidence to the Committee, the Minister said that it was unable to corroborate the information provided by BPEX, but that the Government did not favour the use of taxpayers money for the type of schemes BPEX had suggested were available in France and Ireland.[107]

43. Whilst English pig farmers are rightly proud of their high welfare standards, there can be no doubt that the early introduction of a ban on stalls and tethers ahead of most of the EU, and without assistance from the Government, placed a heavy financial burden on the industry. Many farmers are still recovering from the capital cost of the outlay necessary to comply with the welfare standards. It appears that the analysis of the cost on businesses likely to be imposed by the animal welfare measures introduced in 1999 significantly underestimated the capital costs to the pig industry. The Government must accept that its decision to introduce welfare legislation many years ahead of most of the EU was a significant factor in driving many farms out of business. The decision has placed English producers at a serious disadvantage to their EU counterparts, as our predecessor the Agriculture Committee predicted in 1999.

44. BPEX has provided compelling evidence that the higher welfare standards of the English pig industry has increased the cost of producing a pig. However, although UK pig farmers receive a premium from retailers for producing higher welfare standard pigs, the farmgate prices do not appear to realistically reflect the increased ongoing production costs that UK farmers have to pay to support higher welfare production systems.

45. EU counterparts have been able to produce cheaper pig meat for the past ten years and as some of them are now receiving financial assistance to convert housing, English farmers are unlikely to compete on a level playing field even when the EU wide welfare standards are introduced in 2013. In future, when measures on animal welfare are imposed on the livestock industry, Defra must ensure that the Impact Assessment made of those measures takes into account the long and short term costs likely for livestock businesses.

46. BPEX and individual producers also raised the issue of the phasing out of the agricultural buildings allowance between 2008/09 to 2011/12 which was expected to exacerbate the cost to farmers of converting or replacing buildings at high cost to meet the statutory UK welfare standards. It was argued that housing for pigs, unlike other agricultural buildings, cannot be used for a variety of uses, and has to be replaced on a fairly regular basis (approximately every 15 years) due to the destructive nature of the animal.[108]

47. The Minister told the Committee that the decision to remove the allowance had been made by HM Treasury, and no representation had been made by Defra on behalf of the pig industry.[109] Supplementary evidence from the Minister stated that Defra officials did not have specific discussions with the pig industry on this issue, but had discussions with the NFU on the new capital allowances. Defra officials have been working with HM Treasury and HM Revenue and Customs to ensure that official guidance reflects how the rules on plant and machinery capital allowances and the new Annual Investment Allowance apply to expenditure on slurry storage facilities.[110]

48. We were surprised to hear that Defra had not supported the pig industry in its request for the agricultural buildings allowance to be retained. We believe that there is a case for pig farmers to be awarded the allowance, based on the high rate of replacement necessary for pig housing. We ask the Government to reconsider this matter and report back to us on its decision.

RETAILERS' SUPPORT FOR THE PIG INDUSTRY

49. The general consensus is that British farmers are proud of their high welfare standards and would not wish to return to the use of stalls or introduce castration. However, several submissions from farmers stated that they felt that the Government and retailers had pushed for the introduction of higher welfare standards in the 1990s, but have not been prepared since to support producers who have had to invest heavily in converting to the new standards.[111] BPEX's "Pork Watch" regularly surveys meat sold in the UK. It estimates that only 65% of pork, 22% of bacon, 10% of ham and 30% of sausage meat has the Quality Standard Mark on it.[112] Although some importers have introduced special "UK contracts" which are compatible with key aspects of British pig welfare legislation, BPEX estimates that 66% of imported pig meat has not been reared to UK statutory welfare standards and would be illegal if produced in this country.[113]

^50. The British Retail Consortium (BRC) argues that its members (the major UK supermarkets) only import pig meat from EU producers using equivalent welfare standards to the UK,[114] (although ASDA told the Competition Commission during its study of pig meat supply chain profitability, that "in most instances" it used pig meat produced to UK standards. In the exceptions where it did not, meat was produced to EU welfare standards.[115]) The BRC estimates that if the rest of the retail and hospitality sector does not, then the overall proportion of imported pig meat that would not meet UK welfare standards would be approximately 50%.[116]

51. In order to achieve a fair playing field for UK producers, BPEX has called for all UK retailers and food service companies to specify that they only buy pig products that meet the legal minimum standard for animal welfare in the UK.[117] BPEX told the Committee that overseas producers had said that they could produce greater volumes of higher welfare-quality product, at a higher premium, but there was not the demand for it from retailers and food service companies in the UK.[118] The British Hospitality Association and BRC argue that the consumer demand is for cheaper products, not higher-price meat produced to high welfare standards.[119] BPEX believes that the lack of clear labelling of pig meat has resulted in a low level of awareness amongst consumers of the issue of animal welfare.[120]

Food labelling

52. Several submissions to the inquiry raised the concern that there was a lack of a consistent approach on country of origin labelling.[121] For example, the Food Labelling Regulations 1996 (as amended) require that food that is ready for delivery to the consumer or catering establishment be marked or labelled with:

[…] particulars of the place of origin or provenance of the food if failure to give such particulars might mislead a purchaser to a material degree as to the true origin or provenance of the food.[122]

53. However, section 36 of the Trade Descriptions Act 1968 states:

Goods are deemed to have been manufactured or produced in the country in which they last underwent a treatment or process resulting in a substantial change.[123]

Turning pork into bacon, ham or pies could be deemed to be "substantial change". Therefore, pork from pigs reared in the EU could be cured in the UK and labelled "British". However, recent guidance issued by the Food Standards Agency (FSA) on country of origin labelling states that a substantial change would not cover slicing, cutting, mincing or packing.[124] Similarly, the FSA advises that pork sausages made in Britain using pork from countries outside the UK should not be described as "British pork sausages".[125] It is the responsibility of Trading Standards Officers to ensure that food labelling rules are enforced at retail level and the consumer is not misled.[126]

54. The Committee were shown an example of a pack of Tesco's back bacon which was labelled as "Produce of BRITAIN", but the small print showed the text "Produced using pork from the UK, Denmark, Holland or Sweden and packed in the UK".[127] The pack was from August 2006. The British Meat Processors Association said that retailers were able to offer the impression of loyalty to the UK pig industry without adding value to the UK supply chain,[128] and said that unclear labelling was one of the "most damning things to our premium product."[129]

55. The issue of unclear labelling has been highlighted by the recent contamination of animal feed used to produce Irish pork. Newspaper reports suggested that supermarkets and consumers were unclear which pork products labelled "British" were in fact Irish and possibly contaminated, particularly those food items containing a mixture of ingredients.[130] It was reported that two days after the contamination was announced on 6 December, several supermarkets had still not produced lists of affected products.[131]

56. Currently, EU general labelling requirements for all foodstuffs are set out in Directive 2000/13/EC. On January 30, 2008, the Commission adopted a draft Regulation ensuring that a product's essential nutritional information will be provided on its packaging in a legible and comprehensible manner.[132] The proposal aims to clarify and tighten the rules on providing country of origin declarations, but does not extend the list of foods that require mandatory country of origin labelling. Where an origin declaration is provided and the origin of the primary ingredient(s) of a food differs from where the product has been made, the origin of those ingredient(s) should also be given, for example, "Made in the UK from Dutch Pork".[133] Defra considers that the regulation would be helpful and is working with the Food Standards Agency (which has produced recent guidance on both country of origin labelling and on clear food labelling) to support the new proposals.[134]

57. Both BRC and the British Hospitality Association (BHA) argued that rather than country of origin, the number one factor affecting consumers' choice was cost.[135] The BRC said that research by the Institute of Grocery Distribution (IGD) had shown that country of origin and the "British" label were not enough on their own to convince the consumer to buy the product.[136] Mr Andrew Opie, Food Policy Director of the BRC, told the Committee that "in the top five buying preferences for consumers country of origin was not one of those".[137]

58. BHA told the Committee that "British" food presented a good marketing opportunity for some restaurants to use provenance to attract customers, but it was not always possible for small cafés.[138] It was particularly difficult if a meal contained several raw ingredients from different countries.[139] Some catering companies were interested in animal welfare, and some such as Compass with its "Best of British" promotion, had had success in promoting meat in terms of welfare but the success had been limited by what the customer wanted to pay.[140] BHA had agreed to join a Scottish Executive-sponsored working party to look at provenance labelling.[141]

59. The Food Standards Agency states that better country of origin labelling is high on the list of consumers' demands for change.[142] Pig World magazine argued that surveys had shown that consumers would choose British pig meat over imported equivalents provided that the labelling is clear so that consumers can make their decision in 30 seconds or less, and the price differential is not too great.[143]

60. BPEX told the Committee that whilst people may well put price high in the list of their considerations, it did not mean that it was the only thing consumers were interested in: "if you ask them […] 'would you like your pork to be produced to the same legal standards as it is in this country?' the answer is overwhelmingly yes, because they do not appreciate that it is not for a lot of imported product."[144] BPEX sent the Committee the results of the YouGov survey of May 2008 in which 40% of respondents said that they would be willing to pay between 1p and 10p extra for a pack of bacon to "help British farmers and support sustainable agriculture in the UK."[145]

61. In addition to the country of origin labelling on products, the Pork Quality Standard Mark was introduced in 1999 by BPEX to help consumers identify pork products (pork joints/bacon/ham) that conform to the UK's welfare standards. Submissions to the Committee suggested that consumers were confused by both labelling and product displays mixing welfare and non-welfare products. Pig World magazine told the Committee:

When British bacon carrying the Quality Standard Mark was displayed in segregated blocks in ASDA stores for a test period in 2002, sales increased 3% by volume, 7% by value.[146]

62. The EU Community Action Plan on the Protection and Welfare of Animals 2006-2010 envisages the introduction by 2009-10 of standardised welfare indicators and an EU wide welfare labelling scheme. Defra's evidence to the Committee states that:

The aim is to facilitate the choice of consumers between products obtained with basic welfare standards or with higher standards. The Commission has been charged by the Council of Ministers to assess further the issue of animal welfare labelling and to submit a report to the Council in order to allow an in-depth debate on this subject.[147]

63. The Minister told the Committee that there was not enough information currently on labels for consumers to understand the conditions under which the animal had been raised:

I think clearer and more effective labelling will allow purchasers in supermarkets to make it clear through what they buy that they want to support farmers who use better animal welfare production methods."[148]

[M]y experience as a consumer would be that there is not sufficient information on the labelling of food products, for example, to be able to judge from what you are reading what the welfare standards have been in the way that meat has been produced.[149]

^64. BRC said that supermarkets were responsible for clear labelling,[150] and that its Members have strived to improve the clarity of labelling in recent years.[151] Mr Opie told the Committee "what all good supermarkets do is help consumers make a choice. If you go into any major UK supermarket now, which we all do, you will see lots of products […] very clearly labelled as British with "British", with the Union Jack, with the BPEX quality mark".[152]

65. However, Mr Opie of the BRC told the Committee "I am not sure whether UK consumers would necessarily understand some of the animal welfare issues. I think they understand country of origin better than they would necessarily understand the nuances of animal welfare."[153]

66. BPEX admitted that it was difficult to communicate the issue of welfare standards in one label or symbol, but the industry had tried to do this through the use of the Quality Standard Mark.[154] BPEX admitted that it had not succeeded in making sure that consumers fully understood the issue, and that it only had limited funds to communicate the message it wished to convey.[155] It believed that the retail and hospitality sectors did not always adequately indicate the methods or systems used in the production of pig meat to allow consumers to make an informed choice.[156] In this context, retailers were described as the "gatekeepers" to demand in the market place.[157] Mr Mick Sloyan, Chief Executive of BPEX said:

I do really think that retailers cannot abdicate the responsibility in terms of the specifications that they have; nor food service companies; nor, dare I say it, government in terms of the specifications it uses to buy the products we have which we know are not universally specifying at least a legal minimum standard for UK product. There are a lot of people in the chain who all have a responsibility to communicate this. One thing I am very sure of though is that if consumers were fully aware that when they pick up a very cheap packet of bacon, for example, those standards of welfare were not just not the highest but would be illegal in this country, it would change consumption patterns, not for everybody—I fully accept that—but certainly for a significant proportion of the population.[158]

67. BPEX used fair trade bananas as an example of where retailers and food service companies provided information to the consumer on the benefits of fair trade and created a demand for the product as a result.[159]

68. The British Meat Processors Association (BMPA) believed that processors ought to sit down around a table with producers and retailers to work out how to provide consumers with what they wanted, arguing that consumers wanted to know what the product was, what was in it and where it came from, but were confused about the different production systems.[160] The debate on labelling had become muddled and it was time to agree what they were trying to tell the consumer:[161]

The FSA want to highlight the healthy side of the product or the unhealthy side of the product. The producers want to focus on the provenance. The retailers want to sell the product. It is their responsibility to see it move off the shelf and they are the ones who understand consumers better than we do. We have an input into that but at the end of the day, yes, it is in particular to educate consumers but we have almost got too many vested interests and in the end we do not get a decision and we carry on regardless with the same confusion on the pack.[162]

69. The Minister agreed, when asked by the Committee, that there ought to be a greater effort from Defra to alert consumers to the differences between categories of labelling for pork.[163]

70. BPEX are currently working with the RSPCA for legal definitions to describe and label pig meat as "free-range", "outdoor" or "indoor",[164] similar to the description applied to eggs and poultry that it believed would be understood by the consumer.[165] BPEX said that it hoped to have agreed that voluntary labelling code with the RSPCA by the end of the year.[166] The RSPCA asked that the Government lobby for marketing terms legislation at European level for compulsory pig meat labelling, to help end the confusion for consumers over welfare standards.[167]

71. It is the responsibility of retailers to ensure that the labelling on its products is clear and unambiguous, especially when retailers use the qualities of British meat as a marketing tool. The Government should support actively the European Commission's proposals for clearer country of origin, and also welfare labelling. We are encouraged that the Minister believes that Defra and the Food Standards Agency could do more to promote understanding of the differences in labelling, and we note the recent publication of Food Standards Agency guidance on country of origin labelling. We ask that the Department do keep us informed on progress in this area. The pig industry is responsible for raising awareness amongst consumers of its high welfare standards, but the Government has a responsibility to ensure that consumers have access to clear product information through labelling. Defra must bring together the pig industry with the processing, retail, catering and hospitality industries to establish a strategy for the best way of informing the consumer of the choices available.

72. We are disappointed that such a high proportion of imported pig meat does not meet UK welfare standards. It is not possible from the information available to provide a definitive figure, but we believe that consumers would be shocked to hear that as much as 66% of imported pig meat might have been reared in conditions banned in this country. Whilst price might be the number one factor in consumers' choice, consumers have the right to be properly informed of the country of origin and welfare standards when making their choice of product. The responsibility for this, until the Commission implements its welfare labelling scheme, lies with the whole supply chain.

CARCASE BALANCE

73. Several submissions described the importance of "carcase balance" or selling as much of the meat and by-products of the animal as possible to achieve maximum efficiency. BMPA described it as "a bit of a holy grail in the industry".[168] BPEX told the Committee:

For us the issue is trying to maximise the value for each of those cuts, not just trying to find a home for them, if you like, and that falls into two areas. One is trying to add value to cuts that perhaps are a bit less popular, and one of the other very good examples of late is trying to encourage consumers to use belly pork.[169]

74. The BRC agreed that retailers had successfully attempted to promote cuts of pork that had been less popular historically. It gave the example of one retailer being so successful with its promotion of pork belly that their suppliers could not keep up with the demand.[170] Mr Andrew Opie said that the downturn in the economy meant that consumers were actively seeking cheaper cuts: "that has been a great opportunity to supermarkets to bring both value and a better carcase balance into the equation."[171]

75. Mr Duncan Sinclair, Agricultural Manager, Waitrose told the Committee that Waitrose aimed to use as much as possible from a carcase as then pig meat used for sausage, ham, bacon, ready meals and ready-to-cook meals would all have the same provenance and quality as the pig meat used for fresh pork. The same principle was applied to beef and lamb.[172] Waitrose estimated that the average level of carcase balance that it achieved on a weekly basis in the integrated Waitrose supply chain was 88%.[173]

76. BMPA said that a lack of clear labelling for high-welfare British meat across the food sector was responsible in part for carcase imbalance.[174] BHA told the Committee that, whilst it was not mainstream catering, several restaurants were promoting the use of different parts of the pig.[175]

77. The BRC commented on the ability of EU producers to carcase balance more effectively than the UK:

One of the other problems in the UK is competition from a large well established pig industry in Europe. This has led to strong price competition, especially in processed pork products. Competing countries have well structured, efficient industries, which have also been able to overcome the problems of carcase balancing faced by our producers. This competition over an extended period has meant they now have a substantial share of parts of the UK market.[176]

78. BPEX claimed that processors did not always maximise the use of domestic carcases in bacon, ham and sausages and instead meat was imported for manufacture into those products displacing domestic meat.[177] Mr Opie of the BRC told the Committee: "whilst retailers can continue to promote some of the cuts which we traditionally have not eaten so much here […] ultimately the processors are best placed to try and help the whole industry in terms of maximising the carcase balance."[178]

79. BMPA told the Committee that as many of the remaining products such as feet and tails had no substantive market in the UK, the industry was reliant on export to foreign markets—and had suffered accordingly when export restrictions were in place following outbreaks of FMD in 2001 and 2007.[179] BPEX confirmed this view, saying that the cost to the English pig industry of losing the Chinese market following the FMD outbreak in 2001 should not be underestimated. Defra had worked hard to reopen access to Chinese markets, but it took years to build up export markets again once they had been lost.[180] Defra had also provided funding for a DVD promoting less popular cuts of meat in the public sector and also a cook book of recipes using less popular cuts of meat produced by the Government Office for West Midlands and the Heart of England Fine Foods.[181]

80. Carcase balance remains an important issue for the industry to tackle as a way of increasing its competitiveness. We believe that producers, processors and retailers could have useful discussions on how to promote different cuts to the consumer and provide more efficient use of the whole carcase. Defra should have a significant role in working with the industry to develop markets for the whole carcase. Defra should continue to support literature which encourages the public sector to use recipes for less popular meat cuts.

REGULATORY BURDEN ON THE PIG INDUSTRY

81. Several submissions from farmers, and also Waitrose and the BMPA, commented on the heavy burden of regulation on producers. In particular, the following regulations were considered particularly onerous to producers:

• IPPC (Integrated Prevention & Pollution Control) Directive
• Waste Directive
• Nitrates Directive.

82. We recently inquired into the implementation of the Nitrates Directive in England. Under Defra's new Action Programme, farmers were asked to provide 26 weeks' storage capacity for pig slurry and poultry manure and 22 weeks' storage capacity for all other slurry. Both Environment Agency and NFU evidence questioned the rationale behind the different requirements for pig slurry and poultry manure, compared with other slurries. The Committee's Report urged Defra to reconsider the necessity for longer storage times for pig slurry and poultry manure.[182]

83. BPEX questioned why it was necessary for both Defra to interpret how the EU intended to implement the IPPC regulations, and then for the Environment Agency to interpret what Defra meant. The pig industry had been forced to employ a specialist to help producers understand IPPC and all its implications.[183] John Godfrey, a pig farmer, said that the rules on how the Waste Directive and IPPC would be implemented appeared to be changing frequently which made it confusing for producers:

Two or three years ago we were asked to register every premise we have for exception for the Waste Directive. We were told at that stage that it would be a once and for all registration and would not cost anything. We have done that. A consultation has now just come out to say, "No, we have changed our minds. We want you to register once every three years and it will cost you £50 per premise."[184]

84. Defra argued that "[R]egulation in livestock sectors, including pigs, is essential to protect public and animal health and welfare and the environment", but acknowledged that the cost of meeting regulations was a concern for farmers in the present climate:

Understandably, especially at the present time, pig operators are concerned about meeting regulatory costs such as the environmental controls under the Integrated Pollution Prevention and Control (IPPC) Directive, although the sector has had over 10 years since the IPPC Directive was agreed to come to terms with it and its costs.[185]

85. Mr Godfrey, when told of Defra's position, accepted that it had been 10 years since the IPPC had been agreed to, but said that as the rules and regulations were still being written, the farming sector had no idea what it was supposed to do.

The regulations are changing all the time. We have no idea what we are supposed to do. We had one unit that was supposed to have ammonia emissions because there was a SSSI not far away and, fortunately for us, they decided that the ammonia emissions were not sufficient to put any restriction on that unit but I understand there are other key units where that has been done. The Environment Agency has calculated the figures wrongly and they have had two or three shots at saying how much they have to reduce the emissions. The problem is that we do not know. Although this legislation was previewed ten years ago and we knew it was coming in, we do not know next year what we are going to have to do to comply because the rules have been changed.[186]

Mr Godfrey estimated that the IPPC had cost his farm so far over 500 hours of management time.[187] His farm will be inspected twice a year and required to improve units to what are "the best available techniques". He was sceptical whether the improvements would provide any benefit to the environment.[188] Mr Duncan Prior, Policy Advisor, Livestock and Livestock Products, Defra, told us that implementation of the IPPC was being carried forward with very close working relationships between Defra, the Environment Agency and the industry,[189] and that a joint working party between those parties had looked at whether IPPC annual inspections could be undertaken by third parties, for example assurance scheme inspectors who might already be on the farm, at a reduced cost for farmers.[190]

86. BPEX reported that other EU countries had provided financial support to farmers to meet the cost of implementing environmental regulations.[191] Information from Interpig Group (a group of industry economists lead by BPEX) indicated that aid was provided in Northern Ireland, Scotland, Ireland, the Netherlands, Germany, Italy, Denmark, France and Belgium. The types of financial aid and assistance varied in each country.[192] For example, in Belgium, if farmers replace existing pig housing with housing offering a 50% reduction in ammonia emissions, farmers can either apply for a 20% subsidy on the cost of construction, or if using his own capital, 3% of the interest of the whole cost.[193]

87. BPEX had been told by Defra that whilst other countries had been able to assist their farmers, it was not possible to do in the UK.[194]

88. It appears that once again UK pig farmers are placed at a disadvantage to their EU counterparts who are receiving financial aid through a variety of schemes to comply with environmental regulations. Defra must review the assistance provided by other EU countries and assess whether it is possible for the UK to provide similar assistance for its pig farmers and report back to the Committee on its decision. The Government must work with the Environment Agency and the industry to ensure that the IPPC, Waste and Nitrates Directives do not place an unfair unmanageable burden on the pig sector.

SUPPLY CHAINS

89. Several submissions raised the issue of the poor efficiency and transparency of the supply chain having a deleterious effect on the industry. Waitrose identified the lack of long-term committed relationships as a key problem for the industry.

The English industry is in the main structured in a fragmented manner and is generally adversarial between producers, processors, retailers and manufacturers. Few examples exist of integrated supply chains (either partial or completely) where all the parties work together and add value for the benefit of all in the supply chain, thereby driving sales of English pig meat where profitability is respected and delivered for all the parties involved.[195]

90. BPEX agreed that the absence of effective contractual relationships between producer, processor and retailer has undermined the industry's willingness to re-invest in more efficient production systems.[196] There were very few cost of production contracts between producer and processor, as these tended to be unsustainable for the processor.[197] Relationships between producer and retailer tended to be at arm's length. The Minister reported that producers had told her that they felt a sense of powerlessness when dealing with the big grocery retailers,[198] but she said that it was not the Government's role to "dictate what should happen between producers and the retailers."[199]

91. One farmer highlighted the problem of a lack of legally binding contracts between processor and retailers, with prices decided on the day of delivery. Retailers often relied on short-term buying initiatives which were not conducive to long-term stability of the supply chain.[200] Another farmer noted that problems such as demand in the retail or processing sector were passed down to the producer, but problems such as the increase in feed costs had not had an impact on the other way up the chain.[201] The Competition Commission also told us that costs incurred by retailers, such as shrinkage through shoplifting, were passed down the supply chain to the producer. BPEX claimed that consumers had seen prices increase by 90p but producers' prices had only increased by 27p. It was not apparent where the difference in increase had gone.[202] We were disappointed that the BMPA were unable or unwilling to provide us with an indication of the share of the pig meat retail price between the elements of the supply chain.[203]

92. John Godfrey, another farmer, asked that retailers be more involved in dialogue with producers to ensure the meat they were supplying better met the retailers' requirements within longer term contracts.[204] Pig farmer Leonard Goodier agreed that it would help if processors and supermarkets got to know farmers and the issues facing the industry—in the same way that processors appeared to understand the costs of the poultry industry.[205]

93. BPEX told us that:

What we would dearly like—and if we managed it BPEX's job would be almost complete—is a series of supply chains that run from producer, through the processor to the retailer, all of them understanding each other's problems and mitigating the prices to all three parties through that.[206]

The British Meat Processor Association (BMPA) agreed that the industry needed to develop long term relationships between producers and processors, but that the UK chain had been slow to embrace the integration of farming and processing,[207] but believed that there was a lack of interest in long term contracts between farmers and processors.[208] BMPA said that there were no formal contracts between processors and retailers and that supply of meat was on the basis of a "gentleman's agreement."[209] The processing industry felt that it was taking all the risk.[210] It wished to see a commitment from the retailers in the form of a contract to enable processors to commit to their supply base.[211]

94. Waitrose has spent 10 years developing its own supply chain which it considers to be a model of best practice. During the time in which the industry has decreased in size this supply chain has continued to grow and develop, with the aim of being both transparent and mutually beneficial for all in the chain. The Waitrose supply chain, comprises BQP (a pig production company) coordinating the pig farmer supply base, Dalehead Foods processing the wide range of pig meat-based products and Waitrose as the retailer—marketing and selling the final products. Waitrose ensures the health of its supply chain by adhering to the following principles: a long term view on requirements; clear definitions of production standards for specific lines at retail level; sustainable prices for the farmers involved; and sustainable prices for the processor involved in both directions. The security of the supply chain gives processors and producers the confidence to invest in new production systems or processing facilities to add value or to lower cost. Within the chain there are structured farmer groups that meet regularly to discuss and advise on best practice, and there is communication both up and down the chain, enabling issues to be resolved to the mutual benefit of all in the chain.[212] Waitrose also has a research facility looking at how to drive best practice in the sourcing of animal feed, with the aim of providing a more stable supply chain.[213]

95. Sainsbury's submission stated that they were actively engaged with producers and processors to better understand the pressures they were facing and had set up a "Partnership in Livestock" scheme for pork.[214] The British Retail Consortium believed that retailers had worked with the pig industry for a long time to promote and find new opportunities for English products and that when feed prices were high, retailers had increased prices paid to farmers whilst minimising the cost to the consumer.[215]

96. BPEX believed that retailers were very concerned about potential action from the Office of Fair Trading (OFT) following the OFT's action against supermarkets for discussing milk prices. The intention of the discussions had been to assist the milk producers, but resulted in fines of millions of pounds. Supermarkets appeared to believe that any discussion they may enter into with producer representatives placed them "in some sort of danger".[216]

97. Mr Opie of the BRC said that two or three of his members continued to have constructive dialogue with producer groups.[217] He said that it was possible to do this if you "have a well scripted agenda before you go in and people should understand what they can and cannot talk about."[218] However, the first thing that many farming groups wanted to discuss was price.[219]

98. In supplementary evidence to the Committee, BPEX gave details of the National Pig Association (NPA) meeting with OFT on 24 September 2007 at which the OFT gave guidance on what subjects should be avoided when producers met retailers:

[T]he Office advised […] that in any discussions with retailers, any discussion of retail competitors' pricing intentions should be avoided. Whether deliberately or unwittingly, BPEX and NPA must not act as a channel for disclosing to any retailer their competitors' pricing intentions. No reference should be made to the outcome of any discussion previously undertaken with the competitors of any chain. This would preserve the principle that competitive uncertainty and risk would not be reduced for any individual retailer and, thus, the competitive market would be maintained.

The OFT confirmed that objective information on cost of production increases could be communicated. Similarly, information that was historic and in the public domain (e.g. actual retail price increases which had occurred) could be communicated. It was acceptable to discuss supply chain issues on a chain-by-chain basis, and there were no objections to discrete supply chain issues being debated by participants in that chain.[220]

As a result, BPEX believe that:

[I]t would be very helpful if the OFT were to issue clear and comprehensive public guidance. This would help to ensure that, whilst remaining safely within OFT rules, meaningful discussions can take place amongst actors in the supply chain in order to improve understanding, transparency, efficiency, and trust within, in this case, the pig supply chain.[221]

99. The OFT submission stated that there was "nothing, in itself, wrong with bilateral discussions between different parts of a supply chain. They may serve a useful and necessary function, benefiting consumers by encouraging greater efficiency. However […] if the object of discussions is to restrict the range or volume of products on the market or to artificially raise their prices then such discussions would be illegal under competition law."[222]

100. The OFT does not generally provide specific guidance to individual sectors, and does not issue definitive lists of practices that are, or are not permissible under competition law. Providing specific guidance is considered to be prohibitively resource-intensive, particularly in the case of publishing an Opinion to aid business compliance in the application of UK or EU competition law where novel or unresolved questions are raised. The OFT does, however publish guidance for businesses and industry representatives in general to "assess their actions for compliance with all aspects of UK and EU competition law." Guidance has also been published setting out examples of activities that may or may not be permitted and includes details on information sharing.[223] The OFT told us that it also assists where it can by holding informal meetings with groups (such as BPEX and the NPA).

101. It is important that all links in the supply chain understand the issues each faces. The OFT must continue to provide clear guidance and advice to the businesses on the issues that can be discussed whilst avoiding breaking competition regulations. Defra must facilitate discussions of the supply chain in England, as it has been possible to do so in Scotland.

The Scottish Pig Sector Task Force

102. The Scottish pig industry faces most of the same recent challenges as the English pig industry, although it is much smaller in size and benefits from a more integrated supply chain. On 16 April, the Cabinet Secretary for Rural Affairs and the Environment in the Scottish Executive, Richard Lochhead, set up a task force to "consider actions to assist the pig sector and to determine which actions may be suitable for implementation provided resources are available and State Aids allow."[224] The Scottish Government invited the task force to discuss suggestions for action raised by the industry. These included: resurrecting the "Ongoers" scheme; funding trial vaccination; relaxing rules on the importation of GM feed; health initiatives; government insistence on procuring only Scottish produce in their contracts; an audit of standards, transparency and labelling of imported pork; improved food labelling; research funding; and placing a higher value on locally produced food.[225] Richard Lochhead also asked the Farm Animal Welfare Council to report on welfare standards for pig meat imports to Scotland and wrote to all major retailers asking what they were doing to help ensure the long-term sustainability of the pig sector.

103. In May, Richard Lochhead organised a meeting bringing the hospitality, retail and wholesale sectors together with Scotland's pig industry to discuss how the different sectors could work to ensure the future sustainability of the pig industry. The meeting was attended by representatives from the British Hospitality Association, Scottish Retail Consortium, major supermarkets, Scottish Association of Meat Wholesalers, Scottish Federation of Meat Traders, Scottish Pig Producers, NFU Scotland, Quality Meat Scotland, Office of Fair Trading and Campbell's Prime Meats. [226]

104. On 7 August 2008, the Task Force report was published and the Scottish Executive announced a £1m package to support the pig industry. Richard Lochhead said:

We are pledging £1 million to fund projects that will improve marketing, productivity and pig health to help achieve long-term sustainability for this vital sector […] This package is the first of its kind in Scotland for the pig sector and demonstrates the Scottish Government's confidence in a sector that produces a top quality product and meets the highest welfare standards.[227]

105. The £1 million package included the following elements:

• An immediate £200,000 to improve the marketing of pig meat products to consumers, to be drawn from resources already earmarked for the red meat sector following the foot and mouth outbreak in 2007;
• Around £100,000 to begin research into labelling and work to improve animal health (in particular, research into post-weaning multi-systemic syndrome), and
• Around £700,000 for future projects to be allocated in partnership with the industry, allowing the impact of new industry player Vion to be fully taken into account.

106. The package was described by the Scottish Executive as additional to other actions already underway or completed which included:

• A £30,000 strategic review into the pig sector to help develop market resilience;
• A £300,000 project to look at adding value to the fifth quarter in the red meat sector;
• Writing to all major retailers to ask what they are doing to help ensure the long-term sustainability of the pig sector;
• Highlighting the difficulties facing the pig sector at the highest levels in the European Commission, and
• Hosting a meeting to bring the whole supply chain together for the first time—retailers, hospitality and wholesale sector with the pig industry—to discuss ways forward for the future sustainability of the pig sector.

107. On 22 October, Mr Lochhead announced the priorities for £700,000 of Scottish Government funding which had been announced in August. The four projects to be funded had been agreed with the industry. They were:

• A pig business network to improve benchmarking, collaboration and efficiencies across the supply chain;
• The appointment of a Pig Veterinary Adviser to offer practical on-farm advice on disease control and elimination;
• New guidance and one-to-one advice on slurry and waste management, and
• Research to develop a test for mycotoxin zearalenone, a feed contaminant affecting breeding and growth rates, in pig tissues.

108. Pig World suggested that the UK Government should set up a similar task force to examine the English pig industry.[228] BPEX and BMPA also referred to the Northern Ireland Red Meat Task Force, which examined the sheep and beef industry in Northern Ireland, as a possible model for the Government to adopt for scrutiny of the English pig industry.[229]

109. The Minister, told us on 27 October that she had not yet met Richard Lochhead or discussed the conclusions of the Pig Sector Task Force report with him.[230] Although the pig industry had not asked for a similar round table meeting to discuss the problems facing the English industry, she would not be averse to such a proposal, but first she wished to read all the evidence and the Committee's report before instigating that course of action.[231] In a follow up letter to the Committee, the Minister stated that she had no intention of discussing the report with Mr Lochhead, but there is ongoing contact at official level between the Scottish Executive and Defra. Whilst the Minister said she was aware of the issues raised in the report, these were "matters for the Scottish Government to address."[232]

110. The Minister for Farming and the Environment must make it a priority to discuss the report of the Pig Sector Task Force with the Scottish Executive's Cabinet Secretary for Rural Affairs and the Environment. The work of the Task Force has indicated that it is possible to organise fruitful discussions between retailers and producer groups to promote the sustainability of the industry. Whilst certain matters fall under competition law, we consider it important that retailers, processors and producers cooperate on issues such as labelling, carcase balance, the threat of disease and the regulatory burden faced by the pig industry. The English pig industry should not be at a disadvantage because other administrations are doing more to tackle the problems of their own pig industry than the rest of the UK. Defra can learn from the Scottish example of how to organise and facilitate such discussions.

Public Sector Food Procurement Initiative

111. The Public Sector Food Procurement Initiative (PSFPI) was launched in 2003 to encourage public bodies in England to use the £2 billion they spend on food and catering services to help deliver a world-class sustainable farming and food sector. Public procurement law regulates the purchasing by public sector bodies of contracts for goods, works or services. The law is designed to open up the EU's public procurement market to competition and to promote the free movement of goods and services. It does not allow public bodies to give greater weight to locally produced food and drink when deciding to award contracts. However, there is some flexibility, and the objectives for PSFPI includes that public bodies should increase tenders from small and local producers, and that procurement should promote higher standards of animal welfare.[233]

112. Defra created the model specification clause for procurement which covers farm assurance and organic standards to enable public bodies to specify Red Tractor or equivalent criteria as evidence that suppliers met these standards.[234] Defra is also in the process of producing a model clause for the procurement of pork and bacon which it hopes to clear by the end of the year.[235] Defra intends to give advice to other Government Departments on which farm assurance schemes already meet the required standards, e.g. those marketed under the Red Tractor, Linking Environment and Farming (LEAF), BPEX Quality Standard Mark and RSPCA Freedom Food labels. Under the procurement rules buyers must accept other evidence proving equivalence to these standards.[236]

113. Defra told us that the then Meat and Livestock Commission and now the Agriculture and Horticulture Development Board have worked under the PSFPI to improve supplies of red meat into the public sector.[237]

114. However, a recent report from BPEX and the National Pig Association questioned whether public sector procurement could do more to support the British pig industry.[238] On average, in 2006-07, only 65% of pork and 25% of bacon procured by Government Departments was British. Several Departments (Ministry of Defence, Foreign and Commonwealth Office, Department for Work and Pensions, Department for Children, Schools and Families and HM Prison Service) sourced all their bacon from abroad. [239]

115. Several submissions to the inquiry argued that the Government could do more to encourage departments and local authorities to procure British pork, bacon and ham, or at least procure products that were raised in equivalent welfare standards.[240]

116. Defra published its own report on public procurement on 26 November, Proportion of domestically produced food used by government departments and also supplied to hospitals and prisons under contracts negotiated by NHS Supply Chain and National Offender Management Service (previously HM Prison Service).[241] This confirmed BPEX's earlier report that several departments and the National Offender Management Service procured all their bacon from abroad. Even Defra sourced only 75% of its bacon from the UK.[242] However, the figures for 2007-08 showed that overall, the average figures for the proportion procurement of British pork bought by departments had risen from 65% to 74%. The figure for British bacon had risen from 25% to 29%.[243]

117. Before the publication of the Defra report the Minister, when questioned about the figures in the BPEX report, had told the Committee that in buying pig products of a high welfare standard: "the Government has to lead by example and show what can be done […] it is not perfect and we need to work harder at it but we are making progress."[244] However, in supplementary evidence the Minister stated that cost constraints and the requirement among public bodies to achieve savings in their procurement of goods and services would remain the main barrier to progress.[245]

118. We are surprised that Defra does not lead by example and procure as much of its bacon from British suppliers as it does its pork. We ask that Defra confirms whether or not the bacon it procures from outside the UK is raised to UK welfare standards. Defra should encourage all Government Departments and public sector organisations to buy pig meat which was raised using equivalent welfare standards to those in the UK and submit details to the Committee of how it intends to do this.

Pig-specific diseases

119. The pig industry has faced several serious outbreaks of disease in the past 10 years that has contributed to the situation it finds itself in today (FMD, PWMS, CSF, PDNS). BPEX told us that it had taken four years to recover from the effects of the movement restrictions imposed during 2001 outbreak of FMD. Consequently, farmers were unable to afford to invest in their farming systems which became inefficient as a result.[246] BPEX reported that the industry was taking steps itself to develop a disease control strategy. These include funding the take up of vaccine to tackle PWMS, participating in the Zoonoses National Control Plan, and working with industry to develop a pig health and welfare strategy.[247] BPEX suggested that the Government provide support for pig health and disease eradication strategies through the Rural Development Programme for England. [248]

120. In its submission, Defra detailed its contribution of £1.5million per annum towards the costs of a scanning surveillance programme to facilitate early detection of new pig disease threats and changes in disease trends, to facilitate prompt intervention when threats arise. BPEX are provided with the monthly reports on disease threats published by the Veterinary Laboratories Agency. Also, a Defra representative sits on the British Pig Health and Welfare Council subgroup which is developing the health and welfare strategy with the industry.[249] Defra stated that the Government had invested approximately £38 million on pig-specific projects.[250]

121. BPEX invests "substantial" funds into short-term applied research but needs Defra and BBSRC to continue to provide long-term research and development funding and support of collaborative research with the industry.[251] BPEX asked that the Government work closely with the industry to identify research priorities to improve efficiency in the industry.[252]

122. Defra should continue to contribute to the scanning surveillance programme and to participate in discussions with the British Pig Health and Welfare Council to identify what actions Defra should be taking to tackle pig-specific diseases. In addition to discussing long-term research priorities, the Council should also investigate ways in which the Rural Development Programme for England could be used to support disease control strategies.

Conclusion

123. Over the past 10 years the pig industry has faced serious challenges in addition to the usual peaks and troughs of the pig cycle. The industry should be praised for implementing the changes required of it by UK legislation, and for attempting to organise itself and inform the public of the high welfare standards of British pork. However, there is evidence that several outbreaks of disease, together with the implementation of burdensome legislation and unusually high global prices of animal feed have left the industry either unwilling or unable to invest in the production systems necessary to improve efficiency in the face of overseas competition.

124. It is apparent that a portion of the retail industry has undermined the efforts of Government and the pig industry to introduce and implement desirable animal welfare legislation in the UK. Whilst pig farmers have strived to introduce open housing for pigs ahead of most of their EU counterparts at a significant cost to their businesses, some retailers and catering suppliers have continued to import pig meat that does not meet UK statutory welfare standards, which in some cases is labelled ambiguously so that consumers are ill-equipped to make informed choices. The price paid to English farmers for pig meat should properly reflect the cost of producing it to high welfare standards. Retailers should be more mindful of changes in productions costs affecting the industry in future and must be prepared to respond rapidly should producers be faced with the same scale of feed price increases as they were in 2006-07. Otherwise, the whole English pig supply chain is put at risk. In addition, the lack of transparency in the supply chain leads farmers to form the view that they are not getting a fair share.

125. The pig industry itself must ensure that consumers are aware of the difference in welfare standards between UK-reared meat and some imported pig meat, but the retailing and hospitality industry have a duty to label their products responsibly. The Government must support the Commission's proposals for food labelling changes, and must make clear to the retail and hospitality industries that it expects food to be clearly and unambiguously labelled with country of origin and welfare standard labels.

126. Defra must ensure that government departments and other public bodies source their pork and bacon from suppliers employing high welfare methods of production. In this respect, Defra must lead by example.

127. More generally, Defra must use its leverage to bring together the key elements of the pig meat supply chain to address the problems that threaten the sustainability of the English pig meat industry. Defra must discuss with the industry what work it can usefully commission to ensure the future sustainability of the industry. With goodwill and encouragement, we believe many of these could be resolved. Defra must seriously consider, in discussion with the industry, whether England needs to set up its own Pig Sector Task Force to tackle the issues such as labelling, carcase balance, productivity and efficiency facing the entire supply chain.

128. A level playing field between English pig farmers and their EU counterparts is unlikely to develop in 2013 when the EU ban on stalls and tethers is brought into force as several EU countries are assisting their pig farmers financially to make the necessary changes. The Government must ensure that never again are UK farmers placed at such a disadvantage compared to their EU counterparts as a result of unilateral national action.

40   Ev 69,and BPEX, The impact of feed costs on the British Pig Industry, p 5 Back

41   BPEX, The impact of feed costs on the British Pig Industry, p 6 Back

42   Ev 68 Back

43   Ev 69 Back

44   Ev 4 Back

45   Ev 33 Back

46   Ev 4 Back

47   BPEX, The impact of feed costs on the British Pig Industry, p 7 Back

48   BPEX, The impact of feed costs on the British Pig Industry, p 8 Back

49   Ev 2 Back

50   BPEX, The impact of feed costs on the British Pig Industry, p 9 Back

51   Ev 67 Back

52   Competition Commission, Market investigation into the supply of groceries in the UK, Appendix 9.5, p4 Back

53   Ev 70-71 Back

54   Ev 71 Back

55   Ev 39 Back

56   Q 107 Back

57   Ev 39 Back

58   Ev 71 Back

59   Ev 87 Back

60   Ev 57, 84 Back

61   Ev 2 Back

62   Ev 69, 70 Back

63   Q 56, and Letter to Richard Lochhead, Cabinet Secretary for Rural Affairs, from the Farm Animal Welfare Council, 7 July 2008, www.fawc.org.uk/pdf/letter070708.pdf Back

64   Ev 37 Back

65   Ev 69 Back

66   Ev 37 Back

67   Q 2 Back

68   Q 1 Back

69   Ev 48 Back

70   Q 10 Back

71   Q 10 Back

72   Ev 57 Back

73   Q 170 Back

74   Ev 37 Back

75   Q 108 Back

76   Ev 112  Back

77   Q 106 Back

78   Ev 37  Back

79   Ev 69. Back

80   Pig Production Guide on the BPEX website, www.bpex.org.uk/Press/PigProductionGuide/overview.aspx Back

81   Ev 69 Back

82   Ev 4, 25 Back

83   Qq 38-40 Back

84   Ev 69 Back

85   Ev 99 Back

86   Ev 69 Back

87   The Farm Animal Welfare Council was established by the Government in 1979. Its terms of reference are to keep under review the welfare of farm animals on agricultural land, at market, in transit and at the place of slaughter; and to advise the Government of any legislative or other changes that may be necessary. Back

88   Letter to Richard Lochhead, Cabinet Secretary for Rural Affairs, from the Farm Animal Welfare Council, www.fawc.org.uk/pdf/letter070708.pdf Back

89   Q 7 Back

90   Ev 91 Back

91   Ev 4, 25-26 Back

92   Ev 4, Q 7 Back

93   Ev 4 Back

94   Ev 94 Back

95   Ev 106 Back

96   Ev 106 Back

97   Ev 24 Back

98   Letter to Richard Lochhead, Cabinet Secretary for Rural Affairs, from the Farm Animal Welfare Council, www.fawc.org.uk/pdf/letter070708.pdf Back

99   Q 7  Back

100   Q 9 Back

101   Ev 69 Back

102   Ev 7, 94  Back

103   Ev 70 Back

104   Ev 31-32 Back

105   Q 69 [Mr Nigel Penlington] Back

106   Q 260 Back

107   Ev 81 Back

108   Ev 35-36 Back

109   Q 271 Back

110   Ev 82 Back

111   Ev 11, 102, 108, 116 Back

112   Q 15 Back

113   Ev 34-35 Back

114   Qq 177, 186 Back

115   Competition Commission, Market investigation into the supply of groceries in the UK, Appendix 9.5, p 5 Back

116   Ev 67 Back

117   Q 17 [Mr Mick Sloyan] Back

118   Q 17 [Mr Mick Sloyan] Back

119   Q 132 [Mr John Dyson], 191 [Mr Andrew Opie] Back

120   Q 17 [Mr Mick Sloyan] Back

121   Ev 3, 5, 7, 100, 117-118 Back

122   The Food Labelling Regulations 1996 (SI 1996/1499 as amended), 5(f) Back

123   Trade Descriptions Act 1968, section 36 Back

124   Food Standards Agency, Country of Origin labelling guidance, October 2008, p 7  Back

125   Food Standards Agency, Country of Origin labelling guidance, October 2008, p 8 Back

126   Ev 82 Back

127   Ev 102 Back

128   Ev 38 Back

129   Q 129 Back

130   "Irish pork problem highlights labelling", Agra Europe Weekly, 9 December 2008, and "Pork industry urges tougher labelling", Financial Times, 9 December 2008 Back

131   "Contaminated pork can be labelled British", Daily Telegraph, 9 December 2008 Back

132   European Commission proposal for a regulation, COM (2008) 40 Back

133   Information on the proposal for a new regulation on the provision of food information to consumers, Food Standards Agency, February 2008, www.food.gov.uk/consultations/ukwideconsults/2008/infoprovision Back

134   Ev 69, 71, 82 Back

135   Q 137 [Mr John Dyson], 191 [Mr Andrew Opie] Back

136   Institute of Grocery Distribution, Connecting Consumers with Farming and Farm Produce, 2005 Back

137   Q 191 Back

138   Q 134 Back

139   Q 148 Back

140   Qq 132-133 Back

141   Q 166 Back

142   Food Standards Agency, Country of Origin labelling guidance, October 2008, p 4, "Industry urged to give clear country of origin labelling", Food Standards Agency pres s release, November 2002, www.foodstandards.gov.uk/news Back

143   Ev 100 Back

144   Q 20 Back

145   Ev 29-30 Back

146   Ev 100 Back

147   Ev 70 Back

148   Q 238 Back

149   Q 248 Back

150   Q 205 Back

151   Q 200 Back

152   Q 192 Back

153   Q 202 Back

154   Q 21 Back

155   Q 25 Back

156   Q 25 Back

157   Q 28 Back

158   Q 25 Back

159   Q 27 Back

160   Q 111 Back

161   Q 109 Back

162   Q 112 [Mr Gerry Finley] Back

163   Q 247 Back

164   The RSPCA's draft definitions state that "free range" would mean outside in fields on soil with huts for shelter throughout life, "outdoor" would mean straw bedded indoor/covered area with access to outdoor enclosures (soil or other flooring) throughout life, and "premium indoor" would mean indoor, straw-based, free farrowing system throughout life. Back

165   Ev 107 Back

166   Q 23 Back

167   Ev 107 Back

168   Q 125 Back

169   Q 78 Back

170   Ev 55 Back

171   Q 225 [Mr Andrew Opie] Back

172   Q 223 Back

173   Ev 68 Back

174   Q 129 Back

175   Q 142 Back

176   Ev 54 Back

177   Ev 4 Back

178   Q 225 Back

179   Ev 38 Back

180   Q 80 Back

181   Ev 71 Back

182   Environment, Food and Rural Affairs Committee, Seventh Report of Session 2007-08, Implementation of the Nitrates Directive in England, HC 412, para 72 Back

183   Q 48 Back

184   Q 46 Back

185   Ev 69 Back

186   Q 46 Back

187   Ev 7 Back

188   Ibid. Back

189   Q 274 Back

190   Q 279 Back

191   Q 66 Back

192   Ev 31-32 Back

193   Ev 32 Back

194   Q 69 [Mr Nigel Penlington] Back

195   Ev 57 Back

196   Ev 3 Back

197   Q 5 Back

198   Q 236 Back

199   Q 280 Back

200   Ev 93 Back

201   Ev 103 Back

202   Q 41 Back

203   Ev 47 Back

204   Ev 7 Back

205   Ev 116 Back

206   Q 57 Back

207   Ev 37 Back

208   Ev 38 Back

209   Q 84 Back

210   Q 83 Back

211   Q 92 Back

212   Ev 56-57 Back

213   Q 180 Back

214   Ev 111 Back

215   Ev 55 Back

216   Q 60 [Mr Mick Sloyan] Back

217   Q 216 Back

218   Q 217 Back

219   Q 220 Back

220   Ev 33 Back

221   Ev 33 Back

222   Ev 119 Back

223   Ev 120 Back

224   Scottish Executive, Pig Sector Task Force Report, p 1 Back

225   "Pig Industry Task Force", Scottish Executive press release, 23 April 2008 Back

226   "Meeting to discuss pig sector", Scottish Executive press release, 15 May 2008 Back

227   "£1 million for pig industry", Scottish Executive press release, 7 August 2008 Back

228   Ev 101 Back

229   The Northern Ireland Red Meat Task Force (consisting of the Department of Agriculture and Rural Development, the Livestock and Meat Commission, Ulster Farmers' Union, Northern Ireland Meat Exporters' Association, Invest NI and the National Beef Association) was set up to develop a long-term strategy for the Northern Ireland beef and sheep meat industry. Its work involved a comprehensive investigation of all aspects of the Northern Ireland red meat chain to determine how a profitable and sustainable industry can be achieved.The research included all aspects of production, processing and marketing and a comprehensive involvement across all of the industry interests. It reported in October 2007. Back

230   Q 282 Back

231   Qq 256, 259 Back

232   Ev 82 Back

233   Ev 71 Back

234   Ev 71 Back

235   Ev 83 Back

236   Ibid.  Back

237   Ev 71 Back

238   BPEX and the National Pig Association, Is the Government buying British?, July 2008 Back

239   BPEX and the National Pig Association, Is the Government buying British?, July 2008 Back

240   Ev 5, 8, 96, 101, 107, 108, 111, 116 Back

241   Department for Environment, Food and Rural Affairs, Proportion of domestically produced food used by government departments and also supplied to hospitals and prisons under contracts negotiated by NHS Supply Chain and National Offender Management Service (previously HM Prison Service), November 2008 Back

242   Defra, Proportion of domestically produced food used by government departments and also supplied to hospitals and prisons under contracts negotiated by NHS Supply Chain and National Offender Management Service (previously HM Prison Service), p 10 Back

243   Defra, Proportion of domestically produced food used by government departments and also supplied to hospitals and prisons under contracts negotiated by NHS Supply Chain and National Offender Management Service (previously HM Prison Service), p 11 Back

244   Q 241 Back

245   Ev 83 Back

246   Q 35 [Mr Richard Lister] Back

247   Ev 6 Back

248   Ev 5 Back

249   Ev 71 Back

250   Ev 71 Back

251   Ev 5 Back

252   Ev 5 Back