The British have a national talent for screwing up their manufacturing sectors. And here we go again with pigs. Thanks to the calamitous decline in the breeding herd, grim forecasts from the MLC have consistently warned of a permanently reduced role for domestic producers. The industry peaked in 1998 when 15.6 million pigs were slaughtered, producing 1.14 million tonnes of pork and pork products. By 2001 pig slaughterings had fallen to 10.5 million and production was down to 782,000 tonnes.
Whatever is done, the number of pigs for slaughter will continue to fall into 2003 to below nine million.
It's difficult to quantify how many pig farmers have gone bust. But last year the MLC found far greater interest in its outgoers' scheme than it did in its ongoers counterpart. And the counterpoint to shrinking domestic production is a picture across the continent of rising supply backed by ebullient herd expansion driven by Denmark, Spain and Ireland.
The US, Canada and Brazil are also boosting pigmeat supply, and if they supply more to Japan, a crucial customer in world pigmeat trade, all the more gets locked into Europe to put downward price pressure on Britain.
As a result the British Pig Executive (BPEX) has gone on the offensive. Manager Mick Sloyan launched The Road to Recovery fightback strategy last month and admits: "The British pig industry is in a dangerous spiral of decline with the national herd contracting at an alarming rate. That decline must be halted and reversed."
If it is any comfort, the multiples are fervent in their protestations of support for British pork, with 100% domestic sourcing policies and a raft of marketing initiatives ranging from price cutting to added value routes.
Sainsbury's pork buyer Lindsey Napier is typical: "All Sainsbury's prepacked pork, sausages and organic pork is 100% British farmed. We are in continuous discussions with our suppliers on animal welfare and rearing issues and to ensure the quality of the meat. In a declining market, Sainsbury has an increasing share and we are always looking at ways to increase consumption by promotions and a greater choice of cuts."
And Waitrose points to all its pork, bacon and sausages being uniquely sourced from 30 producers who exclusively rear pigs under a dedicated Waitrose contract.
Yet with fresh pork covering only 20% of pigmeat consumption including catering, that still leaves a vast underbelly where importers can muscle in with all their might.
Just how has the manufacturing base got itself into such difficulties? The trouble began with the price collapse of 1998-99. The herd had been expanded in response to BSE in Britain and swine fever in the Netherlands only for consumers to start returning to beef. A strong pound together with the cost of investment in high level welfare systems notably the notorious unilateral ban on stall and tether housing systems and BSE controls wiped out producers' incomes. And then along came classical swine fever, and the wasting diseases PMWS and PDNS which cause serious loss of productivity.
There had been hopes last year that breeding and slaughter pig numbers would recover. The optimism was the result of a continental pig price rebound in late 2000 caused by the BSE scare on the continent. But then came foot and mouth. FMD's major blow was not so much in terms of disease (though 400,000 pigs were culled) but in movement restrictions that caused a huge build-up of sows on farms. The consequent ban on exports led to producer prices being 10p/kg below what they would otherwise have been, according to Tony Fowler, senior economic analyst at the MLC.
Fowler says the primary reason for the decline in the size of the British pig industry has been "the unusually sustained period of low producer prices. Over the 48-month period 1998-2001, the average producer price was only above 100p/kg for nine months and the highest the monthly average reached was just 103p. 100p/kg is roughly the price that is consistent with a stable breeding herd."
Yet, on the face of it, MLC/EU data shows that prices for most good quality British pigs are often 20%-40% higher than in the continental and Irish markets responsible for most imported supply, with some processors paying up to 110p for light porkers (80-90p on the continent).
The real bugbear is the higher cost base of British suppliers due to a multiplicity of factors, not least sector overcapacity, and the number of smaller processors has helped force up procurement costs to the disadvantage of the big operators. And the cost of the carcase in this country is traditionally higher due to a smaller carcase being needed for joints.
BPEX believes production costs could be significantly reduced if re-investment could be stimulated and, to that end, it is instigating research into feeding methods, management systems, pig health, and carcase weight. It aims to cut production costs by 15p per kg in four years by reducing finishing costs and focusing on immediate post-weaning performance. And priority will be given to projects that help in the management of PMWS and PDNS. The executive has also gone on the offensive over Britain's welfare regulatory burden.
But at the end of the day, the banks privately point out that they will not lend any more to UK pig producers for capacity expansion because outstanding debt is too heavy and the cost base uncompetitive. Even at the 100p price level only the most efficient pig farmers are breaking even.
Another blow to hopes of rebuilding the UK pig industry is the impending ban on antibiotic growth promoters by Brussels. Antibiotics used routinely as feed ingredients boost efficiency and producers' margins by accelerating livestock growth. The UK pig sector desperately needs them to maintain productive efficiency.
The troubles have come to a head at a time when food chain leaders are struggling to address the challenges of the Curry report. Fundamental to the BPEX vision of recovery is everyone getting along better: "The most significant challenge for producers, processors and customers is likely to be acquiring the vision and persistence to change from business adversaries to acting and feeling like true partners." A weakness is "too great a focus at retail on reducing cost and not enough on increasing value". And it sees as a threat "the persistence of a business culture that focuses on price and obstructs the building of mutually profitable relationships".
What action is outlined by BPEX? A raft of ongoing initiatives funded by the levy, at a cost of "at least" £13.4m a year, with three specific objectives: improving competitiveness through the chain; defending and adding value to the market for pork and pork products to strengthen consumer demand; and building alliances and sharing information. Learning from competitors and an export recovery programme are also included.
BPEX is placing its faith in an increasingly concentrated industry, calling for "a limited number of tightly focused supply chains" accounting for the vast majority of British sales. Making a virtue out of necessity, then.
MLC pigmeat marketing manager Chris Lukehurst believes his work must prioritise consumers who value British pork. "British bacon has lost a lot of market share in the last 12 months but we have maintained our share of fresh pork," he says. "The supermarkets are supporting British pork. If they did not, it would severely threaten our recovery plans and we think consumers would be disturbed to see imported pork. The MLC will always support instore activity backing British product. But our work does not involve us just flagging up British as such. It is about improving the offer through different projects with different retailers. And there is a huge unused potential in adding value and in different cuts."
At the heart of marketing initiatives TV ads this year are unlikely will be a hard drive behind the Quality Standard.
Lukehurst points to trials in three Asda stores earlier this year in which all Quality Standard bacon was grouped into a single block. Findings showed that the shoppers discovered it was much easier to identify the bacon they wanted and sales increased 6% as a result. The concept is now being rolled out to all Asda stores, along with a similar strategy for fresh pork destined to play a major part in the relaunch of the Asda's meat range later this year.
BPEX work and multiple flagwaving aside, here's the rub. The economic logic can be confusing, but it is difficult to see how producers can expect to achieve the further price increases and wider margins on which their investment to rebuild stock numbers depends. BPEX says salvation lies in the "reaction of entrepreneurs" to its strategy. "If they support the vision and take action to achieve it, then the industry can start to stabilise and recover."
But even if the strategy is successful, the herd will only stabilise in 2004 before it moves back to just 11 million by 2007. The road to recovery will be a long one. n
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