Rest of the EU bouncing back, but not the UK; banks reluctant to lend more
Permanent contraction of the British pig industry and a consequent need for restructuring of the processing sector and the distribution system seemed increasingly likely before the foot and mouth disease crisis, and now appear almost inevitable.
One indicator is the method chosen by agriculture minister Nick Brown to help pig farmers cope with the new crisis.
Brown announced on Tuesday that he is bringing forward spending already allocated for the producers under the Outgoers Scheme, an aid package put together last year in response to earlier problems including the 1998-99 price collapse and the swine fever epidemic.
As the name implies, this scheme provides subsidies to help pig farmers quit the sector.
There is a parallel Ongoers Scheme of investment aid for optimists wanting to stay in the industry, but the focus of attention on help for those getting out is seen as significant. Recent upturns in the prices of pigs and pork prompted by the BSE crisis have been weaker in the UK than elsewhere in the European Union, and this anomaly has been mirrored in the lack of breeding capacity recovery here, unlike the rebound in Denmark.
Failure of the UK industry to bounce back is perhaps best explained by (and partly caused by) bankers.
HSBC head of agriculture Steve Ellwood gave a notably gloomy assessment at the recent MLC Outlook conference, saying he had seen other farming sectors show sustained or strenthening liquidity ratios but the pig sector was still in very bad shape.
"Pig producers, especially in East Anglia, have not shown in their balance sheets a recovery resulting from last year's upturn in pig prices," said Ellwood.
Other bankers express similar sentiments in private, warning they will not lend more to UK pig producers for capacity expansion, because outstanding debt is still too heavy and the cost base uncompetitive.
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