A fortnight after the National Pig Association gave it a very public dressing down for its “continued inaction” over the pig farming crisis, Tesco finally stepped forward yesterday with a major support package for beleaguered pig farmers, worth a total of £10m.
Some might ask: what took them so long?
When the NPA wrote to Tesco CEO Ken Murphy at the start of May imploring the retailer to commit to a “relatively modest investment” to prevent “the destruction of the sector”, it pointed out Co-op, M&S, Aldi, Asda, Morrisons, Sainsbury’s and Waitrose had “already begun to support their suppliers, with many paying more for British pork through their dedicated supply chains”.
And while Tesco has always insisted it “fully recognise[d] the seriousness of the situation UK pig farmers are facing”, and was working with its suppliers “to understand what more we can do to support the sector” – it was arguably inevitable the supermarket would have to respond further to avoid losing the PR battle against its competitors.
After all, in this era of crisis and soaring production costs, optics are important, and showing you care about your suppliers – as we’ve seen during other crises such as the dairy sector’s travails in 2015 – can and does have a significant impact on public opinion. That’s probably why a press release promoting Waitrose’s £16m support package for its pig farmers (reported by The Grocer two weeks ago) was sent out again today too.
With this in mind, Tesco was keen to stress yesterday it had already been doing lots to support pig producers, including running an additional 15 pork promotions in-store since January, and increasing British pork volumes by 30% compared to this time last year.
The retailer had also contributed to a reduction to the sector’s ongoing pig backlog – which still numbers around 100,000 animals – by taking an extra 32,000 pigs off farms since January, with a plan to take a further 22,000 in the months ahead.
Arguably, that makes its headline £10m figure slightly disingenuous, given more than 30% of the investment was historical.
Tesco clarified that £3.4m had already been passed on to farmers since March, with the remaining £6.6m due to be passed on via Tesco’s pork processors via an “accelerated and enhanced payment plan” to top up payments above the cost of production and “ensure the investment gets passed to farmers as quickly as possible”.
But still, Tesco’s move has been welcomed by the pig industry as a positive step, even if it lagged behind some of its rivals.
NPA CEO Zoe Davies told The Grocer yesterday that it “couldn’t have come at a better time” for the sector, which is now in dire straights.
Indeed, the more pertinent question is whether Tesco’s investment (and that of its rivals) will be enough to save large parts of the British pork sector, given 80% of farmers could go bust within a year, according to the NPA.
Farmers are effectively losing £50 a pig at the moment, the NPA says, with AHDB’s standard pig price (SPP) of 171.61p/kg still way behind an average cost of production now in excess of 210p/kg.
And given how feed prices continue to increase (the latest driver being India’s wheat export ban at the weekend), production costs look set to keep growing.
Therefore, just like we’ve seen in the dairy sector recently, Tesco’s big financial commitment (and those introduced by its competitors) may actually be merely the first phase of many required to prop up hard-up producers.
So while any investment in such a crisis-hit supply chain can only be a good thing, it’s clear the sector is still some way away from being clear of trouble.