Fair returns needed for intensive sectors
Friday, 8 April, 2022
Commodity watch by UFU policy officer David McClure
Pig and poultry producers across Northern Ireland (NI) are experiencing huge price increases for all of their inputs. Feed, energy and perhaps to a slightly lesser extent for these sectors, the price of fuel, are pushing production costs of pork and poultry products to levels never seen before. In contrast to ruminant enterprises where there is the option to focus on growing quality forages in a bid to dilute the cost of purchased concentrates, our intensive sector producers do not have this option and are fully exposed to the current inflated prices.
The Ulster Farmers’ Union (UFU) pork and bacon committee have been highlighting the plight of our members to all stakeholders over recent weeks and months. Our members are fully exposed to the spikes in the market which have been exacerbated since the Ukrainian war. The current cashflows on any pig farm will show that the business is haemorrhaging cash at a level that is not sustainable. To put some context to this, phone calls made to the UFU from family farms are currently citing five figure losses every week.
We continue to engage with processors and retailers on a regular basis with a view to gaining assurances for our members on how to direct their businesses for the future. To date, although the market is showing small signs of correction, there is no rapid upward movement in prices which is badly needed. In the absence of any such price corrections there is no doubt that the supply of pigs in the United Kingdom will reduce significantly, by means of farms ceasing production.
By contrast, the poultry situation presents a variation in exposure to the farmer. Some NI poultry producers are sheltered from “shocks” to the market by their packer/processor who essentially manage the cashflow and deal with retailers directly. Farmers under this model tend to have a degree of protection from feed price increases but are not immune from other cost pressures such as soaring electricity and gas prices. Whilst the role of the processor removes some of the direct impact to our members, it does not undermine the importance of regular retailer-processor engagement to ensure that costs throughout the production system are covered and passed back to the consumer. The UFU poultry committee provide supportive conversations with retailers and are supportive of the ongoing dialogue between processors and retailers.
There are of course some poultry producers who do not fall under the protection of a packer who negates the risk on their behalf. These farmers have been hugely exposed over recent months to the same challenges which have been the bane of the pig industry. Soaring inputs and lagging prices for produce have seen these farmers directly feeling the need for a sharp increase in the prices paid to them for their produce.
By way of summary, the intensive sectors have no ability to shelter from this ongoing storm of soaring input costs apart from ceasing production. The stark reality is that if UK consumers want a secure, safe and traceable source of pork and poultry products in the future, then the price that the farmer receives must increase immediately. Whether the consumer bears all of the pain, or if the price increases are shared between retail and processing, remains a point of discussion. The simple fact is, that in the absence of sharp increases in farm prices which return a fair margin to our members, the pig and poultry farmers in NI cannot continue to subsidise the price of food.
Rural Support are aware of the increasing pressures which the NI agriculture industry is facing. Whether it is financial implications or the stress of the current clouds which hang over the industry that are affecting farmers, UFU would encourage anyone who is struggling to reach out. The UFU are very keen to support any farmer who needs advice or assistance, and Rural Support is another point of contact. They have a dedicated support team available Monday – Friday 9am -9pm on 0800 138 1678 (freephone). Voicemail and support options available at all other times.