Urgent Rise in Farmers’ Prices Needed as Costs Rocket
03/09/07

Livestock farmers need an urgent lift in the prices they are paid if supermarkets are to have continued supplies of local food, according to NFU Scotland which is in urgent talks with the major retailers.

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The price of grain for animal feed has doubled over the last year and these spiralling costs have driven livestock farmers into a loss-making situation (see figures in Notes to Editors). The crisis is particularly acute in the pigs and poultry industry with farmers facing a disastrous situation in the coming weeks in the absence of significant rises in the farmgate price.

NFUS has emphasised the global factors that are driving this increase in food production costs. These include an expanding world population and an increase in affluence within the largest countries like China and India - this is translating into improved diets and increased consumption of products like meat and milk. On top of this, flooding and droughts - a consequence of climate change – together with an increase in crops being grown for biofuels are all reducing the land available to produce food on.

NFUS President Jim McLaren said:

“Is it not an exaggeration to say the Scottish livestock industry is facing a meltdown unless the spiralling cost of rearing and taking care of livestock is reflected in the prices farmers are paid. Supermarkets must understand that the same factors which have driven dairy farmers out of business and landed the country with a milk shortage, are now hitting the whole livestock sector.

“The pigs and poultry sectors are staring into an abyss at present. Pig farmers are losing money on every pig they sell and the story is no better for egg and chicken producers.

“The fact is that global shortages are at last driving cereal prices back to a sustainable level. However for livestock producers who require grain for feed, the effect on production costs is horrific. The price they were receiving was already woeful. This unprecedented rise in costs has led farmers to question their future and I believe it could spell the end of guaranteed supplies of Scottish meat and meat products on supermarket shelves. That is obviously not what farmers want and, crucially, it is not what consumers want. Supermarkets must now stand up to their warm words of commitment to local food production. They must also meet their responsibility to their customers by securing future supplies with higher prices for suppliers.

“Substantial rises in the prices farmers receive do not have to mean big hikes at the tills. Food sold by retailers incorporates a significant mark-up and, for example, a 25% increase in the price a farmer receive for pigs - which would just cover rising costs - would only equate to about four pence on a packet of ham or 10 pence on a packet of bacon. However, it is for retailers to decide whether they want to charge their customers more or absorb these costs within their own significant margins.” More/…
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NOTES:

• In August 2006, wheat for animal feed cost approximately £80 per tonne. Today the price is around £170 per tonne.
• Unless there is a farmgate price increase, pig farmers are facing a loss of between £5 and £13 on every pig sold.
• The cost of producing a dozen eggs has gone up 12p per dozen
  

Even if the entire price rise farmers needed was passed on to consumers, the impact would be relatively small – and that is presuming supermarkets won’t cut their profit margin and will instead ask their customers to pay. For example:

• A 30p/kg rise for pig farmers – to cover extra feed costs – would represent a rise of only 13p on a typical pack of pork steaks or sausages, 10 pence on a pack of bacon and 4 pence on a pack of sliced ham.
• The doubling of wheat prices only adds 8 pence to the price of a loaf (every £10 per tonne increase in wheat prices is equivalent to one pence on the retail price of bread).
• If malting barley doubled in price, it would add around 3 pence to a bottle of whisky.
• In the last year of its life, a prime suckler beef animal will eat around one tonne of barley. The cost of this has increased from £90/t to £170/t. Suckler beef producers need an extra 25p per kilo deadweight, just to cover that individual cost.

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