Ahead of Tesco’s AGM today, pig farmers are questioning whether the extra money pledged by the UK’s biggest retailer will get to them.
Tesco, which posted profits in excess of £2 billion in the last financial year and has today revealed further revenue growth in the most recent quarter, announced in May that it was paying an extra £6.6m to farmers August. Tesco said this will bring its support for farmers to a total of £10m since the start of March 2022.
The retailer, which also said it was taking steps to source more British pork, pledged to work with its suppliers to ensure the investment gets passed to farmers as quickly as possible.
However, unlike other retailers that have pledged money to support pig prices, including Waitrose, Co-op and Sainsbury’s, Tesco has not specified how the extra money will be paid and how it will ensure it gets to producers. For example, it is unclear whether the extra funding simply reflects higher market prices as the SPP rises.
Yet to see benefit
While Tesco’s announcement was welcomed by the pig industry, producers who have been audited by the retailer have since said they are yet to see any benefit at a time when soaring costs mean they are losing thousands of pounds each week.
One said: “We have been audited by Tesco – and that is very onerous, with all sorts of hoops to jump through – and yet we haven’t seen any of this money. Tesco got some good publicity out of its announcement, but I am yet to hear of anyone who has actually seen the benefit. So where is that money?
“We need them to come out and show how pig farmers are going to see the benefit to give the producers the confidence they so desperately need to stay in business.”
Pig producers have been losing vast amounts of money for nearly a year. AHDB estimated average Q1 2022 losses of nearly £60/pig, taking total losses since October 2020 to £500 million. The Q1 figure was based on average estimated costs of 207p/kg. While pig prices have risen since then, average costs have soared even higher on the back of the Ukraine war, averaging an unprecedented 240p/kg in May.
“The situation is still utterly desperate and, for many producers who have not seen the benefits of the retailer money, it is only getting worse,” the producer said.
“Tesco, with the biggest retail market and huge influence in the supply chain, has the clout to make a difference. We need to see its warm words turned into action – otherwise producers like us will slip further into debt and, ultimately, be forced to quit.”
Part of the problem appears to be that, outside of dedicated supply chains, it is difficult to ensure how the extra money supplied by retailers gets to producers via processors due, in part at least, to the nature of contracts.
Figures collated by AgroVision from a large sample of the national pig herd have highlighted how the crisis has affected producers and the UK’s production capacity, highlighting large year-on-year falls in herd numbers, breeding animals, services and pigs currently being produced on farms.
Another producer pointed to the ‘massive profits made by Tesco and others in the supply chain and called for a much fairer distribution. “What this crisis has shown is that the supply chain simply does not operate fairly. In the short-term, we urgently need an injection of funds to cover our escalating costs. Longer-term, we need reform to ensure a fairer supply chain, including better contracts.”
Tesco’s position
Tesco indicated to Pig World that it was ‘fully committed to ensuring we work closely with our suppliers so that any investment made is passed back to farmers as quickly as possible’ and that it has ‘worked hard to ensure the visibility of these increased payments’.
It noted that its suppliers have a range of contracts in place with farmers that supply pigs into Tesco, while it has committed to reviewing prices on a more frequent basis to provide more flexibility for farmers when market prices change
The retailer stressed that it already sources significant levels of British pork, and has upped the levels over the past two years, and is ‘continually looking at ways’ it can source source more’.
Reassured
Farmex director Hugh Crabtree said: “I am sure Tesco shareholders would want to be reassured that it is acting honourably towards the great British pig producers who have contributed so much towards its financial success, yet currently find themselves in a dire situation and fighting for survival.
“The primary producer has for too long been the poor relation in a supply chain increasingly dominated by hugely powerful businesses. Now, more than ever, they need proper support from across that chain.”
Pig vet Duncan Berkshire explained how producers have faced dual crises over the past year in the form of the devastating pig backlog and unprecedented financial losses.
“The last 12 months have presented huge challenges to pig flow and the consequences of that have been felt on farms all over the country – in fact many are still dealing with extra pigs on farm and the subsequent knock on effects to health and welfare,” he said.
“That said, there are signs that we are coming through this particular challenge, only to be faced with severe financial hits to producers.
“I am very concerned that this will be the final straw for many farms and we will simply export pork production to countries with lower production and welfare standards with fewer checks.
“Those producers who remain in the sector are going to have zero funds for reinvestment in their systems for a long time, whether that be buildings, pig flow adjustments, or health upgrades.
“We have always managed to incorporate improvements for the pigs into farm plans, but there is so little appetite at the moment that I do worry that we will stall our usual good progress.
“Longer-term this will not only affect producers, but also the potential benefits we could bring to our pigs. We need to see money heading all the way from the retail level to producers on the ground.”
- Pig World has analysed what all the leading retailers, including Tesco, have been doing to support British pig farmers. You can view the results HERE