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EU-UK price comparison understating difference by 5-6pkg

1st Nov 2016 / By Alistair Driver

Weekly price comparisons intended to show how UK pig producers are faring in the marketplace relative to their EU competitors have been consistently undervaluing domestic pigmeat by 5-6/kg, analysis suggests.

EU flagThe European Commisson's EU reference pig prices, published in the UK by AHDB Pork, currently suggest the average EU pig price stands about 1p/kg ahead of the UK price. In reality, the gap is more likely to be 6-7p/kg, it now seems.

Similarly, the 2015 premium UK producers were receiving against EU pigmeat was not of the scale indicated at the time, once differences in the way UK and EU prices are calculated are taken into account.

Last month, NPA chairman Richard Lister claimed the price comparison, as currently presented, 'dupes' farmers. 

Pointing to significant differences in the way UK and EU proces are calculated, he told Pig World:

“These prices are used to try and demonstrate we get a premium over EU prices or by processors to say they are paying too much for our pigs or by retailers to say EU pigs are cheap. I think the aim should be for accurate price comparison because we are being duped." 

Price differences

Following Richard's comments, AHDB Pork published an artricle revealing provisional findings from work it is currently carrying out work to understand the differences in the way UK and EU prices are set.

Stephen HowarthIts specialist marketing manager Stephen Howarth said the the main issue when comparing prices across EU countries is that the reference prices are ‘gross prices’, before deductions or retrospective bonuses.

In some countries, such as the UK, significant amounts can be taken off the price received by producers, such as for transport, meat inspection, classification and levies. In other countries, some or all of these are paid for by processors.

Furthermore, in countries, like Denmark and France, many producers receive annual bonuses from processors, which do not show in the weekly price.

Initial analysis suggests the reference price comparison appears to overstate the GB premium (or understate the deficit) by around 2-3p, Mr Howarth said.

But this is not the full story. The GB/UK price includes premium pigs, mainly outdoor-bred, which face much less competition from EU pork than ‘standard’ indoor-bred pigs. Based on comparisons between the APP and SPP, these premium pigs will inflate the reference price by around 3p, on average.

This suggests the UK reference price should be reduced by around another 3p, meaning, overall, it should be an estimated 5-6p/kg lower ‘to provide a more valid like-for-like comparison’.

Mr Howarth said: “This estimate will be refined further once we have completed further analysis."

What it means

He added: “Nevertheless, it would mean that for 2016 to date, GB and EU prices were roughly on a par, on average, and since June, EU prices have been even further ahead of GB ones than indicated by the reference prices.”

The mid-October EU Reference prices (see below) suggested the UK price was lagging just 1p/kg behind the average EU price. In reality, it appears, the gap is more likely to be 6-7p/kg.

EU reference prices, October 17 (p/kg)

  • Germany 146.17
  • EU average 143.48
  • France    143.06
  • UK 142.54
  • Denmark  132.52
  • Netherlands  128.54

Last year, the reference prices suggested UK prices averaged almost 30p/kg higher than the EU equivalent.

In reality, the 2015 premium for UK pigmeat was more likely to be in the region of 24-25p/kg.