New year message from Mike Sheldon, AHDB Pork Sector Council Chair

How real is the contraction in European production? Our information says that it is significant and happening right now. Germany and the Netherlands are seeing major reductions in herd size, as their producers suffer under weightier environmental and animal welfare pressures than in the UK, which offers us some competitive advantage. Those two countries are also suffering from the loss of export markets from Germany due to African swine fever (ASF), and this pressure has extended to Denmark thanks to reduced demand for weaners in Germany. Consumer demand in Europe also faces significant reductions, particularly in Germany, where younger people seem to have fallen out of love with a meat-led diet. So where will the balance lie between reduced supply and demand? My feeling is that the balance will be marginally in favour of producers, but we should not rely on consumers being willing to support slaughter prices much higher than current levels.

The cost of production looks set to come down as producers renew feed contracts, and energy prices may fall depending on world events. However, labour costs will likely increase further, along with manure handling and storage costs, and other compliance costs. We cannot afford to wait for higher prices or for world markets to reduce our costs, we need to be driving down the factors that contribute to the cost of production and that are more in our control. This may require bold investment decisions. For investment to take place at the necessary rate, we need to give funders reasons to invest beyond our just being “the good guys.” We need to give them strong business models and detailed plans that give them the reassurance they will see a return.

Reducing costs will be difficult and will only work if that effort is matched by reducing risks. This will require greater collaboration, more sharing of information, less transactional relationships, and a clearer allocation of risks and responsibilities. For those of us wedded to our independence, it may mean a more conscious appreciation of the cost of that independence. Incentive for changing business practices needs to flow from the output of Defra’s supply chain review. What should emerge though is a more rational, professional, and collaborative way of doing business.