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Buyers Must Cover Higher Feed Costs, Says NFUS

by 5m Editor
20 August 2010, at 11:36am

SCOTLAND, UK - NFU Scotland is calling on the food chain for a rapid response to the significant increase in feed costs being faced by Scotland's pig and poultry farmers.

While increasing grain prices are good news for the country's cereal industry, the sudden surge in prices has had an immediate impact on production costs for those keeping pigs and poultry for whom grain makes up a high proportion of their rations.

Despite significant media coverage of high grain prices, buyers of pigs, poultrymeat and eggs have, to date, resisted improving the prices they pay to farmers for their produce. This has slashed the margins that producers in these sectors are making at a time when many are faced with high re-investment costs on farm or servicing the cost of recent investment in their businesses.

Philip Sleigh, who represents the pig and poultry sectors on the NFUS Board, said: "Those parts of the food chain that require Scottish pork, poultrymeat and eggs need to wake up to the damage they are doing to the sectors by not reacting to the sudden surge in costs being faced by many Scottish farmers.

"The rise in feed costs has been so rapid that many producers have not been able to protect themselves by forward buying their feed requirements. They are, therefore, taking much higher production costs on the chin without a corresponding increase in what they are paid for their pigs, broilers and eggs. In fact some eggs buyers have actually have been forcing prices down just when the opposite is needed.

"This refusal by buyers to accept or recognise the need for producers to make an acceptable margin could be the last straw for a number of Scottish pig and poultry producers who are having to take decisions now on whether to invest in their businesses or close down.

"In some cases, the investment is needed to meet regulative requirements such as Nitrate Vulnerable Zone (NVZ) rules on slurry storage. For egg producers, investment is also needed for new buildings and equipment in order to comply with the impending ban on conventional laying cages. Without the prospect of a fair return on that level of investment, it will not be made and more Scottish producers could walk away from the sectors.

"Other producers who have made investment in new buildings are now having to service the debt taken on for those works – so they are in the same position of being unable to afford to sell their products for prices that are at, or below, the cost of production.

"Over recent years, the Scottish pig industry has shrunk significantly due, in part, to some retailers continuing to stock their shelves with imported pigmeat that does not meet UK welfare standards. We need them to back our farmers but if they, and their buyers, also refuse to accept the reality of the increased production costs producers currently face then we could well see a further fall out of Scottish pig production.

"The same situation applies to our poultry units. The legislation banning conventional cages was always going to be a pivotal moment for Scottish egg production but if the marketplace fails to react to current production costs then we could also see even more closures of Scottish egg production units than expected.

"Buyers must be in no doubt about the significance that their pricing policies for pigs, poultrymeat and eggs will have in the coming weeks and months. They have the opportunity to send out a positive signal that our products are wanted and value them according. However, continued failure to recognise current rising production costs would have very serious implications for the future supply chain in both directions," Mr Sleigh said.