Cranswick has defended its decision to stop supplying data into the UK’s major pig pricing scheme, saying it wanted “greater clarity and transparency” in how pig prices were reported.
The processor announced it was leaving the Deadweight Average Pig Price (DAPP) scheme earlier this month, which was followed by Karro leaving the scheme last week.
The DAPP is widely used as a benchmark to set contract prices for pig producers in the UK, and producers have sharply criticised Cranswick’s decision, with the National Pig Association describing it as an attempt to “torpedo” the DAPP. “Everyone tried to dissuade them from leaving the DAPP, but they had made up their mind,” said NPA deputy manager Lizzie Press. “We are bitterly disappointed. It’s a bad signal to producers at a time when the pig industry is trying to invest in its future.”
Producers say the DAPP is a valuable tool that provides transparency in the market about pig prices, but Cranswick said “some food producers, including Cranswick, believe there needs to be greater clarity and transparency in the pig pricing reporting process”.
“We have been discussing this issue with Bpex [which administers the DAPP] for over 18 months and will continue to work with them to find ways of improving the process,” a spokesman added. “We have, at all times, informed our producers and Bpex of our views and decisions.”
Cranswick did not say how it wanted the reporting process to be improved, but industry sources have suggested it was becoming concerned the DAPP - which refers to prices for ‘standard’ pigs - had become artificially inflated as processors like Cranswick were increasingly switching to more expensive, higher-welfare pigs.
When the DAPP was introduced over 10 years ago, the bulk of the pigs sold in the UK were ‘standard’ pigs, Investec, which acts as broker to Cranswick, said in a note. “However, over the last decade, the market has changed, with far more interest now in welfare/outdoor reared pigs. As these outdoor reared pigs sell at a premium to standard, including these pigs in the overall calculation is effectively inflating the DAPP. Cranswick over-indexes in the outdoor reared sector and hence its decision to withdraw from DAPP.”
Discussions had been underway to split the DAPP to address this issue and better reflect prices for standard and premium pigs, and Bpex had developed a proposal for a segmented DAPP at a workshop before Christmas, which was supported by its board in January. “Following the Bpex board meeting in January, Bpex was advised by Cranswick Country Foods and then Karro that they no longer wished to be participate in the DAPP,” a spokesman for Bpex said. “While we can speculate as to the motivation behind these decisions, it is for Cranswick and Karro to explain the thinking behind the decisions, which they took independently.”
Despite the exits of Cranswick and Karro, Bpex insisted the DAPP scheme would continue and DAPP prices remained representative. “Although the DAPP sample size is reduced a as a result of Cranwick and Karro pulling out, it still contains a significant number of individually priced pigs,” its spokesman said. Bpex was also working with pig marketing groups on getting additional pricing data to boost its DAPP sample, he added.
Although some sources have suggested pig prices as captured in the DAPP might come down as a result of Cranswick and Karro leaving, Press said she didn’t expect a reduction in price. “But whether and how it affects the marketplace remains to be seen,” she added.
Tulip, Dunbia, Woodhead Bros, HG Blake, Cheale Meats, FA Gill and Lambers continue to supply data into the DAPP, and Press said there was no suggestion any of those companies was looking to pull out.
Karro did not respond to requests for comment.
No comments yet