Bacon Pigs (Deputation) (Hansard, 27 February 1958)

§ 1958. Mr. John Hare

My right hon. Friends and I have now considered very carefully the points put before us by the deputation, and in particular the specific 59W requests that there should be regulation of imports and that the guarantee arrangements should be modified to give a separate guarantee for bacon pigs.

We have decided that we should not be justified in accepting these proposals, and I have written to the deputation setting out in full our reasons for this decision. The following is a copy of this letter:

21st February,

DEAR SIR JAMES,

The Home Secretary, the Secretary of State for Scotland and I have now been able to consider carefully the points which were made last week to me by the deputation representing the National Farmers' Unions of England and Wales, Scotland and Northern Ireland, the Fatstock Marketing Corporation and bacon curers.

The deputation stated that as a result of the fall in the price of bacon since the middle of last year, curers were no longer able to offer a sufficiently attractive price to secure adequate supplies of pigs, and that throughput had now fallen to an uneconomically low level which threatened the stability of the bacon industry, curers and producers alike. These developments were attributed to unregulated imports of foreign bacon.

It seems to us that this analysis of the situation leaves out several important factors. It is true that since the middle of last year imports of bacon have been running at about 6% above the previous year. But home production has increased in the same proportion.

Moreover, the fall which has taken place in the price of bacon must be seen in relation to changes in the costs of production. Since the last Annual Review the cost of feeding-Stuffs has fallen by an amount equivalent to more than 36s. a cwt. in the cost of bacon production. Therefore the present prices of bacon really compare much more favourably than at first sight with those in earlier years. Indeed, if bacon prices were much higher than they are it could only mean that the consumer had failed to benefit from the fall which there has been in costs of feedingstuffs.

In these circumstances any difficulties which curers may be experiencing today can hardly be attributed unreservedly either to unregulated imports or to excessively low bacon prices. In any case, the curing industry as a whole does not seem to have suffered a reduction in throughput. You told us there has been a fall in the number of pigs supplied to bacon factories by the Fatstock Marketing Corporation. This is true but the number obtained by bacon factories from other sources has considerably increased. For the curing industry has been obtaining a larger number of pigs than it did a year ago.

We cannot, therefore, agree with the analysis of the present situation put forward by the delegation. We have, however, examined carefully the two specific suggestions made. The first of these was that there should be some regulation of the supplies of bacon reaching 60W the U.K. market. The second was that there should be separate guaranteed prices for bacon pigs and other pigs.

As regards the regulation of supplies, we explained that our treaty obligations under the G.A.T.T. do not permit us to impose quantitative restrictions on imports except for balance of payments reasons, unless these form part of an international commodity arrangement under which home production is also restricted. I think you realise the most serious difficulties that action on these lines—or even or a voluntary basis—would involve.

Your second suggestion was that there should be separate guaranteed prices for bacon pigs and for other pigs.

I must say that at this stage at any rate we do not think the case for such a step has been made out. You will remember that the Bosanquet Commission after most careful analysis concluded that The pork and bacon markets cannot be sealed off into separate units. Any arrangements for pig marketing must allow the market in pigs to operate as a whole it consumer requirements are to be met. The effect—and indeed the avowed purpose—of your proposal is to split up the market in pigs by insulating producers from market movements. If the demand for pork, for example, increased and pushed up the market price of pigs for pork, this would be offset by reductions in deficiency payments, so that the return to producers of pork pigs would be unaffected and there would be no financial incentive to producers to send a larger proportion of their pigs to the pork market. In other words, at a time when the consumer was wanting pork and willing to pay high prices for it, the deficiency payment system would be obstructing the satisfaction of this demand. Conversely, if the demand for pork was slack and the market weak, producers' returns would still be maintained by higher guarantee payments so that they would have no incentive to divert supplies to other markets. In either case pig producers as a whole would fail to get the best return from the market, and the Exchequer's subsidy liability would be needlessly increased.

It seems to us that the particular difficulties you referred to may well be short-term in their nature and should be corrected by the operation of the free market. For example, when the pork market was strong before Christmas, the average return to the producer on pigs sold to bacon factories was about 5s. to 6s. a score less than the return on other pigs. But the diversion of pigs to the pork market has already reduced this to under 3s. a score.

I really do not think the case has been made out that bacon pig producers have not received a fair share of price support under the present system. During the current financial year the average return on bacon pigs has been about 2s. 9d. a score below the average return for other pigs. Considering that the costs of production per score of pork pig are at least this amount higher than those of a bacon pig, this position cannot be regarded as unsatisfactory to bacon pig producers. The extreme range of fluctuations in 61W the weekly returns on bacon factory pigs has been from 2s. 5d. a score above the standard price to 4s. 11d. a score below. Such fluctuations are no greater than the producer of any commodity may reasonably be expected to face.

You suggested however that the present position is discouraging specialist bacon pig producers from concentrating on continued improvement in type and quality. If this were the case we should be concerned. The quality premiums given specially by the Government to encourage improvement of our specialist bacon pigs are surely proof of this. But we do not see any sufficient signs that your fears are justified. Over 50,000 pigs a week are still being graded at bacon factories in Great Britain. Surely the specialist bacon pig producer will in the main continue to supply bacon factories on this basis where his pigs command the quality premiums provided both by the F.M.C. and curers and by the Government. Moreover, it is surely right that there should be other pig producers ready to switch between the bacon and pork markets as demand requires.

We recognise the importance of the bacon curing industry in this country. We have indeed by providing quality premiums out of the general guarantees given a practical expression of the Government's desire to help it to obtain its requirements. If it were thought that further assurances are required by specialist bacon pig producers there is nothing in the guarantee system which prevents the introduction by the curing industry of special arrangements for them. At the same time the curing industry now only uses one-third of the pigs produced in this country and we should not feel justified in making arrangements that would have the object of protecting this industry from competition and market fluctuations at the expense of other sections of the pig and pigmeat industry and of the Exchequer.

There must obviously be concern about the course of prices for pigs and pigmeat in the coming months, owing to the large increase in production of pigs at home and abroad. We see no sufficient evidence however to justify that a change in the present arrangements is necessary in the interest of the producer. Within the operation of the free market, this system should give producers adequate protection from the effects of any further falls in market prices.

However I can assure you that if at some future time the fears you have expressed seem to be better justified we will certainly have another look at these proposals, or any others you care to put forward.

I am sending copies of this letter to Sir John Bodinnar and Mr. Guard.

Yours sincerely,

(Sgd.) JOHN HARE.

Sir James Turner,

National Farmers' Union,

Agriculture House,

25–31, Knightsbridge,

S.W.1.