Lidl commits to British pork and cost of production contracts
© Tim Scrivener Discount retailer Lidl has introduced new contracts for pork producers that guarantee a margin for farmers above the cost of production.
It will invest £500m through this new initiative and has reconfirmed its commitment to supplying 100% fresh British pork.
The contracts will be based on an open-book model, providing producers with a fixed margin and a guarantee of minimum producer volumes.
See also: Promising signs for pig producers with uplift in EU market
Net margins for GB pig producers have improved in the past year.
However, this follows a long period of substantial losses through 2021 and 2022, when average finished pig prices fell well below the cost of production, resulting in a contraction in the domestic pig breeding herd.
Producer group
Lidl has established a pork producer group to allow the industry to provide input into the pricing model.
Farms within the producer group will have their carbon footprint measured by the retailer and future plans are due to be introduced to reduce these emissions.
Funding is also being provided to improve animal welfare and water quality in “at-risk” catchment areas.
Richard Bourns, chief commercial officer at Lidl GB, said: “This latest investment underlines our commitment to British producers, animal welfare and the environment.
“Acknowledging the challenges faced by the industry and its farmers in recent years, we recognised the need for intervention and the development of a bespoke solution addressing these challenges.
“That’s why we’ve been working closely with our suppliers and farmers, including major partners such as Cranswick and Pilgrim’s, to ensure we understand the intricacies of this supply chain and are well positioned to deliver impactful change.”
Contracts
The £500m investment and new contracts have received support from the National Pig Association (NPA).
NPA chief executive Lizzie Wilson said: “The NPA welcomes the introduction of Lidl’s pork producer contracts and its continued commitment to ensuring a sustainable domestic supply of British pork.”
Fabio Brancher, operations director for agriculture at Pilgrim’s Europe, added: “With Lidl’s support, this collaborative approach will provide crucial stability for our third-party farmers, shielding them from market volatility and aiding their recovery from recent challenges.”