Food processor Danish Crown has presented a new strategy which includes raising the price paid to pig producers by DKK 0.60 (£0.07) per kg.
The new strategy is to enable Danish Crown to increase future earnings for the sake of the company’s owners.
According to Erik Bredholt, Chairman of Danish Crown’s Board of Directors, positioning itself as a stronger, more profitable company, will enable it to pay settlement prices that are an additional DKK 0.60 per kg above the EU index.
In future, Danish Crown’s settlement price will be benchmarked at all times against a basket of pig prices from the other four large pig producing and pig exporting countries in Europe. The German pig price will have a weighting of 44 per cent, while the pig prices in Spain, France and the Netherlands will account for 28, 17 and 14 per cent.
The company previously and exclusively compared its prices to those paid in Gemany, though it admits that looking at single country does not paint a complete picture. Due to the impact of one-off events, the German pig price is at times a poor yardstick, says Bredholt.
In the past financial year, the EU index was DKK 0.10 below the German pig price, whereas in FY 2014/2015, the EU index exceeded the German price by DKK 0.12 per kg.
One of the biggest challenges facing Danish Crown is the decline in the supply of slaughter animals in Denmark, where supplies are dropping by 2-3 per cent a year. The diminishing supply of slaughter animals is basically a cost for the company.
Bredholt said: “If we can guarantee a settlement price for pigs which makes it attractive for our cooperative owners to produce pigs in Denmark, I am convinced that we will see an increase in the supply of slaughter pigs and thus job creation at the slaughterhouses.”