The Danish organic pork chain

From its peak in 1999 with 533 organic pig farms, the number of farms has declined to 109 in 2007. However, the number of certified organic pigs has been fairly stable around 60- 70,000 with a low point of 46,000 in 2005, but rising again to a level of 70,000 in 2007.

There is a strong concentration in the organic pork production where 21 full-time producers cover almost 60 per cent of the production. More than half of all organic pork farms are classified as ‘hobby’ farms (1-39 sows) however these extensive farms cover only 14 per cent of the production.

Investment analyzes show that since growing consumer demand from 2004 it has overall been the large full-time producers who has invested in building, machinery and livestock. The concentration of the organic pork production is therefore likely to continue and grow relatively faster among the large full-time producers.

Economy and export

The economic value of the organic pork production at farm level has been calculated to 70 Mio. DKK (9.4 Mio. Euro). The export of organic pork was in 2005 approximately 45 Mio. DKK (6 Mio. Euro), and home market sales in retailing have been calculated to 61 Mio. DKK (8.2 Mio. Euro).

Sixty per cent of the Danish organic pork production is exported and 75 percent of it goes to the UK market. On the UK market, which is the second largest organic meat market in the world, Denmark competes mainly with organic pork from Germany and Holland. However, analyzes show that the production in these two countries is generally more niche dominated and more extensive, and they seem less prepared to cope with a 100 per cent organic feeding from 2012 than the Danish producers.

Bargain power

From the qualitative interviews carried out with key players along the various nodes of the Danish organic pork chain bargain power was revealed to take place between the node of ‘slaughtering – retailing’, and the node of ‘processing – retailing’. Due to the monopoly-like situation on ‘raw material’ of Friland/Danish Crown, the bargain power from retailers towards the node of slaughtering was characterized as low/medium.

Contrary to the processors who were in a strong competition with many other conventional products (like sausages, meat fillings etc.), the bargain power from the retailers was characterized as medium/high.

Consumer and producer prices

Over a five year period from 2001 to 2005 organic chopped meat has declined with almost 22 DKK per kg, whereas conventional meat in the same period declined with only 4 DKK per kg.

However, organic producer prices have increased steadily since 2004 from 13 DKK pr kg to over 22 DKK pr. kg, and the economic productivity of the full-time and large full-time organic pork producers was far better off than their conventional counter-parts in the same four year period.

The main explanation for this development is due to the fact that sales in organic pork has reached a level of ‘critical mass’ through retailing, where

• all parts of the organic pig is now sold as organic to organic prices leaving the producers with a better market price
  
  
• the cost of distribution and sales of organic pork have declined significantly

The monopoly position of Friland/Danish Crown towards retailers enables them indirectly to influence producer prices when demand is rising and supplies are insufficient. The organization form as a new generation cooperative, with control over entry, hands over automatically bargain power on supplies.

A future strategy of the producers organized in Friland/Danish Crown would be to continue supply side control and expand on international markets as well. It is on the supply side that they have a product valued high in utility terms, and in the same time they can deliver something relatively scarce or unique in ownership for the other actors along the pork chain. The international expansion is important so steady supplies on relatively volatile national markets can be levelled out as well as counterbalance the bargain power of European retailer chains.