Developments may offer opportunities

The drought, African swine fever and trade war between the United States (US) and China. The developments affect global pig production. However, the same developments could also have a positive effect on the Dutch pig sector.

Due to the drought resource scarcity caused food to become more expensive. Estimates have been made which show that the cost price will increase by €0,05 per kilo of slaughter weight. Now the market price will also rise in the long run, but that can take six months to a year.

This is especially the case for pig farmers who grow their own raw materials. In addition, it can lead to a more limited supply of pigs worldwide, which can have a positive effect on the market price.

African swine fever
A second development is: African swine fever in China. This increases the risk of spreading. There are various reasons for this: the outbreaks are far apart, the transport distance is great, there are many backyard farms, biosecurity is usually neglected and non-transparent trade and smuggling seem to be the order of the day. Despite the government keeping its finger on the pulse, the virus can roam around for years and rear its head unexpectedly.

Let us not forget the development of this virus in the European Union. If it takes too long for the animal disease comes under control, it leads to major economic damage; we learned that lesson after the outbreak of classical swine fever in 1997. In this respect, the development of the animal disease in Romania is a cause for concern, because of the risk of further spreading in Eastern Europe.

trade war
Thirdly, the sector has to deal with frictions between the US and China. This means that the US will not so easily export to China, but will have to sell the products elsewhere (such as in South Korea and Japan). China will want to have pork anyway, which is an opportunity for the EU. The market price there is clearly rising, making it an interesting sales market.

The developments are not necessarily unfavorable for the Netherlands. However, it does lead to additional uncertainties and a market that is difficult to predict. The export opportunities and market prices will therefore fluctuate strongly for the time being. The companies of the future need a larger financial buffer and must devote time and attention to risk management. The risks are therefore increasing, but there are certainly opportunities for a favorable market.

Receive the magazine in your letterbox
This article is part of the 2018 pig analysis. The subscribers of Boerenbusiness Pigs & Feed Pro recently received this. Would you also like to receive this magazine? Click here to become a subscriber and receive the magazine.

With Pigs & Feed Pro you get access to all private articles, data and market information on Boerenbusiness† As a subscriber you also get access to the National Economic Agricultural Congress and other interesting seminars and workshops. Curious about all the benefits? View our offer in the webshop.

Robert Hoste

Robert Hoste is an Economist Pig Production at Wageningen Economic Research (WUR). He is involved in 3 tasks: sector and business economics in pig farms in the Netherlands, international analyzes and the production chain.

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.