Pig market is on a solid foundation

An overview of the European and global pig market with attention to developments in China and America. The prospect of a stable bottom side of the pig market in at least the first half of 2017 is increasingly emerging. A 

In week 2, pig prices in Europe will contradict excellent quotations from the pig farmer's point of view. However, slaughterhouses are less pleased with the changes, given the slow meat market in Europe, while exports outside Europe have yet to gain momentum. That is why less is being slaughtered and that could have a negative impact on European pig prices next week. In week 2, European quotes are still posting purely positive figures, with a plus of 5 cents in Germany to 1,51 euros. The Netherlands and Belgium increased by 3 and 4 cents respectively to 1,41 and 1,44 euros per kilo. More or less stable figures are visible in countries such as France, Spain and Denmark, which move less along with the outliers in Germany.

Outside Europe, it is mainly the demand in China and Japan, and the supply in America - combined with the pricing - which determines the mood. In China, pig farmers have been in the black for more than a year, with returns of more than $100 per pig being no exception. Yet statistics show that this does not lead to a growing pig herd. Just like in 2015, the sow herd also recorded a minus in 2016. Last December, China had 37,2 million sows. With these figures, the sow herd has shrunk by more than 2013 million sows since 11. In total, China had 590 million pigs last December. In 2015, for example, the counter stood at 708 million pigs.

Increasing regulatory pressure is limiting the expansion of the Chinese pig herd. For years, growth in the pig sector in China has been supported by government incentive policies, but this is starting to change due to awareness of the consequences for the environment. Increasing regulatory pressure and price spikes are making Chinese pig farmers cautious. That is roughly the explanation why Chinese pig farmers are holding back and not expanding.

The lack of knowledge also limits growth in China. Running a sow farm with, for example, 2500 sows is different from keeping pigs in the backyard. Labor is also scarce in China, at least in agriculture. This is almost unimaginable for a country with around 1,4 billion inhabitants. Chinese workers prefer a vibrant life in the city rather than working in more remote areas. Given these developments, long-term expectations are good for an import requirement varying between 5 and 15 percent of Chinese production.

The American pig sector has gained more of a foothold in foreign markets in recent months. The Americans set an export record in November with a volume of almost 74.000 tons. This is an increase of 21 percent compared to the long-term average and is mainly due to demand from Mexico. The export of by-products to China also went well with a traded volume of around 32.000. This is almost 90 percent on top of last year's November volume and also at better prices 

Pig prices in America have been on the rise again since mid-November, given the increase from about 35 dollar cents per kilo to 1,24 dollars in early January. Due to the low prices, American slaughterhouses slaughter non-stop, because the earnings are excellent. This year, American slaughterhouses are expanding their slaughter capacity, which is a positive signal for pig prices there and, by extension, the returns of pig farmers.

On balance, it can be said that Chinese demand is likely to continue unabated in 2017, while the rising pork prices in America - combined with the strong dollar - ensure that meat prices on the world market do not fall further. The foundation for a stable bottom side of the pig and piglet market for the first half of 2017 is therefore increasingly starting to form. Especially given the tight pig supply within Europe. However, this does not alter the fact that European pig prices in January and February are sensitive to negative price corrections, because that is inherent to the winter months.