Five questions for Jaap de Wit
'The heads to China and the bacon to England'
'The pig market has clearly become a global market', says Jaap de Wit, departing board member of the Westfort slaughterhouse and now joining the Supervisory Board. On Friday evening, De Wit officially said goodbye to the pig trade and on the occasion of this the DCA Beursprijs 2.0 was presented one more time from café de Posthoorn in Montfoort.
Boerenbusiness looks back with de Wit on the changing landscape in the pig sector, but also looks to the future.
1. Can you take us through some of the developments that the pig market has undergone in recent years?
'Let me start by saying that the pig market has become a global market that is highly dependent on geopolitical developments and trade agreements. The changing markets also mean a different way of working. I would have thought that anyone who had told me 10 years ago that East Asia would become such an important sales market was crazy. Historical trade flows are not a certainty. Suppose the borders with Russia open again, this does not mean that the same question arises again. Russia has become much less interesting. Production there has risen enormously, while the economy, and the ruble by extension, is holding back. When one market falls, another market has to take over, it's as simple as that. That's why we shouldn't focus too much on certain sales markets.'
But it can really disrupt the market?
'That's right. Often the first bill is for the slaughterhouse and the second for pig farmers. When Russia closed its borders in early 2014, slaughterhouses had quite a lot of stock in storage for future deliveries. The losses then amounted to approximately 25.000 euros per export container. As a result, pig prices plummeted and it was then the turn of pig farmers. Slaughterhouses were then able to get the pigs back into the slaughterhouse cheaper, while pig farmers were confronted with poor yields for a longer period of time. That is why the second bill is often the most expensive. The political risk is quite great for both the producer and the slaughterhouse, without our influence on this. In summary, you can conclude that having access to multiple markets has therefore become extremely important.'
2. How important is the sale to China through an export license? Is this the icing on the cake or can slaughterhouses hardly do without it?
'Export to China is perfect for selling the less valuable parts of a pig. Chinese importers are clearly focused on certain parts, such as the heads and legs. These are exactly the parts for which there is hardly any demand in Europe. This makes having access to the Chinese market extremely interesting. The Chinese market has more or less made us forget the loss of the Russian market, even if the demand is different. Incidentally, it is not only China that deserves the credit. The sale of bellies to South Korea is also interesting. Roughly speaking, you can say that several markets are needed to maximize the value of pigs. For example, England is important for the sale of bacon, the hams are popular in Italy, the fillets and chops remain in the Netherlands and the by-products go to Asia. When these markets are easily accessible, a pig can therefore be marketed perfectly. But here too there are no certainties. Export within Europe is more or less an acquired right, because as Europe we are united in a Union, in which every participating country has the same rights and obligations. Outside Europe this is different. There, export is more of a favor than a certainty. Obtaining an export license to China, for example, can easily take 5 years. However, if there is the smallest form of pollution, it is quite possible that the borders will be closed tomorrow. This makes the pig market vulnerable.'
Will England remain a certainty after Brexit?
'That is still uncertain. When Britain decides to neutralize trade tariffs to the rest of the world, competition there will intensify. Countries such as America and Brazil will then probably dive into the English market, causing the placement space to shrink. Should this happen, the European pig sector will have to look for new sales opportunities, for example in Australia or New Zealand. This should actually already be anticipated by ensuring that such export licenses are in possession before the situation arises. Ultimately, the law of communicable vessels applies to the pig market, whereby space is created elsewhere when a country closes its borders.'
3. Your new slaughterhouse is designed to process concept pigs; is this the future?
'Our idea is that the purely anonymous meat market has little future. Only competing on cost is ultimately a dead end. In the past, the Netherlands led the way with the lowest cost price, but now the size is determined by Spain. However, the ratio of added value / added costs remains a field of tension. On the one hand you want to provide added value on the home market, but on the other hand there is a danger that you will price yourself out of the market outside the Dutch borders. Unlike beef, pork is relatively difficult to distinguish. The added value lies more in the non-product-related aspects such as housing, environmental guarantees and, for example, in the area of living without antibiotics. Incidentally, this is a completely different guarantee than antibiotics-free, because that is in fact every pig. Such aspects can make all the difference, because pork itself is quite uniform. Nevertheless, we can certainly make further steps. The genetics are still based on the optimal production of hams. Hams, however, are no longer what they used to be. The middle section has clearly gained ground. On balance, distinctive pork with added costs certainly has a future, but the payback is only limited to a limited extent.'
Explain?
'50 percent of every pig is exported. Incidentally, that is completely different from 50 percent of our total production. In fact, the added value can only be recovered with about 20 to 25 kilos, while the full slaughter weight must be purchased at an additional cost. The meat prices of America, Brazil, Canada and Europe seek each other out in Asia. However, this is different in terms of cost and purchase prices. In Europe alone, Level Playing Field is still hard to find. Controls and regulations in Eastern Europe have a completely different dimension than here, while the levels of VAT within the EU also vary widely. The Beter Leven Standaard is primarily an image booster for Dutch supermarkets, but does not pay off outside the Netherlands. The bulk of the approximately 90 kilos of slaughter weight has to compete with world market prices. More floor space, for example, only increases the cost price. It does not add anything outside the Netherlands. This is clearly different with organic pork. This also has added value in foreign markets.'
4. How do you view bear meat in the context of market-oriented production?
'The problems with boar meat mainly came from a competitive point of view at slaughterhouses. Several slaughterhouses started slaughtering bears in order to keep suppliers on board, but did not take the sales market into account. About 35 to 40 percent of our slaughters are bears. But, as with any pig, the following also applies here: there must be a market for it. In domestic retail, boar meat has more or less become the norm, as the lower limit is increasingly based on 1 star Beter Leven Keurmerk. The English don't want it any other way, while Italians hate it again. So know who you're selling it to.'
5. What are your longer-term prospects?
In any case, the pricing is subject to all kinds of uncontrollable factors. Supply and demand between pig farmers on the one hand and slaughterhouses on the other, only determine the last few cents. No more. The underlying mood is determined by the global market and we have to go along with it. This means that we clearly have to keep hammering on our cost price. Ultimately, I think we will move towards long-term price agreements, even if this is still quite a challenge. I think that in recent weeks many pig farmers could have lived better with a fixed pig price of, for example, 1,50 euros per kilo, than the fluctuating prices in Germany in mid-January, which subsequently also strongly influenced Dutch pricing. Nobody is happy about that. From an international perspective, we must of course continue to work hard on the good reputation we have as a Dutch pig and meat sector. It can ultimately make or break our exports.
Wouter Job
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