Inside: Pigs & Feed
2 reasons that impose resistance on the piglet market
The piglet market has been breaking through any form of resistance for weeks now. Each time, the supply is too tight to avert a price increase. Reaction from fatteners is certainly observable, but if the available piglet supply is eagerly reduced, rising quotations are a logical consequence. Nevertheless, the market is moving towards a ceiling.
Read this article?
Become a subscriber and get instant access
Choose the subscription that suits you
The economic maxim of supply and demand has wreaked havoc on the piglet market in the past 3 months. On balance, the DCA BestPigletPrice has risen by approximately 14 euros since November and other quotes are also moving at or towards price records. In week 6, the WeserEms piglet price will increase by one euro to 56,50 euros. However, the trend report for week 7 predicts a sideways movement, a signal that the top is in sight.
A ceiling starts to form in mid-February, which is based on 2 reasons. Reason one is that the supply of piglets is expected to increase in the coming weeks. This does not mean that supply and demand will immediately be in balance again, but the real tightness seems to be over. The second reason stems from the pig market.
The nervousness on the pig market is increasingly feeding the farmer's resistance. The purchasing prices of piglets are moving at levels that make it a significant challenge to make the fattening period profitable. Especially because feed prices are also rising. This means that even higher piglet prices are absolutely not desirable.
Peace and stability have not yet been granted to the pig market in 2017. In January, pig prices went up and down at full speed, the mood was nervous and there was no stable quotations. The market moves more steadily in February, but a lot is happening in the background. Although the meat market has made a small improvement in recent weeks, it is still uncertain which direction the German pork market will take. Due to the commotion surrounding Tönnies' export license, it is logical to expect that Germany's most powerful market party will put pressure on price formation in the coming weeks.
Vion has left the pig price for week 7 at 1,55 euros per kilo. The meat market shows no further improvement, making a sideways movement a logical consequence.
Given the uncertain pig market, the idea is that piglet prices are moving towards a ceiling. The DCA BestPigletPrice still makes a moderate price increase from 7 euros to 0,50 euros for week 54,50, but with the current market situation there appears to be a strong resistance level at 55,00 euros.
