Interesting price trend
One-to-one comparison of piglet quotations is not possible
The piglet quotations in the Netherlands correspond to each other, mutate in the same market, but often follow a different price trend. What is the reason for this?
This spring's demanding piglet market has turned into a push market. As the month of May progressed, price cuts were already looming. This is because the extreme shortage of piglets turned into a slight surplus. As the weeks passed, it was insurmountable that the quotations had to give direction to the changing market situation.
Recent price developments
In the first full week of June, week 23, the piglet market in the Netherlands went down in price. In Germany, the Nord/West quotation did not fall until mid-July. However, the price lines in the Netherlands, for example of the DCA BestPigletPrice (BPP) and the piglet price of Vion, also differ from each other. Between weeks 23 and 30, the BPP decreased by €9 to €50 per piglet (exclusive of VAT† In the same period, the Vion quotation decreased by €12 per piglet to €51,50 per piglet (including VAT† This means that the mutual price difference has become smaller.
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The development of the BPP, Nord/West quotation and the piglet price of Vion, between week 22 and week 30.
Variable allowances in Germany
The reason that the German piglet price did not shrink for a long time is because Germany has a different payment system than the Netherlands. Germany is an importing country, while the Netherlands exports about 130.000 piglets every week to more than 10 countries. The German market is therefore less susceptible to price reductions, especially at the beginning of a reversal of sentiment.
In Germany, the surcharges can vary per week, depending on supply and demand. An example of this is a Dutch propagator who received more than €10 in supplements this spring, of which a few euros are still left by mid-July. There are also multipliers who, for example, received €7 per piglet in supplements in the first half and €5 per piglet in the second half.
Fixed surcharge on BPP
The BPP in the Netherlands works with a fixed supplement system, based on measurable quality such as floor space and weaning age. There is room for a freely negotiable percentage of up to 10%. The maximum surcharge on the BPP is set at 18%. This percentage applies year round. There is no exchange of allowances on the BPP. This was emphasized once again by Jan Schuttert, chairman of the advisory committee, at the public meeting in Arnhem on Monday 12 June.
The objective of the BPP is and remains to focus on quality in the basic price. From that point of view, the BPP was launched on the market more than 2 years ago. The BPP lists a quality piglet and is not for residual flocks in the free market. The idea behind the fixed bonus system is to stimulate cyclical piglet production.
Extreme situation
The piglet shortage this spring can be seen as a special situation, given that piglet prices are at record levels. In certain weeks the piglet shortage was so great that the supplements here and there exceeded the limit of 18%. The trade is now suffering from this. Some propagators have been promised allowances and are sticking to them. Fattening pig farmers are being duped as a result. This then puts pressure on the base price. The purpose of the BPP is that the base price is not determined on the basis of promised surcharges. Surcharges must be determined correctly on the basis of the base price.
The set-up of the BPP includes a free negotiating room for a surcharge of up to 10%. This can be about flock size, genetics, flexibility, and so on. DCA and the advisory committee are of the opinion that the multiplier, trader and fattening pig farmer determine this percentage among themselves. The objective is to keep the relationship between propagator and fattening pig farmer equal. Therefore, the percentage of 'free bargaining room' can rise as well as fall, depending on the market situation in a calendar year.
Fixed surcharges still flexible
Despite the fact that the BPP has a fixed allowance system, there is room for flexibility. Here lies a task for the pig trade to properly implement and coordinate this flexibility. However, this requires leniency, both from the propagator and the fattening pig farmer. Otherwise, there would have to be an exchange of allowances in the long run, but that does not fit in with the structure of the BPP.
The reason that the BPP has fallen less sharply in recent weeks has to do with the above arguments. The course of the BPP, one to one, comparing with other quotations does not hold. The criticism of fattening pig farmers on a base price that is too tight is often the result of skewed supplements in the spring. So this is the crux of the matter, because there is certainly room for flexibility within the 'free negotiation space' of the allowances. Both up and down, depending on the current market situation.
The DCA BestPigletPrice is published every Monday around 18.00pm. Traders who are affiliated with Vee&Logistiek Nederland have until 15.00 p.m. to submit their submission. DCA arrives at a listing based on the submissions and input from the advisory committee. Click here to read the terms of the BPP.
Wouter Job
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