Don't be too gloomy about the pig price

These are special times on the pig market, driven by the outbreaks of African swine fever in China. Never before have pig and piglet prices risen as quickly as in recent months. The German piglet price was a paltry €28 per piglet last October, which was a record low. Six months later the quotation had risen to a record level of €64 per piglet.

Pig prices, in turn, increased by tens of cents per week this spring. The German VEZG quotation eventually reached €1,85 per kilo, but the slaughterhouses then backed out by offering a 'Hauspreise'. This tempered the euphoria, which has now made way for a depressed mood. Under pressure from slaughterhouses, quotations are currently tumbling to lower levels. This dents the confidence of fattening pig farmers, which also causes piglet prices to plummet. However, the bottom under pig prices has certainly not disappeared.

Correction after overreaction, although there is more to it
First of all, the reductions can be seen as a correction after an overreaction in the spring. This is inherent in markets that are under high tension. Bitcoin, for example, also often falls back after a period of price increases. It is certainly not an exaggeration that the pig market is under high tension. Recently, the association for the meat industry in Europe (Clitravi) announced: the alarm clock, due to the rapid increase in pig prices. The margins at meat processors would therefore have shot through zero.

Yet it is too simplistic to see the reductions only as a correction. After all, slaughterhouses experience that China is currently much less active in the market than in recent months. This is probably because the Asian country has built up significant stocks in recent months. Barely a month ago, the Chinese claimed that the cold stores were chock full would sit.

Mood-making?
Dutch pig farmers reacted irritated to this reporting and regarded it as mood-mongering. That is also too short-sighted. In the first 4 months of this year, China imported no less than 634.000 tons of pork from European member states. This is an increase of more than 35%. Other exporters also benefited from the Chinese buying urge. It is therefore not unlikely that Chinese cold stores have become full. The sounds are also confirmed by the fact that the Chinese purchasing urge has weakened since June. 

Also the temporary import ban imposed by the Philippines German pork use, depresses the pig price. This was probably the straw that broke the camel's back. The day after this report, pig prices turned red. The 'poison cup' had already filled up due to lackluster pork sales in Europe and the decline in demand from China.

In the meantime, the holiday period has arrived, which means that relatively many Northwestern Europeans are traveling to southern destinations. As a result, meat consumption in Northwestern Europe is declining. Pigs produced under the 'Better Life Quality Mark' are currently hardly available for sale. In addition, the temperatures in recent weeks did not invite you to light the BBQ. All these factors put pressure on pig prices. However, meat consumption picks up again when the tourist season comes to an end. This will certainly take another 6 weeks. Until then, the pig market is in a tough phase. 

Even fewer pigs in Germany
Yet there is no need to be gloomy about the prospects for the pig market. The fact is that the German pig herd has shrunk further, in sows, piglets and fattening pigs. There are also no fewer than 2018 German pig farmers as of May 1.300 stopped. Due to the aging population, it is also expected that the downward trend will continue for the time being. Although the better pig prices invite entrepreneurs to increase the number of pig places, a further shrinkage of the German pig herd is likely.

The German pig shortage has been noticeable all year and will most likely continue to influence the market. Therefore, there is no reason to be gloomy, as the pork price is strongly influenced by the conditions in Germany. Elsewhere in Europe, the pig herd may be growing steadily, but German slaughterhouses cannot maintain capacity utilization levels with Spanish pigs.

China is coming back to the market
It is likely that China will enter the market again. The fact is that the Chinese pig herd was 25,8% lower in June than during the same measurement moment in 2018. The Chinese Ministry of Agriculture reported this this week, without mentioning exact numbers. There are even reports that the supply at Chinese slaughterhouses has dried up, forcing them to close their doors. 

The figures suggest that China is still heavily dependent on Europe to supply its population with pork. Besides, it will last at least 5 years before Chinese production is back to normal, according to the estimate of the world food organization FAO. This estimate deserves a comment, because there are also authorities that predict a slower recovery.

In previous years, exports to China peaked mainly in the months of September, October and November. Then the pork is imported for the Chinese New Year celebration. During this festival, which is scheduled for January 25, 2020, a lot of pork is traditionally eaten. Despite the outbreaks of African swine fever, this will not be any different now. It's probably just a matter of time before Chinese demand picks up again. European exporters benefit from a competitive advantage over their largest competitor, as China and the United States still do a trade war fight it out.

Good cards
In short: pig prices are currently moving to lower levels, but there is no reason to be gloomy. As long as there are (too) few pigs in Germany and China, pig farmers have excellent trump cards. Especially because the supply at Dutch slaughterhouses is also going to dry up. Participants in the stopper scheme must be empty before the new year. It remains to be seen how large the 'stoppers' crowd will be, although the number of slaughter hooks will remain the same in any case.