News liquidity monitor
Fattening pig farmer closes 2020 the same as 2019
The liquidity of pig farmers was very good at the beginning of 2020, but as the year progressed, the current account deteriorated further. In the last quarter, the current account averaged €81.000, which is €29.000 less than in the same period in 2019, according to the ABN Amro liquidity monitor. The current account of sow farmers in particular has deteriorated. What is the expectation for 2021?
At the beginning of 2020, the liquidity of pig farmers started to improve. This is due to higher meat and piglet prices. However, as the year progressed, prices fell sharply due to the corona crisis and trade barriers. When the African Swine Fever (ASF) also hit Germany, prices plunged to a low point and the average liquidity of pig farmers plummeted.
Dutch piglet prices fell from €89 in March to €25 in December. The fattening pig prices also had to drop considerably and fell from €1,86 per kilo in March to €1,25 in December. The total expenditure of the average pig farm in the fourth quarter of 2020 was slightly lower than in 2019, mainly due to lower purchase costs of piglets on fattening pig farms.
Pig farms have attracted less money and spent less on investments. Banks have also suspended repayments and less tax has been paid.
Sow farmers a lot of damage
The current account of sow farmers in particular deteriorated rapidly in the second half of the year. In the fourth quarter the piglet price fell far below cost price and the cash flow became negative on average 56.000. Compared to the same period in 2019, this is a decrease of almost €40.000.
Among the fattening pig farmers, the damage was somewhat limited compared to the previous year. The current account stood at 2020 at the end of 116.000, which is virtually the same as in 2019. Fattening pig farmers were able to somewhat offset the lower prices with the lower purchase costs of piglets. In the months of April to July, however, the fall in the piglet price did not provide sufficient compensation, liquidity improved slightly in the months of August to November, because piglet prices then continued to fall.
Uncertainty in 2021 too
The past year was a period full of uncertainties for pig farmers. The situation does not look entirely rosy for 2021 either, and AVP and corona are leaving their mark on the market. The sale of pork to the catering industry can increase again in the course of the year, provided the spread of the corona virus is limited.
The situation on the German pig market is likely to continue to be a disruptive factor in the European pig market. They are busy there to curb the oversupply of fattening pigs. It is expected that this will be removed in the coming months, but the export barrier that Germany faces will not disappear in the short term.
Shrink in numbers
As a result of the reorganization of the pig farming sector, the number of pigs will probably decrease further in 2021. ABN Amro expects a decline of approximately 7% in the pig herd, with the decrease mainly due to the number of sows. The bank also forecasts that the number of sow farmers in Germany will decline sharply as a result of difficult market conditions and the social and political discussion in the country about the welfare requirements for pigs. A decline in the sow stock of more than 10% does not exclude ABN Amro.
The piglet and finisher prices are likely to improve in the first half of the year, the bank predicts. As long as AVP does not come to the Netherlands and the corona crisis becomes less drastic, the bank expects an improvement in liquidity before 2021.
Chanti Oussoren
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