Irritation and questions about 5xD plans from German supers

Market parties indicate that the new direction taken by supermarket chains appears to be inspired by the difficult situation in German pig farming. Due to African swine fever and corona, sales prices are in a trough. Farmers and advocates have repeatedly called on supermarkets to take a stand and give priority to home-grown suppliers. Although everyone has the feeling that things are going to change (in a positive sense), questions are still raised about the implementation of the plans. For example, a spokesperson for one of Germany's largest slaughterers reports: "Supermarkets are forced to send a signal that sticks. However, little thought has been given to the concrete implementation." Meanwhile, Dutch piglet traders also notice that the subject is alive and well, among both suppliers and buyers. The 5xD requirement may benefit the appreciation of German piglets, but insiders do not expect the Dutch piglet to immediately become redundant.

Lots of open ends
The intention of the supermarkets has been communicated with German pig slaughterers who supply the supermarkets on a daily basis. However, this initially appears to have been one-way traffic and there is irritation about the lack of knowledge among the executive management of the supermarkets. "It is quite frustrating to see that a package of requirements is handed over without the messenger of the assignment having any knowledge of how this should be completed, or whether these requirements are realistic. Especially for the short period within which things must be achieved," said the spokesperson for the German slaughterhouse.

The scale on which the 5xD requirement must be introduced in a short time also seems to be a point of attention. Almost all major supermarkets now intend to stock their fresh meat shelves with home-grown meat. The same spokesperson said: "The supermarkets that have now indicated that they want to switch to the 5xD strategy have a market share of approximately 75%. We must bear in mind that only 30 kilos of a slaughtered pig consists of parts that are suitable for sale in supermarkets. This immediately presents a problem that arises in every chain: what will be the surcharge for such a product for consumers and farmers, and how are the costs of this chain recovered from the only limited part of the pig that is actually sold in the supermarket? generates money. These are all questions that do not yet have an answer. The development is good in principle, but it must all be feasible and well thought out."

Furthermore, it is still uncertain whether there are enough pigs in Germany itself to fully implement the 5xD strategy for all parties that have now said they want to conform to 5xD. Germany relies on imported piglets for a significant part of its pig production. These imported piglets do not meet the 5xD strategy because the meat must come from pigs born in Germany. "Germany imports around 12 million piglets from the Netherlands and Denmark. So for all the pigs slaughtered, this flow of piglets is already disappearing. Moreover, not every German fattener wants to participate in such chains, especially now that the added value is still completely unclear. A significant group of companies wants to keep the reins in its own hands. How many pigs for slaughter are available to answer such a question? Nobody knows at the moment. In addition, some parts of the pig are of course more in demand than others, for example it is unlikely that you will be able to find all can have pork tenderloins from 5xD pigs. How do you deal with this as a chain? There are still many open ends," says the spokesperson for the German slaughter company.

Piglet shortage in Germany
While Germany has historically had a piglet shortage, this shortage is currently only increasing. The poor prices have been causing a shrinking sow herd in the country for some time, which has recently accelerated, according to the spokesperson for one of Germany's largest pig slaughterers. "We have already seen a reduction of 2020 sows in 100.000. The expectation is that another 2021 to 2022 sows have disappeared or will disappear in the period 150.000-200.000. Together we are talking about a reduction of around 300.000 sows in a period of more than two years. Although German fatteners are not currently eager to stock piglets due to the uncertain prospects, it does mean that when there is more enthusiasm to stock piglets again, this will have to be done to a greater extent with imported piglets. Piglets that do not meet the 5xD requirements".

In addition to the current contraction, the parties we spoke to also point to the upcoming stricter regulations for German propagation companies. Free-range farrowing crates are becoming mandatory in Germany. To this end, companies must be able to submit an action plan by 2024. Adjustments to existing stables will cost a lot of money and many companies will no longer make these investments, according to both trading parties and slaughterers. A trend that will put further pressure on the availability of German piglets.

Parties are thinking about future trade flows
Parties in the Dutch piglet trade are noticing that developments in Germany are raising more and more questions, both among buyers in Germany and among Dutch breeders who supply to Germany. One of them says: "It always remained a niche concept, without major consequences for mainstream piglets. Now that the large German supermarkets want to take steps in the short term, things seem to be changing. German fattening pig farmers are struggling. for example with Westfleisch with a euro discount If the piglet comes from the Netherlands, these are still small things, but it does mean that when choosing a permanent coupling, the question is asked more often: is it better for me to work with a German master?"

Dutch breeders also ask questions: "How sustainable is the piglet export to the eastern neighbors, is it perhaps wise to spread the sales somewhat and also sell some of the piglets to Dutch fatteners? These are issues that were previously not or less important. However, the fact remains that Germany does not have enough piglets of its own. There may be a difference in valuation based on origin in the long term, but if every German fattener wants to have their stables full, Dutch and Danish piglets will remain necessary."

The decline in the German pig herd could therefore seriously hinder the plans of the German supermarkets. Today's guidance is therefore partly characterized as 'mustard after the meal'. Now that a significant number of German pig farmers have disappeared, demands are being made that require the presence of these German sows. What the plans should look like in concrete terms and to what extent they can actually be implemented must become clear from negotiations that are taking place now and in the coming period. More information must also be known about costs for consumers and the additional costs for pig farmers.

Despite the many speculations, the parties agree that the Dutch propagator does not have to worry for the time being that Germany will disappear completely as a sales market. Especially if improving market conditions lead to a greater demand for piglets, Dutch and Danish suppliers remain important in keeping German stables filled. However, recent developments may well lead to an additional appreciation of German piglets, to the detriment of imported piglets. There is still too much uncertainty at the moment about exactly what impact this will have, but it is advisable for parties not to simply ignore the trend towards more local and home-grown products when determining long-term sales channels.