'The fact that piglet prices are now rising is not yet a market recovery'

While beef and poultry meat prices managed to peak this year, the pork market has been in a quagmire for some time. Hoste speaks of four factors that lead to this. The first and most important factor is the drop in meat demand. "The demand for pork has fallen considerably this year. In Europe, this is partly due to the ongoing coronavirus and the lockdowns associated with it. In addition, meat consumption in Europe is structurally lower, especially in Germany."

China, the most important sales market outside Europe, is also purchasing significantly less pork. According to Hoste, this is a result of rising Chinese production and slightly lower consumption. “Both small-scale pig farmers and large integration companies have quickly ramped up production, leaving European exporters with fewer gaps to fill.” Moreover, China is difficult to reach. Due to the outbreak of African swine fever (ASF), German pork is being boycotted by China, while a Dutch slaughterhouse is also being banned by China, Hoste summarizes.

Higher slaughter weights and expensive feed
While meat demand has fallen, pig production has increased. The pig economist points to the December 2020 census when the European sow herd showed no decline. "When you combine this with increasing productivity per sow and increasing slaughter weights, this automatically leads to more meat production." At this point the shoe pinches. While meat demand has fallen, slaughterhouses and meat processors are facing significant staff shortages. This combination of factors does not give slaughterhouses an incentive to slaughter many pigs, Hoste indicates. "Slaughterhouses have difficulty deboning the meat, causing the freezers to fill up."

The fourth factor in the so-called 'perfect storm' is the high feed costs. "We have not yet reached the price peak we saw in 2013, but feed costs have risen considerably this year." Based on raw material prices, Hoste expects the increase to continue in the first months of 2022.

An increase in piglet prices does not yet constitute a market recovery
Hoste has been following the pig market closely for thirty years. Although he dared to make forecasts in other years, he will not dare to do so for next year. "Let me put it this way: there are hardly any bright spots at the moment. The fact that piglet prices have recently risen is not a sign of market recovery. This fits with the annual pattern that prices almost always show. You could speak of the seasonal cycle at a low level ."  

Chain concepts for more control
According to Hoste, what is currently lacking is the excessively high degree of self-sufficiency of the European pig sector. "According to my calculations, it is now 135%, a few years ago it was more than 120%. Ideally, this is closer to 110%." In that case, the by-products can still be exported to China, but the meat parts can remain within Europe without surpluses. Hoste thinks that contraction would be conducive to market recovery. "In the past I have looked into a quota system, but such a system is not in line with European policy and will therefore not be introduced."

As a remedy to achieve more balance between supply and demand, Hoste points to closed chains with a director. "This directing role suits meat companies best. In such a chain, the pig farmer is not an 'employee' but a full partner. This way you can distribute the profits and losses throughout the chain and the drive to perform is not lost." According to Hoste, all existing initiatives in this regard are still too non-binding. The veal sector, for example, consists of several integrations; that is another direction in which we can think, says Hoste.

China is not a closed book
The lines of thought that Hoste outlines are medium-term solutions. The high level of self-sufficiency is likely to remain a hindrance for the market in the coming months. China seems like a closed book. Or not? According to Hoste, the Chinese government aims for a self-sufficiency rate of 95%, which structurally provides room for imports. But it is to be expected that these import volumes will fluctuate over the years. And given the large volumes involved, this immediately affects the global pork market. "Chinese pig production has recovered surprisingly quickly from African swine fever, but part of the recovery of the balance in China is due to decreased pork consumption. 'Teething problems' are lurking with a rapid scale-up."

Hoste points out the availability of breeding sows. The number of sows seems high on paper, but in practice it is more difficult. A substantial part of the Chinese sow herd are genetically female fattening pigs. "The piglet output is disappointing. If they are replaced by high-quality breeding material, production will increase again." Moreover, China is not yet free from ASF. However, Hoste warns against betting on capricious Chinese demand. Apart from China, Europe will probably continue to suffer from significant oversupply unless there is a hard crash in the form of a cold restructuring. "Let's hope that doesn't happen, though."

5xD strategy cannot be extended
One development that the Dutch sow farming industry will have to deal with next year is the much-discussed 5xD strategy in Germany. Hoste sees this as a hiccup for survival. "I understand from a German perspective that almost all major supermarkets embrace this initiative. However, if you look at the market realistically, it is difficult to organize. Hoste gives a calculation example: Germany slaughters more than 40 million pigs every year, for which 13 million pigs were slaughtered last year. piglets were imported. It is expected that import dependence for piglets will only increase in the next few years.

I estimate that approximately 20 million pigs are needed annually to meet the pork demand from supermarkets. It then becomes difficult enough to find enough German piglets for domestic sales to supermarkets. It would not surprise me if the first D is filled in flexibly in times of shortages, and could also become a NL of the Netherlands, or DK in the case of piglets from Denmark." All in all, 2022 will be another challenging year , Hoste expects.