It squeaks and cracks in the pork chain

Unprecedented, outrageous and right, these words all apply on the revival which the pig market is currently showing. Prices have shot high into the mountains from a deep price trough. And that in a matter of weeks, while spring has yet to officially begin in the western hemisphere. earlier we already wrote that the cause is a cocktail of factors, including the war between Ukraine and the end of the corona crisis. Last but not least, the tight supply of pigs is also a factor pushing up prices. In fact, probably the biggest driver of overheated sentiment in the market.  

For fear of empty hooks
It is striking that slaughterhouses are currently (resigned) price takers. The large German slaughterhouses already accepted a record increase twice in a row in March. The famous Hauspreise is not (yet) taken out of the stable. Slaughterhouses do not do this for fear of empty slaughter hooks. In view of the supply contracts that have been concluded for the retail sector, this is not a good prospect. With less than 800.000 slaughterings already a quarter of the slaughter capacity in Germany remains unused. And you can't cut two backs out of a pig. 

Speaking of supply contracts, slaughterhouses are now trying to avoid this en masse. Market leader Tönnies speaks of a untenable situation† The Danish Crown has also sounded the alarm. The pain is not only in Germany, by the way. Dutch slaughterhouses also indicate that the rate of increase cannot be kept up with. A vote is being made that the German increases will not be followed this week. In our country, the supply is relatively less tight, but that will undoubtedly increase if pig prices lag behind. A difficult dilemma for slaughterhouses to navigate between. All the more so because their margins are also in the mangle.

Loss Westfleisch 
The fact that 2021 was not a fat pot for slaughterhouses is also apparent from the annual figures of Westfleisch† The cooperative meat group unexpectedly incurred a loss of millions last year. Whether others will follow will soon become apparent. For example, when Tönnies' figures become known. Vion will also publish its annual figures at the end of this month. After that, Westfleisch's results can be better placed in perspective. The costs in the chain have risen considerably and Westfleisch is not the only one to be confronted with this. However, the conditions for slaughterhouses in the Netherlands are more favorable than those in Germany. With the exception of Van Rooi Meat, the Chinese boycott does not apply here. From that point of view, Dutch slaughterers should not delay.   

The game between pig farmers and slaughterhouses in our country is played very hard, according to the market. Pig farmers are not very compassionate. After all, they themselves also have to contend with significantly higher (feed) costs and, moreover, still have to wipe out losses. The loss will therefore have to be passed on to the consumer, but that will be quite a challenge for slaughterhouses to achieve this. After all, retail likes to stunt with meat and is not used to paying high purchase prices. Due to the tight supply, a new reality is emerging, in which the primary producer seems to have a stronger position. That could be seen as the gain from the contraction.