Has top pig price been reached for a while?

At many slaughterhouses, part of the sales is often fixed in longer-term contracts. A spokesperson for a large Dutch slaughterhouse, who does not wish to be named, reports that the contract/spot market ratio differs per company and situation. "Butchers on the corner usually buy meat through intermediaries at weekly prices. Part of the sales abroad or larger volumes in retail, on the other hand, are more often fixed in contracts. It is very variable how this is arranged and what choices are made in this regard. depends, among other things, on the customers and markets you serve, but at the moment it is very simple, if you have a relatively large volume under contract, it hurts." The only solution: "The prices of meat for consumers must rise sharply in the short term."

Rise cannot always be passed on
The current revival of the meat market is mainly due to a revival of pork demand within Europe. German slaughterhouses offer less product and this creates space. It is also a well-known psychological effect that arises in a rising market, which provides extra space upwards. "For a while, meat buyers were hesitant, now everyone wants to do business for the next increase. It is therefore exciting what will happen in the coming weeks. For the time being, the top seems to have been reached for a while, when the 'wild' mood ebbs away, it should become apparent how solid the base under the current price level."

The current sharp rise in pig prices means that contracts are also being broken open in the Netherlands. At least, the parties are trying to reach an agreement with the subsequent links in the chain. "How successful this is differs per situation. From your relationship and history with your customer, the position of the customer, etcetera. I must also indicate that the Dutch supermarkets have recently shown themselves quite willing to enter into contractual agreements in a good way. However, there are also large meat processors with long-term contracts with customers who - for whatever reason - are forced by customers to fulfill agreements. but it is far too simplistic to assume that the entire increase in the purchase price can be justified on the basis of the weekly increase in the pig parts."

'See it as a contract with pre-purchase feed'
Is it wise to work with longer-term contracts? From the slaughter world, a comparison is made with the pre-purchase of feed by pig farmers. "There too, entrepreneurs make various choices: when do you pre-order?; for how long?; for what price and what part of the volume? That's exactly how it goes in the slaughtering world." The parties indicate that working with contracts is actually a kind of risk management, which unfortunately turns out to be a risk.

It is reported that, despite the recent increases, everyone is aware that prices have to go up further. Although high prices have been reported for feed, pigs and pork, there is no sign of optimism at any link in the chain. A special situation.

Are the margins at slaughterhouses actually lower than five weeks ago with a pig price of around €1,20? The answer to that question is telling: "We are trying to get as clear a picture as possible of the situation, but to be honest, if the dust clears in the coming weeks we will have to see how the flag is exactly, it is unbelievable what happens in such a short time." It is indicated that pork is increasingly taking on the characteristics of a world market commodity. Pricing is becoming more and more volatile 'just like with products such as oil, wheat or soy'.