Anticlimax pig market after high expectations

Probably the only correct conclusion is that the Dutch pig sector has been living in a bubble too much in recent months. Due to the closure scheme, there are significantly fewer pigs available within the country's borders. The reduction is likely to lead to as many as 20% fewer slaughters once all participating farms have been emptied. Less slaughtering is already taking place in the Netherlands, although a true shortage is not yet evident.

In the first half of the year, 7.160.436 pigs were slaughtered. Compared to the same period a year earlier, this represents a decline of just under 2,5%. In exact figures, this equates to just over half a week of slaughtering.

Significantly lower live exports
The decline can be partially offset by additional pigs remaining in the Netherlands. Live exports almost halved in the first half of this year. Sales to Germany, in particular, have dried up significantly. This is partly due to Germany's foot-and-mouth disease (FMD) outbreak at the beginning of the year, which put pressure on pig prices there. Because Dutch slaughterhouses have started paying proportionally higher pig prices, exports have become less attractive. This spring, Dutch slaughterhouses regularly scrambled to fill their own slaughterhouses as much as possible. This only fueled expectations for higher pig prices in the summer.

Slaughterers' margins under pressure
Rumor has it that slaughterhouses had a good first quarter, but that margins subsequently became negative. Nevertheless, market leader Vion indicated that profits will be made again in 2025 after difficult years, although they did not substantiate this with figures. Nevertheless, it can be assumed that slaughterhouses have struggled to make money in recent months, as evidenced by the DCA parts prices, who could not keep up with the pace of rising pig prices.

Pig cycle still functioning
For several weeks now, Dutch slaughterhouses have been struggling to fill their slaughter shackles. This is due to the persistently lackluster sentiment in the meat market. Expectations that parts prices would rise have proven to be wishful thinking. Looking beyond the domestic exit bubble, this isn't entirely surprising. In many major European pig-producing countries, the supply increased, partly due to the well-returning prices of recent years. The pork cycle is therefore still very much functioning. The European pork market is not oversupplied, but at the same time far from tight. According to insiders, the high prices for beef and chicken are not leading to significantly more demand for ham steaks or schnitzels.

Sales to China have increased slightly compared to last year, but the high export volumes of a few years ago are not being achieved. The euro's appreciation is also not helping sentiment, as are the outbreaks of African swine fever less than 100 kilometers from the Dutch border. This makes slaughterhouses in the Netherlands hesitant to freeze meat, which would likely lose significant value in the event of an outbreak.

Anticlimax
The impact of the phasing-out scheme will not diminish in the coming months, resulting in further declines in slaughter figures in the Netherlands. This will, in one way or another, strengthen the position of Dutch pig farmers in the supply chain. At the same time, the harsh reality is that there are still enough pigs in Europe to meet meat sales.

Price pressure is no longer evident after the correction of recent weeks, although it is still filtering through to Dutch slaughterhouse prices. We are likely heading for a stable market during the summer holidays, which, for many in the sector, feels like an anticlimax due to the initially high expectations. There may be a slight increase after the holidays, although history shows that the biggest increases are always recorded in the first half of a calendar year.