Analysis Pigs
Six reasons why pig prices are plummeting
The pig price was initially attributed to a sunny summer, but nothing could be further from the truth. The market has already plummeted several times. This week, it's happening again. However, the price pressure is not entirely unexpected when we examine the market situation.
The pig prices had already dropped significantly at the beginning of July, and in the last week of this month, the pressure is once again high. Vion lowered the weekly quotation by 5 cents to €1.91 per kilo yesterday, after signals last week indicated that this step was inevitable. The spring gains that the quotation had built up are now completely off the table. Other quotations in Northwestern Europe are likely to follow the same downward trend later this week. This definitively shows that the market cannot meet the often high expectations. Boerenbusiness lists the causes.
1. Weather is not cooperating
Perhaps the most striking reason is the weather. In our part of Europe, it has been historically wet in recent months. This has severely disrupted the barbecue season. Supermarkets and trading houses were left with unsold meat stocks, which are now being pushed into the market through discount promotions. This meant that the summer weather this week also hardly stimulates the market, especially since we are in the middle of the summer vacation, and relatively many Dutch (and Germans) have sought sunny destinations in Southern Europe. This naturally leads to a decrease in demand.
2. Market tensions
Market tensions are also a significant reason for the current price pressure. African swine fever has been lurking for a while, but is now reappearing in Germany. Even large professional pig farms have been affected. With the way the virus is spreading through Germany, the Netherlands could also be affected. This increasingly makes Dutch slaughterhouses realize that large frozen stocks are not desirable. In the event of an outbreak, they quickly lose value, dampening the willingness to slaughter. The higher interest rates in recent years have already made financing stocks unattractive. The trade conflict between China and the European Union also does not bode well for market sentiment, although it does not yet hinder sales in the short term.
3. Inflation remains a theme
The inflation storm of recent years may have subsided, but that does not mean that the negative effects on the market are suddenly negligible. In June, inflation in our country was still over 3%, with food being one of the drivers. In the Eurozone, the average money devaluation is still well above the 2% target set by the European Central Bank. It is no wonder that major food companies such as Lamb Weston, FrieslandCampina, and even McDonald's recently stated that inflation still has a depressing effect on sales. Not least because people eat out less frequently and make more selective purchases for home consumption. Pork sales also seem to be affected by this, although this cannot yet be confirmed with consumption figures.
4. Imbalance in world market prices
When we zoom out to world market prices, we can only conclude that Europe is not competitive with other suppliers. Compared to other major exporters such as Brazil and the United States, as well as Canada, Europe is far behind. This also affects European pork exports. In the first four months of this year, European sales decreased by nearly 6% to 1.46 million tons. Compared to 2023, the differences are not significant, but compared to previous years, European volumes are much lower. In key markets such as China and Japan, there has been a significant decline in recent months, partially offset by higher sales to the Philippines and South Korea.
5. Supply quietly increased
While demand is affected by inflation (and sales outside Europe are under pressure), European pig production has quietly increased. In the first four months, slaughter numbers in Europe increased by 2%. Meat production increased by almost 4% due to higher weights. Among the major pig-producing countries in Europe, only Denmark significantly reduced pig slaughter due to the shrinking pig herd. Growth is mainly happening in Eastern Europe. Looking at more recent figures in our country, the supply is fairly comparable to last year. In the first 29 weeks of this year, 1% fewer pigs were slaughtered than last year.
6. High expectations
Last but not least are the high expectations in the market. Hope may indeed spring eternal, but in practice, it is often in vain. Two major sporting events (the European Football Championship and the Olympic Games) were expected to undoubtedly boost meat consumption. Danish Crown even expressed this hope aloud when announcing the annual figures at the end of May. Or was wishful thinking in this case the father of the thought? In any case, the high expectations have not been met. And although the Olympic Games have just begun, this will no longer make a difference.
