How the pig price is stuck between supply and demand

The European pig market is in an acute shape crisis. Normally, prices at this time of year have a reasonable chance of rising, but now the market has already slumped hard twice in a short time. This week it went wrong again. There is an oversupply caused by a tangle of causes. The German pig price fell this week to €1,50 per kilo, the lowest level since 2021 at this time of year. A year ago, the price was half a euro higher and in the years before that the difference was even greater. In the Netherlands, the situation is even more dire with prices still well below those in Germany. Due to lucrative buyout schemes in our country, slaughterhouses would have to fight for the last pigs, but this does not lead to higher prices. Unfortunately for those who stay. The word crisis is easily used these days, but the pig sector is now really heading straight for one across the board. Buffers have to be used to keep things running in times of structurally high manure disposal costs in the Netherlands and rising feed prices. Historically, the chances of price increases in the second half of the year are considerably smaller than in the first half. In addition, there are hardly any bright spots in the market. Yes, the World Cup is about to begin, but its effect should not be overstated. In the past, it had more of an effect on sentiment than it does now. Supermarkets nowadays are less often aggressive with meat promotions. At the same time, consumption is under pressure due to inflation, changing eating patterns and increasing competition from other protein sources. Too much pork There is too much pork in Europe that is not finding its way to the consumer. This is not so much due to production in the Netherlands, but in surrounding countries. Especially in Denmark and Spain. In both countries, pork production in the first months of this year is clearly higher than last year, as a result of larger animal numbers and more slaughterings. As a result, extra meat is entering the European market at a time when sales are lagging.On the world market, European exporters are facing stiff competition from Brazil, which has built up a strong position in many export markets. The United States is also showing record export volumes, supported in part by a relatively weak dollar. And China is not in the market because of a continuing oversupply in that country, causing pork prices there to fall to the lowest level in years. Spain and Denmark exported substantially more pork within the European Union in the first months of this year than last year. Pork cuts are being offered at sharp prices to keep sales moving, leaving little room for other countries. This concerns price-setting cuts that weigh heavily in the value of the carcass, such as hams and forequarters. Danish Crown recently described the European pork market as historically difficult and that says a lot.Full German marketIn the background, it also plays a role that the German pig sector is no longer shrinking. The number of slaughters is almost 2% higher this year than last year. That seems manageable, but due to the dominant position of Denmark and Spain, exports are stagnating. The current supply of around 750,000 slaughters per week proves difficult to place on the market, partly because export flows are under pressure and the European market is well supplied, according to German market parties. This despite the fact that German pork consumption is once again rising slightly. Full cold storesAll in all, there is so little confidence in market recovery that parties do not dare to freeze the meat. Due to rising energy costs, long-term storage has also become a lot more expensive. Market parties also indicate that available freezing capacity in Northwestern Europe is limited due, among other things, to the surplus of fries. It is unlikely that pork consumption in Europe will rise significantly. Although beef and chicken were relatively expensive in recent years, this has only limitedly supported demand for pork. Moreover, these markets are also under pressure due to disappointing sales figures. Rising inflation in the eurozone is not a good prospect, because it reduces purchasing power. Pig cycle The pig cycle seems to have to do its work. In recent years, market confidence was consistently good enough for piglet production to be (very) profitable. This stimulated growth of the sow herd in, among others, Denmark, Germany, Spain and also France. With rapidly falling piglet prices, that is now changing rapidly. The number of sow slaughters in Germany is this year 2,5% higher than last year. Especially in recent weeks, many cull sows have been offered, which further strengthens the current price pressure. Presumably, supply will increase further in the coming weeks. The German piglet price has meanwhile fallen back to €48 per piglet and a further decline is in prospect. In the other member states the situation is probably comparable, although sow slaughters have not been specified. On balance, a further contraction of the European sow herd seems necessary to bring supply and demand back into better balance. The rapidly falling piglet prices and rising numbers of sow slaughters indicate that this process has now started, but it will probably still take some time.