Win some, lose some
EU pig prices came under pressure as the summer progressed, due to increased supplies on the EU market and, in many countries, the warm weather arrived a bit late to give the usual seasonal ‘barbecue boost’ to sales of pig meat. Despite disappointing prices, abundant grain supplies continued to exert downward pressure on production costs and helped many producers remain in profit. In Denmark, high levels of weaner exports continued to put pressure on availability of pigs for domestic slaughter.
Although pig prices in most EU countries remained relatively stable during the first half of 2014, the market came under increasing pressure during the summer months. But ‘win some, lose some’ was the experience of many pig farmers, as declining feed prices led to lower costs of production.
Trading difficulties with Russia affected EU pig meat exports from January, following the outbreak of African Swine Fever within EU borders, but latterly affected other meats, dairy products and produce, which all contributed to market uncertainty.
Although EU pig meat exports to a number of the key markets in SE Asia improved during 2014, especially Japan and China, this is proving insufficient to offset the better than expected EU pig supplies and depressed demand in the early part of the summer. These factors led the Danish Agriculture & Food Council to revise down its price forecasts for the remainder of 2014.
Producers in the UK have faced the additional burden of a stronger £, which has contributed to additional downward pressure on prices.
On the positive side, most EU producers, depending on their buying position in recent months, will have enjoyed the benefits of weakening grain prices. Recent data, published by AHDB/BPEX, showed that the average pig DAPP price, despite the downward movement in recent months, remained comfortably above the average ‘cost of production’.
The July pig census in Denmark revealed a small increase in the breeding herd.
However weaner exports from Denmark have continued at high levels for much of this year. According to Statistics Denmark data for the first half of 2014, exports broke through the 5 million barrier. There was a modest increase in exports to the main market in Germany but the Polish market took increasing quantities, following the reduction in sow numbers over the last couple of years.
The high level of weaner exports continued to have a knock-on effect on the availability of pigs for domestic slaughter. In the first seven months of the year, slaughterings fell to 10.8 million head from 11 million in the same period in 2013.
As reported in The PigSite, Danish Crown announced further incentives to its producer members to invest in much needed new capacity for finishing pigs, to help stem the increasing flow of exports.
The new initiative means that Danish Crown’s producers, who start up new finisher units, will receive a guaranteed contribution margin per finisher – to an agreed formula based on a calculation by the Danish Pig Research centre. The scheme also includes subsidies for new build units at higher levels than those previously agreed.
“With these measures we want to send out a signal that we believe in the future of finisher production in Denmark,” says Asger Krogsgaard, Vice-Chairman of Danish Crown.
“We’re putting a safety net under our producers who invest in new units and new jobs, and are offering a firm guarantee of minimum earnings, which they can take along to their banks. It can mean the difference between a yes and a no.”
Danish Crown has limited the subsidy to 500,000 finishers. If the scheme proves successful, it will be extended.
“This contribution margin guarantee will not make it more profitable to be a finisher producer in Denmark, but it will hopefully create an opening for finisher producers, who wish to expand but who lack the financial backing and security. If growth and jobs in meat production in Denmark really start to take off, our politicians must deliver better conditions similar to those enjoyed by our competitors in Germany, Sweden and Poland. Until this happens, Danish Crown will do what we can to reverse the trend,” says Asger Krogsgaard.
Despite the reduction in slaughterings, the overall level of pig and pig meat exports from Denmark rose in the first half of the year – from 938,000 to 960,000 tonnes. There was a small reduction in shipments to the UK market, but sales to most other key markets increased.
Analysts at Rabobank still predict robust demand on global markets into 2015, as continuing outbreaks of pig diseases, such as Porcine Epidemic Diarrhoea Virus (PEDv) will affect availability of pigs in countries where these occur.