Either your farm is being hit by African Swine Fever and you can only face losses (like in Eastern Europe), or the market is hardly being touched by the global turmoil (like in the USA), or you may see unprecedentedly high revenues for your pigs.
The latter is the case for many producers in Western Europe, especially at the end of 2019. About half of the pigs worldwide have died or have been culled to try and contain African Swine Fever. The main decisive factor is still the human being: people can throw away infected products and infect wild pigs, or they can maximise biosecurity.
Not enough pork for Chinese consumers
Prices for slaughter pigs in November of this year rose to a peak of about 5 euros per kg live weight in China; consumers on the other hand are eating less pork, as there is simply not enough pork available. I myself have seen in June that a restaurant changed its menu and now only offers beef and sheep, no pork. This is more than surprising, knowing that pigs and pork are interwoven with Chinese culture.
Pig prices in the Netherlands
Very recently, prices in the Netherlands surpassed the psychological barrier of 2 euros per kg carcass weight. Piglets were also very expensive, peaking at over 80 euros (excluding VAT) for a 25kg piglet. Prices for pork at the supermarkets rose by 13%, which is extremely much, given the common bandwidth of about 4-5% above or below the average. Indeed: 2019 is a bizarre year for pig producers.
Biosecurity in farms
A consequence will be that pig production will expand. Chinese producers are trying hard to restock their farms and build new farms. The Chinese are really implementing biosecurity measures:
- entering the farm as a visitor may require 2 days waiting and several disinfection steps,
- staff entering the farm will not go home for several months but stay inside.
What does expanding pig production mean for the market?
In other parts of the world pig production is also expanding. What will that mean for the market? Of course: after a couple of years the world market will be more than satisfied. But I do expect a price drop to less than 1 euro per kg carcass weight in Europe, and for a longer time. What is needed to survive this? Focusing on added value, strong long-term cooperation in the supply chain and building a strong financial buffer.
Graph 1 shows the monthly cost cover ratio in piglet production and finishing. This ratio has been 106% for piglet production and 97% for finishing on average over the period since January 2010. Especially piglet producers are facing strongly fluctuating ratios. After the worst profit in September last year, with piglet prices of about 30 euros for a 25kg piglet, the tide changed, resulting in a cost coverage of over 150% in November this year.
In growing-finishing the cost coverage surprisingly passed the 110%-line and even resulted in a 122% coverage ratio.
The feed price has shown a modest increase since mid-2016. The current price level amounts to 260 euros per tonne of complete feed for a closed cycle farm (Graph 2). Since January the price has decreased by almost 25 euros per tonne, but started to increase lately. A further price development is to be expected.
Some farmers stop, but production rights remain
In 2019 some pig farmers will stop production. They have applied for a special legal exception to not fully comply with the ammonia emission reduction requirements. This exception rule ran for a couple of years, but has now ended. Those production rights are then available for other farmers, so this means no change in pig numbers.
The Dutch government issued a redevelopment programme (in Dutch) for the pig sector with a budget of 180 million euros. A limited number of pig farms can join the programme, ranked according to level of odour nuisance. Application is now open and farm closures are expected as of late 2020 or beginning 2021. This programme likely will lead to some 5-7% reduction in pig numbers.