THE margin squeeze being experienced by pig producers is not likely to end anytime soon but hopes remain that the downturn will be shorter lived than in the past.
Australian Pork Limited general manager marketing, Peter Haydon said when looking back at data collected on the industry since 1991, a clear trend emerged.
It showed every five to seven years, there were two years where demand was ahead of supply, leading to higher prices.
“This trend always seems to last two years, then it’s followed by a significant price decline, as we’ve experienced in the past year,” he said.
Mr Haydon was hopeful this recovery phase would be shorter than in previous years.
He said the downturn in 2005 was particularly long due to import pressure, taking up the majority of the seven-year cycle from 2003 to 2010.
“Post 2010, the price reduction in that seven year cycle took less time to turn around,” he said.
“The question now is how quickly we can get the price back to a positive trend.”
APL is hopeful this will happen by June next year, which would make the downturn much shorter than other recovery periods.
But, in the short-term the price pain is forecast to remain.
“At the end of 2016, we went from 2.5 per cent growth in pig meat volumes to 5-6pc growth, and it stayed there for the best part of a year,” Mr Haydon said.
“Demand was growing, and that lead prices up, but then supply overshot demand.
“While demand is still growing it’s going to take some time to get back to an average price trend.”
Mr Haydon said until the end of April this year, the volumes of pigmeat being produced was set to remain high.
“Post April it looks like total production will grow at a more moderate rate,” he said.
Mr Haydon said if there was 0 to 2pc growth to June 2019, then demand should catch up to supply by that time.
Adding pressure to the market in the past year was growing carcase weights.
“Last year weights rose significantly,” he said.
“Producers had better productivity this past year than the last, and that year was better than the year before.”
Mr Haydon said this productivity trend was likely to continue.
So, an overall decline in volumes would be dependent on how many people stopped producing pork, with some anecdotal estimates that there could be between 2000 to 6000 less sows in production due to people exiting the industry.
Mr Haydon said that while imports had only risen slightly, by 1pc, some producers had been selling at import prices to processors.
He said if volumes moderated in the next 12 to 18 months, and demand growth was between 6pc to 8pc then firming of wholesale prices could be expected later this year, followed by pig prices firming after that.
“So there is at least light at the end of the tunnel,” he said.
Keyneton pork producer Shaun Blenkiron said the forecast was disappointing.
“Personally, I thought we would have to write-off most of 2018, but I was hoping things would turn around by the end of the year,” he said.
“We’ve missed out on good prices the past two Christmases, so to go three years without a bonus would hurt producers for sure.”
