Page 7 - APN May 2017

4.00 3.50 3.00 2.50 2.00 1.50 1.00
.50 0.00 -0.50
Baconer buyers price trends during the four cycle stages 1996-2017
Pig prices baconers until 2003
Pig prices baconers Jul 2010-2017
Linear (pig prices baconers Jul 2010-2017)
Pig prices baconers 2003-Jun 2008 Linear (pig prices baconers until 2003)
Pig prices baconers Jul 2008-Jun 2010 Linear (pig prices baconers 2003-Jun 2008)
Figure 1
Where to from here for industry?
Marketing Matters
OVER the course of the past three months, many more conversa- tions about volume and price have occurred for me than had occurred in the 12-18 months before that.
These conversations have ranged in emotional intensity from ‘passion- ate and rational’ to more ‘shout, blame, argue, discuss, and then agree where we agree and where we differ’.
This is not a complaint, it absolutely goes with the territory and there have definitely been things that have helped hone our imperfect understanding of what has gone on and what some of the causes are.
It is clear that supply has increased in a num- ber of ways, including some people staying in the industry for longer, some people managing their herds to maintain carcass weight over Christmas, advanta- geous growing condi- tions, some liquidation of stock that had been held in freezers (particu- larly, though not limited to necks and legs) and the increased use of im- ported ribs, bellies and shoulders.
It is equally clear that retail demand for Aus- tralian pork is both posi- tive and higher than last year.
While there is no evi- dence that Australians are wanting fewer ribs or bellies or pulled pork when they eat out, it does seem likely that more im- ports are getting used in this area.
This accounts for the barriers in keeping flows of Australian ribs, legs and bellies moving at the 2016 wholesale prices.
The eating out parts of the Australian pork mar- ket have been relatively opaque to us.
The paths to market in- clude a number of links in the supply chain (pro- ducer–wholesaler–dis- tributor–small café/res- taurant owner).
This is where some of our problems seem to have stemmed from.
This part of the value chain is difficult to get information about.
If you are a meat trader, you won’t tell people how much of what you sell to whom because that infor- www.porknews.com.au
mation is what your busi- ness relies on to make a profit.
Nevertheless, this area of the value chain we need to better understand and we will work on ways to achieve that.
We are currently mak- ing a year on year meas- ure of foodservice con- sumer demand for pork.
Another element in the past three months has been sentiment.
I have been told a num- ber of times that we have never had this kind of price drop, this fast, in living memory.
Figure 1 shows pig pric- es over the past 21 years split into four phases: the ‘before major imports’ phase (1996-2002), ‘the imports growth phase’ (2003-2008), the post- industry crisis ‘demand significantly ahead of supply’ price boom phase (2008-2009) and finally the relatively consistent price growth from 2010 onwards.
In fact, we may look back at 2015-16 as anoth- er ‘demand significantly ahead of supply’ price boom.
A number of produc- ers have suggested that a price realignment had been anticipated, just not to the level of what has occurred.
Sentiment usually plays a part in market volatil- ity, and the sooner that turns, the sooner the mar- ket will.
It seems like it’s time for us to come and visit producers and discuss this with them directly.
So, Andrew Spencer and I plan to visit groups in each state to discuss what has occurred, what we can learn and most importantly, what to do about this (in addition to what is already being done).
From the graph, it ap- pears that the reduction in pig price in 2017 is similar to what occurred in early 2010.
However, the big differ- ence is that in 2010 the price reduction was ex- pected – everyone knew that supply had been cut and as the herd rebuilt prices would be normal- ised.
This year, the reduc- tions were more of a surprise as there had not appeared to be the same clear cause.
by PETER HAYDON General Manager Marketing
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