Page 12 - APN September 2017

Page 12 – Australian Pork Newspaper, September 2017
www.porknews.com.au
Figure 1
BETTER news, I hear you say, what the hell is he talking about?
Well, the truth is no one recovers straight from freefall, almost always we need to stabilise before we move forward.
There is now quite a lot of evidence that stabilisa- tion, albeit in a less-attrac- tive place, is occurring.
This evidence includes pig prices are stabilising, on-farm stocks appear to be normalised, average slaughter weight is de- creasing (meaning more pigs should be hitting the centre of the grid so in theory, prices ought to start moving up), whole- sale prices seem to be sta- bilising and retail sales volume growth continues to be healthy, meaning per capita fresh Australian pork consumption contin- ues to grow.
It’s up over 1kg per Aus- tralian in the past year.
Moving forwards, what is going to happen?
To have a view on that, we need to acknowledge some of the things we have learnt (later we will touch on some of the things we still have to learn).
One of the things we have learnt is our indus- try production survey is good at predicting slaugh- ters for the coming eight months.
It has not really been good at three important items: 1) predicting the phasing of growth by month; 2) what will hap- pen to meat production (it has no estimates of car- cass weight); and 3) what will happen to 30 percent of sows that have rarely or never been reported by some producers.
Fortunately, the pig in- dustry’s annual cycle is reasonably predictable, so it is not impossible to take the production survey year end number, adjust it for collection methodology (monthly data collection is not ideal for an industry that works on weeks) and forecast phasing.
We have had our first attempt at this in Figure 1. However, if the industry works on weeks and we are trying to improve our forecast phasing, then we should also try to forecast
by week.
Figure 2 shows my first
attempt.
This chart reflects real-
Marketing Matters
by PETER HAYDON General Manager Marketing
ity in the actuals, where actual slaughters have been higher than forecast because farms have been normalising their grower herd numbers.
The forecast area in pink shows that up until Christmas, there will be just over 100,000 pigs per week (less in October).
It looks like Christmas will be big, with slaugh- ters after Christmas in the relatively high 103,000- 107,000 pigs per week range, which is similar to the weeks commencing June 25 to July 30 this year.
However, there are also difficult to estimate but common-sense mitigating factors.
For example, the con- sensus in March this year was everyone who could find a space for an extra pig in 2016 had done ex- actly that.
Now that pig returns are not where they were in 2016, the people who added a few pigs or rented facilities are likely to have exited these pigs.
These are likely to be in the 30 percent of produc- tion the Australian Pork Limited production sur- vey has never been com- pleted for.
Whether this is 1 per- cent out of 30 percent or 3 percent out of 30 percent, we have no idea but it is a good time to encour- age those who have never completed the production survey to start.
That would help all of us.
Another factor for later in 2018 is increased pro- duction then seems coun- terintuitive when returns are low.
It makes absolute sense for the people who had already decided to invest in expanding to execute their plan (they are obvi- ously in the industry for some time).
However, a rational inves-
tor would not continue to expand until the outlook was more acutely positive than it appears at present.
This bring us to slaugh- ter weights, which we have no mechanism for forecasting as yet.
For the purpose of mar- keting planning, I have assumed that slaughter weight until February next year will continue to grow at the average weight of the past 12 months.
This seems quite aggres- sive (as weights have gone up unusually quickly this year), but as we have said before: “Hope for the best but plan for the worst.”
On that assumption, if we keep our foot on the consumer demand gas, which we are doing with every available dollar ap- proved in the AOP, we should in theory see an improvement in price in the run up to Christmas.
Am I clairvoyant?
Of course not, my name
is not Clair, but we have to have a view on the future and that’s mine.
Next month, I’ll explore what this view of the fu- ture means for marketing activity.
Until then, rest assured we are working more closely with the supply chains (we have monthly hook-ups) and we are all focused on immediate sales and are in the pro- cess of sharing data to understand better two of the areas we need to im- prove in: wholesale trade and foodservice volume monitoring.
While it is not yet the time to review 2017 in the bigger picture, the thoughts that occur to me are:
1. Should we (and by ‘we’ I mean all of indus- try) have started talking about high levels of prof- itability causing competi- tive entries earlier than May 2015?
☛ continued P13
Figure 2
Figure 3
Now that we have some better news, what have we learnt?