Page 4 - Australian Pork Newspaper

Is the pig cycle changing gear?
Page 4 – Australian Pork Newspaper, December 2019
www.porknews.com.au
Figure 1
Marketing Matters
ONE of the things we identified to watch af- ter the 2017 price down- turn was the long-term pig price trend: both the trend for a full year (in black in the figures) and the trend in months (in purple).
When we looked at the long-term trend, it ap- peared to take between about five and seven years between peaks in the 12-month price trend (shown by the wide black line in Figure 1).
That would suggest the next 12-month price peak might occur in late-2023 and, in that scenario, pric- es might start dropping in mid-2024.
It appeared the cycle could possibly be used as an advanced warning or leading indicator.
However, if you look at the 12-month pig price trend line (in red) in com- parison to the 12-month pig price line, we see mostly, the period the black line stays above the red line is two years.
The exception to that is the period between spring 2013 and spring 2017.
This obviously means market conditions were different in 2013-2017 than they were in previ- ous price peaks.
We can speculate on what the causes of the prolonged peak were, but we don’t really know.
However, we can see the black line went above the red trend line again in spring 2019.
Based on history, this might mean that from Au- gust 2019 we have price declines that take the 12-month price back to the red trend line.
If that recurs, then pig prices may start dropping around July or August 2020.
If the market conditions are similar to those in the 2013-2017 peak, then pig prices might start to de- cline two years later in July or August 2022.
So, based on history and if we do nothing different, prices might start drop- ping in either spring 2020, spring 2022 or mid-2024.
The question for pro- ducers is, how would you manage and protect your business in each scenario?
Of course, there are an infinite number of options in the future, however, there is one more thing we might be able to read from this chart.
If we focus on the monthly price (in purple), rather than the 12-month price, we can see that from one monthly price peak to the next takes be- tween 58 and 82 months.
The most recent pig price recovery has taken only 34 months.
So, the pig cycle does appear to have sped up.
That might be because of higher levels of indus- try marketing.
It will probably have been affected by high beef and lamb prices.
It may be because there is increased demand from ham and bacon value- adders.
Whatever the cause, we have all seen predictions of new normals.
However, market condi- tions both globally and domestically have rarely been this uncertain.
It is likely to pay to pre- pare for more than one scenario.
Figure 2
Figure 3
by PETER HAYDON General Manager Marketing