Hardly anyone could have missed the scarcity of raw materials in the world. The papers are full of news about delivery delays and companies complaining about high raw material prices. The meat market is also happy. The World Food Organization (FAO) meat index, as a gauge of global meat prices, rose to 112 points in August. This is the highest point in five years and twenty percentage points higher than the same period last year. Meat prices have risen across the board, from beef to poultry. The index could have been even higher, had pork not been a bummer.
The World Food Organization (FAO) meat index, as a gauge of global meat prices, rose to 112 points in August. This is the highest point in five years and twenty percentage points higher than the same period last year
Crisis in pig farming
The prices of pork are under heavy pressure, we see the DCA quotations for carcass parts drop every week. There is a crisis in Northwest Europe in particular. The pork market has its own unique dynamic, with the mood today being depressed by the effects of African swine fever in Germany. As a result, slaughterhouses in the country are unable to export to Asian markets and are dumping volumes in Europe. Slaughterhouses that can go to China are experiencing a declining demand. After a sharp dip in recent years, production there is picking up again. Moreover, it is expensive to get the meat from A to B, because of the high prices for container transport.
Tönnies, the largest meat concern in Europe, sounded the alarm this week and believes that the German government should meet the pig farming needs. According to Tönnies, corona is depressing pork meat consumption and there is only a temporary problem. In the meantime, the German government has announced that the sector can count on financial compensation to get through this period.
Aldi Germany opts to solve the oversupply of pork by stunting prices. This only concerns German pork. Although this is somewhat sensitive from a social point of view, it will sound like music to the ears of abattoirs. The cold stores in northwestern Europe are reportedly overflowing and that entails high storage costs. According to Aldi, the price actions are necessary to pull the market out of the doldrums and get stocks off the market. Otherwise, pig farms may collapse, affecting German meat production.
Beef scarce and high prices
Unlike pork, beef is scarce. Just like poultry meat, which benefits from good sales opportunities in the Middle East. Restaurants have reopened in many countries, which means that luxury meat items are in high demand. But there is also excellent sales for by-products, which ensures a good valorization of the carcass. This is partly due to good sales opportunities outside Europe. For example, European exports to China rose by 7% in the first half of the year to a sloppy 1.5 million tons.
The average carcass price in the European Union for cattle (heifers, bulls and cows) is moving slightly below €4 per kilo, which is about 10% higher than last year. Prices usually drop somewhat in the summer months, but that is not the case this year. At the same time, there are doubts as to whether the price increase will continue, although this is often the case seasonally at this time of the year. However, market insiders think that prices for beef in Europe are slowing down for the time being, although the shortage is not over yet.
The scarcity in beef is partly due to the improving milk price, which in the Netherlands moves around €37 per 100 kilos (excluding the premiums and surcharges for special milk flows such as GMO milk and PlanetProof milk). Given the rapidly improving dairy prices, there is probably more in the pipeline. This motivates many dairy farmers to keep cows, despite the high prices for concentrates.
Critical labor shortage
Finally, we cannot leave the labor factor in slaughterhouses unmentioned. This is increasingly an issue. Slaughterhouses in both Europe and the United States are short of staff, which means that shifts cannot be filled. A solution is not immediately available. In the United States, there has been a conflict between the government and the large slaughterhouses in recent weeks. The government believes that the large meat companies such as JBS and Tyson Foods have too much market power that harms citizens because the price of meat in the US has risen as a result. Abattoirs, in turn, say that the high meat prices are a result of the scarcity on the labor market, for which the government bears responsibility.
This article is part of the content collaboration between Foodlog and Foodbusiness.