Price pass-through effects in pig farming
Unusually high increases in feed prices of up to 100% have had a severe impact on pig farming in recent years. While high grain and protein feed prices were very quickly passed on to the market, it was not possible to pass on the higher production costs directly to higher sales prices in the finishing sector due to limited demand at home and abroad. While pig feed has cost over 47% more in the last 6 years, pig prices have only increased by just under 15%. However, the deterioration in profitability has not led to a massive slump in pig farming. Initially, pig herds were expanded to a lesser extent, and only recently has there been a demonstrable decline in pork production.
The higher feed costs were distributed across the pork industry in several ways. Less efficient farm units were abandoned. However, piglet producers have made the largest contribution. In the period from 2006/07 to the most recent period, it can be seen that piglet prices have fallen the most in relation to fattening pig prices. The two periods of high feed price increases in 2007/08 and 2010/11, in which piglet prices were pushed down sharply relative to pig prices, are particularly striking. In plain language: the higher feed costs for fatteners were passed on to lower piglet prices.
The number of sow farmers declined, but the number of sows was also systematically reduced. Nevertheless, the number of piglets was high at the time due to increased piglet yields per sow and year and increasing piglet imports. The high piglet supply allowed high feed costs to be passed on to piglet prices. However, by 2012/13 at the latest, it became clear that the price pass-through mechanism was no longer working in the same way with stagnating or declining availability of domestic and foreign piglets. Although piglet prices are still under price pressure, this is within the usual range of typical seasonal price trends, the fluctuations of which are less pronounced. It can be seen that the fall 2012 low in the piglet-to-fattening pig price ratio and the spring 2013 high were less intense than in previous years.
For the foreseeable future, falling feed prices with a surplus of fattening pig places will benefit piglet prices. The price ratio of piglet prices to fattening pig prices will clearly benefit piglet producers.
Nevertheless, piglet prices will remain in line with market realities. Piglet prices are still dependent on fattening pig and feed prices, but in contrast to previous years, a larger proportion of the sales revenue from pig fatteners will be passed on to piglet producers. The level of pig and feed costs will determine the extent of revenue sharing. There may also be cost pressure for politically motivated animal welfare reasons. All previous market laws will continue to develop their typical characteristics in the future.
