Page 5 - APN March 2017

Working to subdue our growing pains
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Fresh pork retail volume growth and price trends
2011
Pork volume growth
2012
Pork price index
2013
2014
13 per. mov. avg. (pork volume growth)
2015
2016
13 per. mov. avg. (pork price index)
Marketing Matters
IT is probably fair to say that from a commercial perspective, 2017 so far has been the opposite of 2016 for pig producers.
In particular, it’s hard to stomach reductions in price from close to $4 per kilo to close to $3.20 as an average.
From the evidence avail- able, it appears that vol- ume produced in January 2017 was 14 percent high- er than January 2016.
Retail sales however, grew by 12 percent in January and by 18 percent in March.
January 2017 was the first time in a number of years that supply growth has ex- ceeded demand growth, hence the fall in prices.
As the prices have con- tinued to fall in February and March, it is likely that supply has maintained its strong growth.
Unsurprisingly, there have been quite a few calls from producers ask- ing me what’s going on, what Australian Pork Limited is doing about it and why the hell did I say we needed to grow by between 12,720 to 20,000 sows (4.8 to 7.6 percent)?
If I may, I’ll respond to those in reverse order.
Why the hell did I say expand by at least 12,720 sows?
There are two reasons.
For the first one I have to take you back to August 2007.
That was when I joined APL.
I spent six of the first eight weeks at APL trav- elling around the country meeting producers.
Many of those meetings happened at kitchen tables where producers outlined just how much money they were losing.
They explained, some- times in tears, how wor- ried they were that they would lose their farm, their way of life and their self respect.
You can’t witness that and not have it stay with you.
When I got back from my travels, the price and im- port data reinforced what I had been told by producers.
Imports were growing because they were cheap- er than Australian pork; this increased supply and that decreased pig price and producers’ margins over a number of years.
When the drought spiked grain prices it re- sulted in the industry con- tracting by 17 percent and many producers going out of business.
To reduce the ‘imports are cheaper’ problem we needed modern facilities.
To get those we needed strong balance sheets and confidence.
Over time, balance
sheets did indeed get re- paired and 2015 and 2016 were good enough years for confidence in invest- ment to return.
That appears to have started to come through in both increased productiv- ity and new capacity (and some filling of previously retired capacity).
It has come through in a bigger lump than we hoped for but if this im- proved productivity in the hot months stays, we are a step closer to international competitiveness.
The second reason I said we want an increase in sows was that future sales will be more certain if pork gets into the regular meal repertoires of more consumers.
We need to be a habit for more people.
In order to do that we needed more volume.
What is APL doing about it?
Clearly, people who are making less money than they were a year ago are stressed; those who are making less money and have invested are doubly stressed.
As is hopefully widely known, we have increased marketing activity over the March to June period.
The new versatility ad- verts (there are six and will soon be eight of them) each feature a spe- cific pork cut and show the consumer an array of different recipes they can make with that cut.
There is an example at youtu.be/PgVSdgncHSs
These are customisable, so if there is a particular special promotion on in a particular channel in a particular state, we can integrate the advertising to make consumers aware of that special.
Finally, while demand has been strong, it has been converted into both volume sales and consum- er price increases.
The level of premium charged for pork has in- creased on average.
Figure 1 shows pork price premium (the orange line) versus all fresh meat has increased from about 105 percent in 2011 to over 120 percent in Febru- ary this year.
The blue bars repre- sent volume sales growth (and decreases) by period, compared to the same pe- riod the year before.
The first signs of de- creasing pig prices being reflected in reduced con- sumer prices have been seen in butcheries.
This should start to transfer to other retail shops for both at-home and out-of-home sales, which should accelerate sales, and is exactly what we want right now.
Figure 1
by PETER HAYDON General Manager Marketing
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Australian Pork Newspaper, April 2017 – Page 5
Pork retail price index vs. all fresh meat
Retail volume sales growth in same period the year before (%/yr/yr)