Page 6 - Australian Pork Newspaper

Figure 1
Can we avoid the pig cycle?
WHILE volume sales in retail have continued to grow, they are not yet growing at a fast-enough pace to significantly lift pig price.
However, the latest pro- duction survey suggests volume of production will moderate over coming months.
If that is the case and we continue to see good demand growth, the com- ing year should be more attractive than the last.
Over the course of the past two months, an in- dependent statistician has been employed to have a look at our supply data with a fresh set of eyes.
This statistician has highlighted some things we should keep in mind.
Some of these things we know, such as every five to seven years there is a pig price spike.
These tend to last for two years and are then
Marketing Matters
followed by a crash.
The causes of the price spikes appear to be differ- ent, however, our indus- try’s responses to them
seem similar.
It also appears that af-
ter the price falls there are two or three years of gradual price repair.
It seems the repair peri- od after the 2009-10 price fall saw a quicker recov- ery than previous ones.
What does this tell us?
First, it appears when pig price starts growing rapidly, there comes a point when industry re- sponds, causing a price fall two years later.
So, looking at the rate of price growth may be a predictor we did not have last time.
In addition, keeping an eye on the seven-year cy- cle, even if the causes of the price fall were differ- ent to the previous ones, is something we should do from now on.
So a question is, how do we forecast further out so we can compare indus- try forecasts to historic
cycles?
Peter Smith and his team
have done good work this year improving the timeli- ness of meat production reporting and improving the phasing of forecasts.
The team’s next two challenges are how to forecast further into the future and how to involve in forecasting those pro- ducers who care for the 30 percent of pigs not covered by the production survey.
He will be trialling methods to improve both between now and Febru- ary next year.
This also raises other questions.
For example, if we could see two years ahead, what would we do differently?
The reality is that in 2016, volume produced grew at 3.2 percent and price grew at 10.2 per- cent (worth an extra $146 million to all producers combined).
In 2017 so far, volume produced has increased 6.3 percent (to October) yet price has declined by
14.8 percent (or $190 mil- lion).
We can argue about whether the prices at the end of 2016 were sustain- able or not, but even if they weren’t sustainable, we still want to avoid the financial and emotional stress of this year’s fast fall.
So if we can forecast two years ahead, we might be able to create activ- ity contingencies that can avoid the price drop or at least significantly lessen its impact.
There are options that include not only having contingency marketing and sales activities, but also ways to fund them (at least temporarily) to better match supply to de- mand.
This might be in the form of more domestic activity, it may be work- ing hard in the next couple of years to expand exports (in which case we need to work on improved value for money) or a combina- tion of the two.
There has to be a more cost-effective way to deal with an extra 10-12,000 tonnes of production than having a price-driven rev- enue reduction of almost $200 million.
That is the challenge for next year in addition to getting positive momen- tum in the industry.
Let’s put 2017 behind us, have a great Christ- mas and hopefully a more prosperous 2018.
by PETER HAYDON General Manager Marketing
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Reappointment of NFF president
THE Australian Gov- ernment welcomes the reappointment of Fio- na Simson as president of the National Farm- ers’ Federation.
Assistant Minister for Agriculture and Water Resources Senator Anne Ruston said it meant Ms Simson would continue to deliver for Australian farmers.
“Ms Simson has made an outstanding contri- bution to our $60 billion agriculture sector over the past year, and I look forward to continuing to work with her in the role,” Minister Ruston said.
“Rural women have
always played an inte- gral role in Australian agriculture and rural communities, and she has been an inspira- tion as the first female president in the NFF’s 37-year history.
“She has great prac- tical knowledge as a farmer herself, along with considerable ex- perience representing farmers, and will con- tinue to be an asset to our sector.”
Fellow Assistant Minister for Agricul- ture and Water Re- sources Luke Hart- suyker said Ms Simson is well-respected in the agriculture sector and
a mixed farmer and grazier on the Liver- pool Plains.
“Ms Simson has been a long-term advocate and leader of Australian agriculture,” Minister Hartsuyker said.
“She will continue to do an excellent job lead- ing our national peak farming body.
“We also welcome the appointment of three new Board directors to the NFF – Robyn Bry- ant, Mark King and Derek Schoen – who bring an important mix of farming and industry representative experi- ence to the organisa- tion.”
Page 6 – Australian Pork Newspaper, December 2017
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