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The Meat Trader’s Journal #28

UK government impact, Argentina beef consumption, ASF vaccine, pork fraud, EU-China EV duties

The meat industry faces significant shifts as global economic and political factors reshape consumption patterns and trade dynamics.

🔓Market Movers & Shakers Intel

Market Insights: Spain. Here’s What to Know.

As summer approaches, Spain's pig prices are expected to rise slightly. Several factors influence this forecast, including the current state of European pork markets, the impact of geopolitical tensions, and the introduction of new feed regulations.

European Market Dynamics

May's weather didn't favor pork prices in Europe, with a weak barbecue season failing to boost consumption. Despite Spain's efforts, pig prices remained stable due to competitive pressures and high carcass weights.

Changing Consumption Patterns

Summer typically shifts consumer preferences towards grilled meats. However, inflation and reduced purchasing power are expected to dampen demand. In Germany, pork consumption has already declined by 4% from last year.

Global Trade and Feed Costs

Asian markets, particularly Japan and Korea, show interest in pork bellies, balancing the declining ham prices influenced by ASF in Italy. Spain's Royal Decree 496/2024 now permits the use of processed poultry proteins in pig feed, offering a new protein source for livestock.

Feed Prices and Production Costs

Global instability and uncertainties around Ukraine's export capabilities have driven up wheat prices by 30% since April. These elevated costs are expected to persist, impacting overall production expenses.

Industry Changes in Germany

June brought significant news from Germany, where Vion announced it was ceasing its slaughter and cutting operations. This marks the end of the company's presence in the German market, leaving its remaining facilities up for sale. The German slaughtering sector has been shrinking due to a declining pig herd, consolidating Tönnies' dominance in the market.

African Swine Fever Impact

Compounding Germany's challenges, recent ASF cases pig farms in Italy, Germany and Poland have caused temporary halts in some slaughtering plants and hindered exports. German pig prices have remained unchanged for 17 weeks, maintaining a delicate balance.

Chinese Trade Relations

The potential retaliation by China against EU pork exports, in response to EU tariffs on Chinese electric vehicles, poses a significant threat. China is a major market for EU pork, particularly offal and viscera, and any trade limitations would severely impact the Spanish slaughter and cutting industry.

Spanish Market Developments

In June, Spain's pig prices finally increased after ten sessions of no change. This rise is typical for the season due to lower supply. However, maintaining these higher prices is uncertain because exports are sluggish and there's tough competition from the US and Brazil. While Spanish farmers are benefiting from high pig prices, slaughterhouses are struggling. They can't easily pass on the increased costs of live pigs to pork prices, which is squeezing their profits.

Mid-Year Overview

As we pass the midpoint of the year, Spanish farmers are experiencing an extraordinary year with pig prices significantly exceeding production costs. Slaughterhouses are faring better than last year due to manageable live prices. However, the charcuterie industry faces ongoing challenges because the prices for processed pork products, like sausages and cured meats, have not increased as much as raw pork prices. This makes it difficult for them to cover their costs and remain profitable.

What to Expect in Short Term

Spain's pig price is expected to peak in July, with uncertainty about maintaining this high. Despite challenges, Spain remains better positioned than ASF-affected countries. The industry remains vigilant, hoping for stability in an unpredictable market.

We can conclude that while pig prices in Spain are set to rise, the increase will likely be modest due to competitive and economic pressures. The Spanish pig farming industry continues to adapt and thrive amidst these challenges.

I will send in the What’s App Group Chat, the update of Pork and Beef Imports Summary for Korean Market. If you are not in the group, check here.

Example:

🏆Highlighting the relevant stories from top-down
→ UK government changes affect food industry
→ Argentina's beef consumption hits record low
→ African Swine Fever vaccine available soon
→ Pork producer fraud case in Iowa
→ EU imposes duties on Chinese electric vehicles

UK government changes set to impact food and beverage industry

Publisher: Food Navigator (05/07/2024)

New UK government policies expected to significantly influence food and beverage sector regulations and trade relationships.

Key Points:

• Post-Brexit trade deals and regulatory changes may alter import/export dynamics for meat products.

• Potential shifts in agricultural subsidies could impact domestic meat production and pricing structures.

• Food labeling and safety standards might undergo revisions, affecting both local and international meat suppliers.

Laura's POV: The UK's policy shifts could create new opportunities for agile meat traders, particularly those adept at navigating evolving regulatory landscapes and identifying emerging market niches.

Argentina’s beef consumption plummets to historic low

Publisher: Reuters (05/07/2024)

Key Points:

• High inflation and reduced purchasing power have led to a significant decline in beef consumption among Argentinians.

• Shift towards cheaper protein alternatives like chicken and pork is gaining momentum in the local market.

• Export-oriented beef producers may seek new international markets to offset domestic sales decline.

Laura's POV: This trend presents an opportunity for pork and poultry exporters to expand in Argentina, while beef traders should monitor potential increases in Argentine beef exports to global markets.

African Swine Fever vaccine breakthrough in Philippines

Publisher: Philippine Daily Inquirer (06/07/2024)

Philippines announces imminent availability of African Swine Fever vaccine, potentially revolutionizing pork industry protection.

Key Points:

• The vaccine's introduction could significantly reduce ASF-related losses in the Philippine pork industry.

• Successful implementation may lead to increased pork production and export potential for the country.

• Global pork traders should monitor the vaccine's efficacy and its impact on international pork supply chains.

Laura's POV: This development could stabilize pork supplies from Southeast Asia, potentially altering regional trade dynamics and presenting new opportunities for partnerships in vaccine distribution and pork production.

Pork fraud case in Iowa (USA)

Publisher: N'West Iowa.com. Review. (8/07/2024)

Fraud case in Iowa highlights vulnerabilities in pork supply chain, emphasizing need for enhanced verification processes.

Key Points:

• The case reveals potential weaknesses in current pork trading and distribution systems.

• Increased scrutiny and improved traceability measures may be implemented across the industry.

• Traders and brokers may face stricter compliance requirements to prevent similar fraudulent activities.

Laura's POV: This incident underscores the critical importance of robust verification processes in meat trading. Traders should proactively enhance their due diligence procedures to maintain trust and integrity in transactions.

EU imposes duties on Chinese Electric vehicle imports

Publisher: : Pig333 (5/07/2024)

EU's imposition of duties on Chinese EVs may indirectly impact agricultural trade relations, including meat exports.

Key Points:

• The move could potentially lead to retaliatory measures affecting EU pork exports to China.

• Shifts in EU-China trade dynamics may create opportunities for other pork-exporting nations to increase market share.

• Meat traders should closely monitor broader trade tensions for potential spillover effects on agricultural products.

Laura's POV: While not directly related to meat, this trade dispute could reshape EU-China agricultural trade. Savvy traders should prepare for potential market shifts and explore alternative supply routes if tensions escalate. The tariff if approved will last for five years.

🗺️Trends - Discussion

👀 Traditional grocers’ market share declines; supercenters rise

The meat retail landscape is transforming, with traditional grocery stores losing market share rapidly. Data reveals that traditional grocers' share of meat sales has decreased from 42.8% in 2019 to 39.7% in 2023. This significant change highlights shifting consumer purchasing habits .

Key Drivers of Change:

• Millennial Engagement: Millennials are increasingly purchasing meat from supercenters, driving up their sales .

• Economic Pressures: Inflation and demographic changes are altering consumer spending patterns, pushing more people towards value-focused shopping .

• Value-Focused Shopping: About 30% of shoppers are now frequenting value retailers more often to find better deals amid rising prices .

• Online Convenience: E-commerce platforms are gaining popularity, offering the convenience of ordering meat products from home.

Impact on Traditional Grocers:

To stay competitive, traditional grocers need to innovate and adapt.

Potential strategies include:

• Strengthening Value Propositions: Highlighting cost savings and value to attract budget-conscious consumers.

• Focusing on Quality and Nutrition: Emphasizing the quality and nutritional benefits of their meat products.

• Offering Diverse Package Sizes: Providing a variety of package sizes, including freezer-ready options, to meet different consumer needs.

• Enhancing In-Store Experience: Improving in-store experiences with better cross-merchandising and appealing displays.

Supercenters' Competitive Edge:

Supercenters are successfully attracting more meat sales through several strategies:

• Competitive Pricing: Offering lower prices on meat products appeals to consumers dealing with inflation.

• One-Stop Shopping: The convenience of purchasing groceries and household items in one place attracts more customers.

• Millennial Appeal: Effective engagement with millennial shoppers, who are a growing demographic in the meat market.

• Increased Food Offerings: Supercenters like Walmart have seen significant revenue increases by expanding their food sections, including meat.

• Effective Merchandising: Utilizing strategic food merchandising techniques to create appealing displays and provide recipe ideas.

As the meat retail landscape evolves, traditional grocers must adapt to maintain their market share. By focusing on value, quality, and enhancing the shopping experience, they can compete effectively with supercenters and e-commerce platforms.

For more information, check this sources:

1. Grocery Dive: Grocers lose billions in meat sales as mass retailers gain market share

2. Provisioner Online: Meat department sales shift to value-focused channels

3. Nielsen IQ: Meat department trends 2024

4. AG Funder News: Plant-based by numbers: USA continued declines for alt-meat, more positive news for alt-dairy

5. W. P. Carey School of Business: Walmart supercenter conversions' surprising effects

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💎Did you know?

The 5C’s of Iberico Ham that Will Skyrocket your Sales

Today, we explore the essential elements of Iberian ham, focusing on the five key aspects—known as the 5 C's—that can deepen our appreciation and enhance our expertise of this exquisite delicacy. Whether you are an industry veteran or new to the world of Iberian ham, these insights will provide valuable knowledge to elevate your experience and business.

I wrote this inspired in the interview (video below) of Jose Pablo Ferrandiz, Director of Public Opinion, Politic and Social Studies at Ipsos Spain. In the interview, he discusses the five 'C's of Iberian ham from a fascinating perspective that I believe is worth sharing with our community.

The 5 C’s are:

1. Conocimiento /knowledge

2. Calidad / Quality

3. Cultura / Culture

4. Consumo / Consumption

5. Comunicacion / Comunication

1. Conocimiento / Knowledge: While Spain is well-versed in Iberian ham, markets like Germany, France and other international markets have significant growth potential. Did you know that, even in Spain, only half of the population knows about the specific classifications of Iberian Ham.

2. Calidad / Quality: The quality of Iberian ham is highly regarded. However, there’s a lack of awareness about important aspects like labeling, traceability, animal welfare, and environmental care. These are vital both within and outside Spain.

3. Cultura / Culture: Iberian ham is a cornerstone of Spanish and Portuguese cuisine, giving it a unique cultural distinction. In Spain, 85% of surveyed individuals purchased Iberian ham last month, primarily enjoying it at dinner. Its flavor and emotional connection are key selling points.

4. Consumo /Consumption: Consumption patterns reveal that Iberian ham is a staple in Spanish households, with 85% of respondents having purchased it in the last month and enjoying it at least twice a month, primarily during dinner. The taste and emotional connection people have with Iberian ham play a critical role in its popularity, making it more than just food but an experience.

5. Comunication / Communication: Effective communication of Iberian ham's positive attributes is essential for expanding its market internationally. Improved messaging will likely boost both awareness and sales.

Therefore, understanding and leveraging the Spanish 5 C's of Iberian ham—Knowledge, Quality, Culture, Consumption, and Communication (Comunicacion, Calidad, Cultural, Consumo y Comunicacion)—can unlock immense potential for growth and appreciation.

Watch this Video for the Interview (Spanish):

That's all for this week!

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Warm regards,

Laura Valls