Randers, 3 june 2010
Danish Crown’s prices have increased by DKK 1.40 over the past seven weeks and currently stand at DKK 10.20.
This week, prices have stabilised as the market has lost a bit of momentum at present. Since the beginning of the year, prices for pigs have gone up by DKK 2.20. This is the first time in a whole year that the price is above DKK 10.00.
The last time was in week 28 last summer when the price was a straight DKK 10.00. Back in 2008, prices were above the DKK 10.00 mark for 20 weeks running, topping at DKK 10.90 before the financial crisis brought this trend to a halt. In the subsequent period, all prices in Europe have been under pressure. However, there is now light at the end of the tunnel.
Leading the way
- In recent weeks we have driven the European market, offering the best prices thanks to having placed more products outside the EU. At the same time, our inventories are very low, which has paved the way for positive optimisations, says Carsten Lehrmann, Danish Crown’s Export Director.
He explains the price increases as follows.
- There are several positive reasons for the price increases. Generally speaking, three important factors have played a role. First and foremost, DC Future has had a positive impact. Secondly, the EUR is weak and the USD strong. And finally, our broad market access and sales strategy are proving just right in the present situation, says Carsten Lehrmann.
Broad market access
Danish Crown exports about 90% of production, and a large share of the exports are settled in USD, which has increased by approx. 25% since last November. This guarantees competitive advantages for Danish Crown over other meat exporters in the world market, and also higher prices.
- During this period we have increased our sales outside the EU quite considerably. The trend has been controlled by our ability to sell the same types of products in different markets. This involves products which we have sold in the most attractive markets where we have been able to optimise prices, explains Carsten Lehrmann.
Shorter commitments
He mentions Russia as an example of a market which has accepted increasing volumes. All Danish Crown facilities are approved for exports to Russia, and the new contracts made in the spring are also boosting exports. Moreover, sales to Japan have increased strongly and had a significant impact on prices, while sales to China, which used to be a less accessible market, have turned this country into the third-largest market for Danish Crown. Sales to China are primarily of by-products. But nevertheless ...
- There is a strong demand in the world market, and prices are expected to continue rising. We have therefore decided to reduce our sales in the spot market and on long contracts, instead focusing our sales on shorter commitments. So far, this has taken our prices to the top in Europe, explains Carsten Lehrmann.
Low inventories
While pork prices have been skyrocketing, Danish Crown has also been able to reduce inventories. Today, levels of frozen products are very limited, and this strengthens the outlook for the coming barbecue season.
- The situation is non-typical in a good way. In the past, price increases at this time of year have been governed by the barbecue season and the hot weather. However, neither are here yet. The question is whether barbecue sales will affect sales to the same extent as previously, or whether the recent increases in world market prices far outweigh the barbecue effect, concludes Carsten Lehrmann.