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The price of meat on the European stock exchange is rising sharply and, for the first time, producers want to resort to the institute of so-called “force majeure”, which would allow them to raise prices in contracts with traders far earlier than Allow contracts.
“We dare to say that force majeure has struck here and the situation we find ourselves in allows us to use this clause. If we want to survive, we cannot wait three months”, says Karel Pilčík, owner of the family business MP Krásno, who is one of the largest producers of meat products in the Czech Republic, in an interview with Agenda SZ Byznys.
Moreover, the meat is not only more expensive, but it is also starting to run out on the market. The Czech Republic imports about half of its consumption and there is a shortage of trucks in Europe.
“Polish freight forwarders have thousands of trucks that are there because the Ukrainians drove them and they went to war. So there is a huge transport problem. Last year, but also this week, we happened that they did not bring us two trucks, because there is no one to bring them,” says Pilčík.
The price of meat on European exchanges is on the rise, but this has not yet been reflected in trade. Do we now have to worry about so many bigger increases?
It is necessary to divide meat and products. All meat prices are based on the German stock exchange. The meat as such, that is to say the muscle, so we are talking about the price from week to week and these prices naturally increase. But even here we have to realize that, for example, 79.90 per neck or 59.90 per shoulder will not be realistic in the long run. Meat is getting more expensive, chilled pork halves have gone up more than half a euro in the past four weeks. Individual-grade cuts of meat are also getting more expensive – for example, thigh has jumped 40% in the past four weeks.
If we want to survive, we can’t wait three months
Does this mean that you as a manufacturer will now increase the price by 40% for the chains? Or how much more expensive are the chains willing to accept?
I think they should. The problem is that some customers have a “three-month” obligation, ie to declare themselves and then become more expensive after three months. But that cannot apply now. We dare to say that force majeure has struck here and the situation in which we find ourselves authorizes us to use this clause. If we want to survive, we cannot wait three months.
Also, this is not the end state. We calculate that the price of half the pork from the current 1.6 euros will get more than two euros. It’s not just pork. There is also a huge increase in poultry. It will become more expensive twice in a week. Chicken breasts have now increased by eight crowns.
Why are the prices rising? After all, did exports to China fail, which always drove prices up?
It is a serious disease. There are few piglets in Europe and therefore few pigs. China is not buying, but the conflict has fueled it now. Moreover, we are only talking about the price of meat, but we must also talk about auxiliary materials. It makes everything more expensive for us and everything is five to forty percent. Packaging, boxes…
So how much will the price of products increase for customers now?
Now we’re giving the strings an April 1st deadline. I will say it a little differently. If our pork leg has lost 80% in the last 12 weeks and there is 90% meat in the ham, for example, the ham should also slowly increase by 80%. Of course, the composition of the products is wider, so if I take it like MP Krásno in summary, we are now talking about the fact that we should increase by 15-20%.
The truth is that at the beginning of the year, we managed to translate ourselves into an increase in energy prices, of around six percent. But it was management.
So from April 1st, which channels will receive which prizes? And is that an average for everything, or will something go a lot higher?
I do not deal in meat as such now, there is a weekly price, but the products should increase in price by about twenty percent. But it must be said again that we do not know what will be on the stock market next week. We expect the increase to be around twenty cents. Such an increase in weeks has not been around for a long time.
Never in the past have prices increased so much?
There were a few weeks like this about four years ago. However, it took two to three months for the price to rise so high. Now these are jumps from week to week.
You talked about the application of what is called force majeure in contracts with channels. Has this happened in the past and are they in favor of it?
It hasn’t happened yet. Meat growth has never been like this in history. The final price at which we will arrive was probably already in history, but it has gone gradually. I am convinced that traders understand this. They buy the meat themselves, which allows them to see the basic raw material become more expensive from week to week. But it will certainly not be easy.
You said it made chicken more expensive. And the beef?
It’s pretty similar there. In December we bought a quarter of beef for about 90 crowns. Today it is 125 crowns.
Covid, war and more bird flu
I will come back to the fact that meat is now becoming more expensive because of the war. Why? After all, meat is not imported from Ukraine to the Czech Republic?
It was not imported from Ukraine, only chicken. And chicken, for example, now has the problem that bird flu is rampant and millions are being spent on this disease. Now it all happened all of a sudden. Covid, then there was some solace, and now war is raging all over the place.
There is nothing today – for example, we always ordered boxes two months in advance. Today, it takes six months. The labels are the same. We want to order machines from Germany, and the first paragraph says that if the subcontractors do not supply them with components, they have the right to postpone the delivery time. The machines should be three quarters of a year old. There are also no trucks. They are taking orders for 2023 for tractors.
When costs go up, one of the costs is fuel. About half of the meat is imported to us…
There are states that say not to ban exports, but say their customers come first. Which is normal. Germany said so, and there was a huge reduction in the number of sows. They will be self-sufficient, so we won’t get much from Germany.
In countries like Belgium, France, the Netherlands, the truck cost 1,500 euros, today it is 100% more. Moreover, these trucks are not. Polish freight forwarders have thousands of trucks that are there because they were driven by Ukrainians and went to war. So there is a huge transportation problem. However, it happened to us last week that they did not bring us two trucks, because there is no one to bring them.
German company Tönnies Fleisch said it won’t beat because it has no CO2that stuns pigs. Everything is really starting to fail here. It is one of the most famous companies in Germany, slaughtering 60,000 pigs in three operations a day. This will certainly be known in the market.
So not only is there a risk of higher prices, but maybe the meat will run out too?
It can happen. We may have a slight problem with the meat that is difficult to import from the countries of the Union.