Rising global pork prices start to have impact on Estonian consumers
The cost of pork has risen sharply on the world market over the past week leaving the Estonian meat industry concerned about the future. Consumers in Estonia have proved highly sensitive to price changes and competition is fierce. However, the latest price rises will not be reflected in the cost of pork on Estonian supermarket shelves just yet.
On Thursday, the Nõo meat factory in Tartu County reported, that pork prices have reached their highest level in 20 years. The cost of raw pork has risen by almost 60 percent in recent weeks, while the price of pork products has also gone up, though only by 10-15 percent.
Olle Horm, head of the Atria meat factory, which supplies products for the brands Maks & Moorits and Wõro, told ERR, that the latest surge in raw pork prices began last week.
"As competition is tough and consumer purchasing power low, it is unlikely that all this will reach consumers in the near future. The pressure to keep prices low is very high indeed," he admitted.
According to Horm, Atria is continuing to monitor the situation closely and, with costs rising rapidly across the board, the temptation for Atria to increase its prices for customers is strong. Nevertheless, according to Horm, that is certainly not something Atria will be doing in the immediate future.
"Nobody can say whether or not this is just the beginning of the (price) increases, so the situation is unpredictable and there's no way of knowing how prices will behave further down the line," Horm said. "At the moment, we are sitting and waiting to see what is ahead. The meat industry is a low-margin labor-intensive business, but we can't absorb raw material price increases indefinitely."
CEO of food companies Rannarootsi Meat and Maag Grupp Sven Sooman, also said that it was very difficult to predict how prices would develop in the future.
"The latest increase in pork price increase has definitely not yet begun to affect products on the supermarket shelves," he added.
According to Sooman, Estonian consumers are very sensitive to price changes, with even more now opting for cheaper, mostly imported goods at the supermarket than before. Sooman also pointed out, that the amount of food purchased in Estonia has begun to decline in general.
According to Ragnar Loova, Managing Director of Nõo meat factory, the steep rise in raw material prices will inevitably lead to the increased use of lower quality raw materials.
"People often make choices based on cost, and because of the price pressure, unfortunately, they are opting for food, which has been imported from far away or is of lower quality," he said.
Olle Horm added, that there has been growing tendency for more people to purchase cheaper products, as well as a rise in consumer anxiety. However, he also said, that up to now, there has been no noticeable drop in the consumption of meat products.
Horm pointed out, that pork is the last of the main meat products for which prices have gone up. Last year saw a surge in the cost of beef for instance. However, as Estonian consumers don't tend to eat as much beef as pork, it did not cause any major shockwaves. Chicken prices shot up next, with the cost of fillets practically doubling.
"Chicken consumption has fallen a bit and now it's the turn of pork to have an upturn in price. However, the increase hasn't yet hit final prices to the extent that it's starting to affect consumption," Horm added.
According to Horm, there are several reasons for the recent rise in the cost of pork, which is naturally affected by other trends in the global market.
These include China's ecomomic behavior, and the EU's overproduction of pork in the past, as well as the sharp rise in global cereal prices as a knock-on effect of Russia's war in Ukraine.
CEO of Ranna Rootsi Sven Sooman pointed out that operational costs for pig farming have become more expensive and that, as a result the amount of pork produced has decreased.
"Pig farming became no longer profitable due the significant increase in the cost of feed and grain, as well as energy," he explained.
According to Ragnar Loova, pork prices are expected to remain high for some time.
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Editor: Michael Cole