We know that every year in the summer, the price of pork in Spain is situated on the European podium as the continent's most expensive among the countries of significant production. Nevertheless, what is happening this year is unprecedented and unparalleled.
Let's take a closer look (with a magnifying glass) at the European prices this July. We will give the prices in euros / kg live for the sake of a more evident and easy to understand comparison:
Germany | Holland | Belgium | Spain (Mercolleida) | |
---|---|---|---|---|
1st Week | 1.22 | 1.05 | 0.97 | 1.328 |
2nd Week | 1.11 | 1.05 | 0.97 | 1.322 |
3rd Week | 1.11 | 1.05 | 0.94 | 1.300 |
4th Week | 1.11 | TBD | 0.94 | 1.300 |
There is a total disconnection from Belgium, which has a price tag lower than the rest of Europe because of the presence of ASF in its country. This circumstance severely limits pork exports and weighs like a brick on the price of pork in this market.
Most of the month, our price in Spain has been 25 cents more expensive than in Holland (not to mention the 36-cent difference with Belgium!) and about 20 cents more than Germany. It seems incredible, but it is true. And, although a truism: if it has happened and is happening it's because it's not impossible.
Spanish slaughterhouses are extremely efficient and remarkably competent. They are true champions of excellence, skilled in efficiency. But even so, such exaggerated differences are impossible to digest. It is not possible to pay 20 cents per kilo more for pigs than your competition and still make money.
To put things in perspective, let's consider that Spain sacrifices around 1,000,000 pigs every week; 20 cents per kilo represents the not insignificant figure of 20 million euros. (Every week! Tick-tock, tick-tock...) This is in the farmers' pockets and has come out of the slaughterhouses' pockets. This is how it is currently.
The arrival of the summer heat always causes a slowdown in the pigs' metabolism; this year, this natural dispersion of supply is compounded by a newly created bottomless pit of demand: the new large slaughterhouse in Binéfar. These two factors, together with the German collapse (caused by the shutdown of Tönnies' largest plant due to COVID-19), have led to an unprecedented gap.
The current situation is very tricky. Importing live animals for slaughter is being encouraged along with importing pork and primal cuts, and these arrive here at prices that are not just competitive, but crushing. Additionally, we must bear in mind that the slaughterhouses are in the red. And without oil (profits), engines first overheat and then break down or explode.
We believe that the price in Germany will not go up definitively until China decides to buy on a massive scale. At the moment, China is importing carcasses from the United States at a very good price (in the United States a pile-up of over 3,000,000 animals was created; a part of which is now being sacrificed every week). This flow of cheap carcasses could very well last a couple of months still. Although... there are many signs that China-US diplomatic relations are of the love-hate variety and, right now, all the possibilities are open, including China suddenly banning US pork imports.
The price in Spain will go down (we can't keep waiting for Germany to go up, it's not possible) and it is likely that Germany will go up somewhat in the short term (as Tönnies in Rheda recovers its slaughter pace). It seems that China will not show much interest in buying again until the end of September.
The Spanish farmer has weathered many storms riding on the backs of a few ultra-efficient slaughterhouses (sometimes unaware of being so) which on the basis of extremely tight costs (the key) have been able to pay, historically, a little more for the pigs than in other markets. This has been the case year after year. In our opinion, this is one of the reasons that explains the uninterrupted growth of the Spanish pig herd. Let us not forget that the rest of the producing countries in Europe are in clear regression. As this is an ongoing trend and not just an single event, there must be some underlying reason. For the moment, and as is being demonstrated right now week after week, it seems that we live on the "Island of Happiness" in Spain as far as pig production is concerned... The current price seems more like a "Monument to prices" than anything else. To contemplate it you have to look up... from all sides.
It is not wise to kill - even figuratively - the goose that lays the golden eggs. Let us remember the proverb: "Grasp all, lose all". We consider it our duty to call on prudence, moderation, and consideration, restraint and possibility, fleeing from maximalism which is, by definition, extreme.
The incomparable master Confucius (Chinese thinker and philosopher) said over 2,400 years ago: "A man who has committed a mistake and doesn't correct it, is committing another mistake."
Guillem Burset