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In February we confirmed that the price of pork was rising due to the already commented factors (psychological effect of the new Spanish mega-abattoir, some animal health issues, desire of the abattoirs to slaughter...), and in March we have seen that China is starting to feel like buying.
We stated, a few months ago, that the presence of African swine fever (ASF) in China could cause a doping effect on the exports shipped to China. Indeed, before the prevailing confusion in China and the soundness of the exported pork (EU and North America, essentially) regarding animal health matters, the Chinese operators and the consumers have thrown themselves into foreign pork.
The current Chinese buying activity is surprising because of its volume. Besides, the prices agreed on are attractive.
The prices in Germany (carcass weight) have risen by €0.17/kg in the two last market sessions in March. The main Spanish market (Mercolleida) has accumulated, in four market sessions, an increase by €0.141 kg/LW: an average exceeding €0.03 per session. And all seems to tell that we are far from the ceiling.
The flow of meat to China has been and is so important that there has been an emptying effect on our traditional markets. As a consequence, the prices of pig butchering in the EU rise and rise non-stop... and that's what allows the abattoirs to keep on with this upward trend whose end is unknown to us.
The rise in pork price is being so intense and important that the processing sector will have to make a superhuman effort and transfer the rises in price to the final product as soon as possible. The greatest difficulty will be faced by supermarkets, that are always reluctant to sudden price variations. Nevertheless, the rise in prices is so great or amazing that there is no alternative: right now, for the processing industry the only plausible motto is: “RISE OR DIE”.
We think that the great problems can only be solved with great solutions. We think that the survival of many Spanish pork processing companies will depend on their ability to transmit the required rises to their finished products. Yes, you have read it well: we have used the word "survival".
We have described the wonderful present of production. Regarding the future, it's not difficult to guess that in May and June the price will be quite higher than now, and that in autumn there will be the usual drop, that will probably be sharper, because the price will be very high.
As we have said in previous comments, 2019 will become an extraordinary milestone in the balance sheets of pig producers... and this will go on and on for now and with no fear.
Confucius, a great Chinese fount of wisdom, said: "They who expect constant happiness and joy will have to become accustomed to frequent changes".
Guillem Burset
