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In this month, now coming to an end, we have seen that the demand for slaughter pigs in the Spanish market has far exceeded the supply. With the start-up of the new mega-slaughterhouse in Aragon, the existing slaughter capacity in Spain greatly exceeds the supply. It seems clear that this state of affairs is destined to continue in the short and medium term.
Germany remains, without a doubt, the European main market despite its steady decline in slaughter. The last three markets there have closed with + 6, + 5, + 6 cents per kilo carcass weight (an incredible 17 cents in three weeks!). It's an almost desperate bullish race driven by the slow - and so far unrelenting - reduction of its national supply. For years, Germany has been buying a substantial part of its slaughter pigs from neighboring countries (mainly Denmark, the Netherlands, Belgium and Poland). Slaughterhouses are struggling to secure supply, no matter what the pigs are costing them.
We in the Spanish market have limited ourselves to following close behind the Germans, smoothing and moderating our movements according to the superior market perspective (with more insight) of those who make up Mercolleida's table. Indeed we have risen, yes, but not as much as they have (12.50 cents per kilo carcass weight in the last three weekss). Producers have wagered on delivering heavier pigs (up to almost 3 kilos more in carcass weight than in the same weeks last year) to further profit.
It happens, however, that the coronavirus (SARS-CoV-2 according to WHO) pervades everything. In China, most ports remain almost at a standstill (or have at least slowed). Following their New Year, maritime traffic has been very disrupted and the arrival, unloading, and distribution of imported meat is frustratingly delayed. Let's just say that it is much more difficult than usual for meat to reach its destination.
Despite the enormous efforts China has made, and is making, in its fight against coronavirus, it cannot yet say the disease is under control. And this seems like it will take a while... Meanwhile, the effects on the world economy are increasing relentlessly, mainly due to mandatory or voluntary restraints.
The pace of China's new pork orders remains exasperatingly slow; prices are more than acceptable, but far from last year's historic (and insane) highs.
For years Spain has been exporting more than half of what we produce. China has grown in importance as a destination although Europe remains our main destination. We must take care of this closer —and almost domestic— market because the competition from the USA for the Third Countries will be felt more and more strongly, since US production is growing constantly. Besides, we cannot expect China to maintain its enormous meat deficit forever and ever, ad aeternum.
We need (all of Europe needs) China to return to normalcy, both in the flow of its ports and in the regularity of its orders. Almost all the major players see the current situation as temporary and a waiting game. In the meantime, everything that cannot be sold is frozen in hopes that all the factors that have been upset will return to normal. In other words: stocks are rising and rising. Slaughtering to freeze is done and can continue to be done... but everything has a limit. In one way or another we are approaching this limit. Let's cross our fingers and hope that China gets back to normal as soon as possible. Restoring normalcy in China is the key factor in the current world market for pork. That's just how things stand.
The proximity of spring plays in favor of steady markets; it's still far away, but you can already smell it in the air. Good weather has always been synonymous with increased consumption, if only because of barbecues in Germany.
Despite the exuberance of the current price and despite the incredible balance of the last twelve months, a cloud of uncertainty hangs over our heads like a a prophet of doom. Perhaps it's "altitude sickness" (from the price level) or "dizziness from the ravines" (from what could happen). Let's hope that the factors change and that we can forge ahead on the path to normalcy. Let us hope that we don't have to live out the saying, "desperate times call for desperate measures"... Let's hope, let's hope.
The great philosopher and writer, Albert Camus, wrote: "There have been as many plagues as wars in history, yet always plagues and wars take people equally by surprise."
Guillem Burset
