Discrepancies and the North-South divide in the EU

Above all, we must highlight that there have been no further cases of foot and mouth disease in Germany. Seven weeks have already elapsed since the outbreak near Berlin and no new cases have been reported. This absence of new developments is, in itself, the best possible news. The problem, and its consequences, appear to be largely confined to Germany. If there are no new cases (fingers crossed), normality will be restored within a few months. The German authorities are relaxing the sanitary protection measures and a sense of expectant calm is gradually returning. This normality is very necessary for the entire swine industry in the EU as a whole. If things continue this way, it is expected that Germany will regain access to exports to a few third countries before the end of the year.

February is ending with a clear upward trend in the Spanish price; the Spanish quotation seems to follow the path of an arrow, upwards and upwards... So far this year, the average carcass weights are still very high, an absolute record compared to the same weeks of previous years. We should probably get used to the fact that this circumstance is recurrent: little by little, the range of carcass weights has been changing and it seems the new situation is irreversible. We reiterate here that such heavy carcass weights (as in January, for example) produce pieces that are too large, outside the commercial range. We have experienced a February with the price consistently increasing every week, in contrast to the stubborn price stability in Central European countries, forced by the German situation. To finish painting the picture, we must comment that the pork trade is sluggish and the (unwanted) stocks are increasing.

At the time of writing this text, the Spanish and German prices (according to Mercolleida, for equivalent qualities) are far from each other: 1.63 is the official Spanish price and 1.34 is its German equivalent. Germany suffers the penalty for the foot and mouth disease detected in January (it has lost practically all options to export to third countries) in addition to the presence of ASF, which continues to hinder its commercial opportunities. In Spain, the lack of supply for the existing slaughter capacity continues and persists. Right now, this overcapacity of slaughter seems systemic to us.

Germany maintains its status as the leading market in Central Europe: its neighboring countries' quotations closely follow Germany's. Between Germany and its neighbors (Netherlands, Belgium, ...) there are regular and frequent very important exchanges (which makes all these markets behave as connected by almost perfect communicating vessels) both in live animals and in pork.

Germany and its satellites are all quoting within a narrow range; several integers below the Spanish quotation. At present, the North-South divide in the EU is more evident than ever and is becoming a disparity that is strengthening and becoming chronic.

Twenty-nine cents difference per kilogram live equals 38 cents per kilogram carcass. Quite the difference. Spain's price seems to be perched on an ivory column, far ahead of the rest of the EU quotations. This significant difference can only be temporary, but, as long as it lasts, Spanish slaughterhouses will find it difficult (impossible?) to obtain positive operating margins. This is an undeniable fact. The German price is expected to rebound as the good weather approaches.

In the global scenario, we must point out that both the United States and Brazil are seeing very high prices for this time of the year: In Brazil, the market is following good export rhythms and in the United States there is undoubtedly a reduction in herd size (circumstantial, for sure). The high prices of our main competitors on the international scene can only be in our favor.

Here we would like to mention the extraordinary strength of pig production in Russia. Let's take a look at some figures:

Source: 333 Pig production data

Plain and simple, a 387% increase in 23 years (!). Production in 2024 is equivalent to a weekly slaughter of around 1,240,000 animals (1,100,000 currently in Spain). Spain's big neighbor to the East is presenting its candidacy to be a formidable competitor on the world markets. At the moment it is competing with Brazil for third place in the world, relegating Spain, definitively, to fifth place. For now, Russian pork is present in China. Its progress is all the more remarkable because it came from a flat situation: no know-how, no livestock farming culture, no commercial experience, and mostly obsolete equipment. We know that Russia is a major cereal producer and also that, crudely speaking, pork is nothing more than a processed cereal...

To conclude, we would like to mention some remarks from the President of PIMEC (Catalan Small and Medium Enterprises Employers' Association), Mr. Antoni Cañete: “China produces, the United States innovates, and the EU creates standards...” We fully subscribe to these statements: a word to the wise is sufficient...

Guillem Burset