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August ends with the eleventh consecutive drop in the Spanish market, Mercolleida. It was not possible for the price to stay the same... Especially due to the German decline with two price drops (5 cents in carcass on the 4th and 7 cents in carcass on Wednesday, the 18th). Spain entered August with a price of 1.291 € and ended the month at 1.233 €. Over the month Spain accumulated a drop of just six cents live, less than Germany, which dropped slightly over 8 cents live over the course of the month. Let us remember that the current price in Germany is equivalent to 1.01 live (as we can see, the Germans are going along other dark paths, in another dimension). The Spanish decreases have been in "gliding mode", overlooking the fact that they have the most expensive price on the continent. Surely now decreases will come in "sinker mode" because prices are not expected to be able to stay 22 cents higher than Germany. What cannot be, cannot be, and is impossible.
Spain is immersed in a series of concatenated and consecutive decreases... in summer! Frankly, we think that what we have experienced in these 11 weeks is only a part of the journey; there are still substantial decreases to be made. Times of sweating blood are approaching for pig farmers. Huge storm clouds loom on the horizon...
The current price is rubbing up against the cost price... which in itself is good and extraordinary news (by comparison: Germany and Holland have been selling their pigs well below cost price for many, many months... not to mention Belgium).
Let's take a look at slaughterhouse growth in Spain over the last few years (information from Pig333 pig production data):
| Year | Total slaughtered (in thousand head) | % Growth vs previous year |
|---|---|---|
| 2013 | 41,418 | |
| 2014 | 43,484 | 4.98% |
| 2015 | 45,891 | 5.53% |
| 2016 | 49,084 | 6.95% |
| 2017 | 50,073 | 2.01% |
| 2018 | 52,289 | 4.42% |
| 2019 | 52,982 | 1.32% |
| 2020 | 56,461 | 6.56% |
| 2021 | 59,566 (*) | 5.50% (*) |
(*) = Provisional data. Projection.
The progression is magnificent in itself. Splendorous, powerful, brimming. To date, this growth has been neither penalized nor punished (which is strange, even). Note that it shows a 44% increase from 2013 to the present. That's 44% in 8 years! About 18,000,000 head more per year. The absence of China has starkly revealed the exposedness and fragility of the entire sector.
We believe that this autumn will be remembered for marking a true change of cycle: the time of joys, bonanza, and substantial profits (proverbial fat cows) is over (evidently, for now, and until further notice) and from now on it will be a matter of minimizing the damage, calling on the efficiency and excellence that the Spanish swine industry as a whole has so often demonstrated.
Europe has a surplus of pigs; the sharp drop in Chinese imports has exposed the EU's imperious need to export. It so happens that there is no plan B for where to place the huge quantities of pork that China used to buy from us. Nor is there even a shadow of a plan C. The only solution will be to reduce the European herd as a whole. We are certain that there will be a second wave of sow culling. In all countries.
Spain sold 165,000 tons of pork (and offal) to China in January, the same amount in February, and the same in March of this year (in three months = 495,000 tons, more than the total sold to France in the best year when France was Spanish' leading destination: 460,000 tons). With the disappearance (or near disappearance) of China as a destination, rethinking many things is imperative. For the moment, the summer heat has been the great ally of production, slowing animal growth, limiting supply, masking and disguising the true situation.
September will show in all its harshness the precariousness of the present moment: pigs will arrive for slaughter in droves, and it remains to be seen if slaughterhouses will be willing to process those pigs whose pork they cannot sell. Create or increase stocks knowing that the market will go down? No, thank you. Slaughter pigs and process them at a loss? No, thank you. We believe we will inevitably see a very significant chain of declines. Let us mention here that the extraordinary demand generated by the new, large slaughterhouse in Binéfar has already been more than met by the growth of the pig herd: in fact, between 2019 and the present, weekly slaughterings have increased by more than 120,000 pigs, much more than the actual activity of the aforementioned slaughterhouse.
For the first time in history, Spain may have to face a problem of lack of space (freezing chambers) to store the huge stocks that will undoubtedly be created. This is not a boutade, on the contrary, it seems to us a potentially very real problem. We have never experienced anything like the tsunami of pigs and pork that is approaching. As we have mentioned before: this autumn will long be remembered as apocalyptic and as the beginning of a great crisis. A real landmark or milestone in the path of Spanish and European pig farming.
We have been fortunate to have lived through some extraordinary years; great profits in the production sector (this is the only way to explain the growth described above) and expansive development of the processing industry (mainly slaughterhouses and processing plants). The past is the past, therefore it is behind us, and now it is necessary to adapt; crises usually end with some stakeholders disappearing and others becoming stronger (i.e.: we either do not come out of a crisis or we come out of it stronger). Adapt or die could be a motto.
We will end with a phrase uttered by the great Albert Einstein: "There is a driving force more powerful than steam, electricity, and nuclear power: the will."
Guillem Burset
