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Indeed, we are living in turbulent times, days of pigs, pigs and more pigs meaning pork, pork and more pork. Let's look at the multitude of concurrent factors in this kind of perfect storm of the market (inside the European Union):
- In Germany, the ban on exports to the People's Republic of China continues. Pork that cannot be sold to China remains in the European Union.
- The pool of backlogged pigs in Germany is beginning to be slaughtered; some slaughterhouses work on Saturdays. This pork will also remain in the confines of the European Union.
- Germany is slaughtering its pigs at a record-breaking average carcass weights (the average is close to 100 kilos!). This also represents more pork that must remain within the European Union.
- In Spain, each week we are slaughtering more pigs than ever before. According to MAPAMA, from January to August we have slaughtered 4.60% more pigs than last year, which have produced 6.70% more pork. Because the freezing capacity is already 100% used, the pork from the extra slaughtered pigs must be sold within the European Union.
- The average carcass weight in Spain is substantially higher than in previous years; this also means more pork in the European Union.
- China has banned imports of pork from two major slaughter plants in Denmark (due to an outbreak of COVID that mutated in mink; 15,000,000 of these animals have been slaughtered). This pork that cannot go to China will remain in the European Union.
The impact of the pandemic in Europe continues; the situation is very uncertain and the circumstances are too changeable. Consumption during the Christmas holidays is reported to be low. The European market has been saturated for weeks and is now collapsing as a result of this significant (and so far endless) oversupply.
Pork prices are falling in a cascade, hurried along by the urgencies of the Northern European countries; with pork falling back, pigs must also drop in order to keep up the slaughter as fast as possible (now it is very necessary to kill at full speed). In Spain we are coming from very high up and, whatever happens, 2020 won't be a bad year for the farmer.
We were told by two major Spanish operators that at the end of last week it seemed that "someone" had pressed the invisible panic button. Everyone was eager to sell and place their stocks of frozen pork, without a buyer so far, to prevent them from depreciating further. There was a kind of hysterical, contagious flurry. This has been the scenario the last few days. There are fewer and fewer operators and they are getting bigger; this results in an intensification, exacerbation, and expansion of market movements. In a highly fragmented market it is easier for operators to absorb part of the extreme movements; this is not the case now in Spain.
China has lifted its foot off the accelerator; the price of pigs there has been slowly falling and falling until reaching 20% cheaper than last year; somehow its production is recovering. U.S. exports to China have increased exorbitantly, alleviating much of China's deficit due to the absence of Germany. China continues to buy a lot from us in Spain, but has lowered its prices; and it seems that it wants to keep lowering them. In addition, China is exponentially increasing its sanitary controls on frozen foods in search of possible contaminating sources of COVID-19. At the moment these controls only delay some deliveries.
The United States presents itself as a strong candidate to hold the hegemony in the world pig trade. Let's consider that the United States (without Alaska) has an area more than 16 times that of Spain. If they had the same density of pigs as Spain they would then be slaughtering 16,000,000 pigs a week (incredible!), not their current 2,600,000 (over SIX times more than today). They can grow. They can grow a lot. And they have abundant cereals and legumes...
Returning to our market in Spain, there is no doubt that the declines will continue until they reach a floor that is still not felt or seen, not even in the distance; low prices will encourage consumption and somehow the bleeding will stop. It will be rough, it will be very rough, it will be extremely rough, but it will stop. We will need to put our heads down and hold on. But "a heavy purse makes a light heart" and production cannot and must not ignore or forget its formidable outcomes of recent years. Other producers in other countries will suffer more, much more.
Let's cross our fingers in hopes that freezing chamber capacities will be sufficient. All the volume available will be needed. Everything points in that direction.
The more than foreseeable drop on this Thursday, November 19 will not be the last one of the year. Far from it. There are still a number of them chained together.
Let us finish with a Spanish saying that is an antidote to pessimism: "The best prophet of the future is the past." We will see this time.
Guillem Burset
