Spain is China's leading pork supplier. Market soaring: Shooting upwards like a rocket

In January this year, Spain exported a total of 165,000 tons of pork to China (CEXGAN data). This makes Spain by far the leading supplier of pork to the People's Republic of China.

Let's break this information down to evaluate it properly: In Spain we are slaughtering pigs with an average carcass weight of 90 kg. Thus, one tonne equals approximately 11 pigs in carcasses (the equivalent is clearly seen: 11 x 90 = 990 kilos).

A few simple calculations: 165,000 x 11 = 1,815,000 pig carcasses (equivalent).

Since we know that in Spain we are slaughtering around 1,100,000 pigs weekly, and we know that in January there were exactly four weeks of activity, we can easily deduce that in January Spain exported 1,815,000 / 4,400,000 = 41.25% of the total slaughter exclusively to China.

Let's remember that in September 2020 Spain exported some 80,000 tons to China, which at that time was a historic record. Four months later not only has this record been shattered, but it has more than doubled! This is the news. China has been involved in Spain's exports lately; never at the current level. It seems that the exception has become the rule. We must emphasize the formidable growth in freezing capacity that has taken place: a good stimulus (high prices) has provoked this reaction (new freezing tunnels).

New mutations of the ASF virus are appearing in China (probably due to illegal vaccinations), China is far from having control over this disease and, on the other hand, pork consumption is growing and growing. It seems to us that the Chinese deficit will last all year and, therefore, the flow of exports from Spain to this large Asian country will not let up.

Extraordinary Chinese demand is pulling Spain's market to the heights. February's rises (1.70 cents, 2.40 cents, 3.70 cents, 5.70 cents ► A total of 13.50 cents per kilo live in an unprecedented month) are clearly due to the pull from Asia. In our previous commentary we stated: "the Spanish price should climb little by little during the month of February"; and in reality it has risen rapidly (explosively would be more like it), much faster than expected. This explosive pace of the rise has been due to the tremendous export to China, which acts like a giant vacuum. Spain's privileged situation - riding on record after record in exports - translates into a current price that is exaggerated with respect to its European partners. Let's take a look:

(** The Netherlands price is from the previous week (19th Feb.)

The Spanish export "explosion" to Southeast Asia is causing shortages in the domestic market. European balances have been upset: Germany cannot export either to China or to most of its destinations in third countries and consequently it is swimming in an abundance of pork; in Spain, exactly the opposite is happening: there is a shortage of everything because the wild export flow has drained the market to the point of being totally out of stock. An unprecedented flow of German pork is arriving in Spain. The theory of communicating vessels, in its economic version, holds true.

On Thursday the 24th Germany rose by an unusual 9 cents per kilo carcass. The backlog of pigs is gone and the massive slaughter of sows from months ago is starting to be felt. Since November 18, the German price had stayed the same until Wednesday, February 17, when it rose 2 cents; the drastic rise on the 25th heralds a radical change of course. Following in Spain's wake.

The Spanish processing industry is experiencing difficulties. Prices of its raw materials are rising and it is not at all easy to apply these increases to the selling prices of its products. Soon it will mark two years of this peculiar and anomalous situation that has been the norm since the spring of 2019.

We believe that the sustained rise will continue in March. Provided, of course, that China maintains its buying momentum. Although, with the data available at this time, it is certain that this will be the case. It is clear, at this point, that in 2021 Spanish pig farming will still be profitable. The first feed materials will be expensive but we will be able to overcome it.

Carpe Diem. It is time to live in the present, passionately, but not rashly. What is to come will come; what is to be will be. Today's reality is magnificent, phenomenal and splendid: let us enjoy it, for we cannot close our eyes to the evidence. Let us repeat it: Carpe Diem.

Undoubtedly, Mercolleida has become the leading European market, both in terms of slaughter volumes and market behavior.Is there room for price rise? Well, the Spanish market is rising without any kind of hang-ups.

"A good player is always lucky." A famous phrase from Cuban José Raúl Capablanca y Graupera, the last World Chess Champion from a Spanish-speaking country.

Guillem Burset