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The repetition of the prices in the Spanish last market in July seems the prelude to a series of repetitions. The market is in a balance, fragile though, but in a balance whatsoever.
The pigs do not grow well due to the high temperatures, and the supply is lower. On the other hand, the abattoirs have not been able to increase the value of pork at the same path as that of the live pigs (a record increase of €0.37 in terms of liveweight in 11 weeks), and their margin has vanished.
The slaughterings are going through the motions, and some abattoirs only slaughter pigs four days a week, and those who go on with slaughterings five days a week assume that there are only pigs available for an activity 15-18% lower. Slaughtering pigs and butchering them is not attractive due to the absence of a commercial margin.
We are at the top level of this year (and of last year), and it seems clear that freezing pork is not an option. The abattoirs try to sell as much fresh pork as possible. The farms are still full of pigs, and all seems to tell that in September there will be an important, or very important, supply of pigs (like every year), and the prices should fall.
China has imported enormous amounts of European pork during this first semester, but right now, the Chinese market has lost strength. The prices have fallen, and right now, both the US and Canada have better possibilities than Europe (the prices of their pigs are decreasing at full speed, specially in the US) for selling pork to China.
We could say that Europe, as a whole, is in standby (wait and see mode), waiting to see what happens. Germany has way fewer pigs than usual, and they do not have a higher price simply because it is not possible to increase the price of pork. The same happens with France, that was the first client of Spain until last year.
We will continue exceeding €1.30/kg whilst the supply is still restricted. We must not forget that the Spanish price is the highest in Europe, with the exception of Italy. It is undeniable that the Spanish production has grown by more than 15% in the last two years (see the previous comment), and finding a market for these surplus pigs entails concessions in terms of prices. The battle will be held in September, and it will all depend on the foreign markets.
The great Pablo Picasso said: “That inspiration comes, does not depend on me. The only thing I can do is make sure it catches me working.”
Guillem Burset
