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As we do every year, we are publishing the last commentary of the year before Christmas, a day when peace and harmony should prevail.
The year that is drawing to a close has been exceptional in every regard; in addition to the financial crisis in pig farming, there has been the geopolitical crisis (read war), the aftermath of the COVID crisis, the energy crisis, supply problems, etc. All of this has been bathed in heavy and even toxic doses of uncertainty, anxiety, and insecurity.
The clear and indisputable reduction in the pig inventory in the European Union and exploding costs of production and feed have led to never before seen pig prices, especially for this time of the year. Without exception, pig prices throughout Europe are at record levels.
The high prices, both for feed and energy, augur well above-average pig prices; in 2023 it seems certain that the price of pigs will rise much higher than usual and get very close to cost prices. Hopefully above, although it will not be easy.
In Europe, pork consumption is declining. The causes of this decline are many and varied: inflation, which is reducing the purchasing power of households, the "background noise" made by animal activists, vegans, and conservationists, and also the push for so-called "plant-based meat" whose presence on the market, although minor for the moment, is already noticeable and undeniable (this "meat" seems destined to become more and more patent). Probably also young people's abandonment of traditions. The future does not look easy for our industry's activities.
In North America (mainly Canada and the United States), pork prices are well below European prices; this hampers sales of EU meat to third countries.
China - the great destabilizing factor - is lowering the price of its pigs at full speed. The abolition of the Zero-Covid policy is causing a proliferation of cases never seen before in China. The Financial Times has just published a study predicting tens of thousands of deaths among the Chinese population due to the disease. Overall, it does not appear to be the best situation in terms of expecting high consumption...
With Europe having fewer pigs, Spain's leadership will be strengthened. The balance of Spanish exports will shift towards EU member countries to the detriment of exports to third countries: in reality this is already happening, but it will be accentuated.
We have seen a very timid rebound in live pig prices in December as a reaction to the late Christmas demand (uncertainty has delayed buying decisions until the last moment). However, Christmas will pass and we fear that January and February will be long, cold, and dark. It is very possible that, after the holidays, the market will readjust abruptly: the EU will continue to have a pork surplus and our American competitors (USA, Canada, and Brazil) have a much cheaper raw material (pork) than us for export to third countries. All this leads us to think that pig prices will clearly fall throughout the EU already in January but more so in February. Pork will probably fall first, as is already happening (hams in Italy are already worth much less now than a few days ago). These will be the first stages of the selling price versus cost of production struggle that will be ongoing throughout 2023.
The year is ending much better for the pig farmer than one might have thought at the beginning of March, although in the end few will be able to report positive balances. For the slaughterhouse it has been a hard year in which the usual autumn downturn (which used to "fix" the year's results) has come very late and very sheepishly. The processing industry is still unable to pass on the crazy increases in pork prices in April. It has definitely not been a good year for any of the links in the pig production chain in Spain.
In an environment as changing and uncertain as the current one, it is necessary to find set, reliable references. In an inhospitable and hostile environment, it is important to clearly differentiate the wheat from the chaff. We all know that we must reduce costs, minimize avoidable expenses and, perhaps, postpone compromising decisions. As always, the storm will pass and the sun will shine and reassure us with its customary and habitual warmth. The drawback is that we do not know when all this will happen. But it will happen, with total and absolute certainty.
In one way or another, many factors of uncertainty will eventually settle, clarifying the picture. We hope and expect that this will happen sooner rather than later.
It's Christmas. Time for peace, harmony, and family. For a few days let's give ourselves permission to put our worries aside and let our spirit be filled with well wishes. Let us take the time to think about how to smooth out those rough edges of our character that may be bothersome to those around us and let our hearts be imbued with good wishes.
May luck smile on all of us. Let's say goodbye to fear, unpleasantness, and sadness. Let us fervently hope that 2023 will be more favorable than the year that is coming to an end. We wish all our readers a very Merry Christmas and a Happy New Year.
Guillem Burset
