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With the end of the year approaching, we would like to mention a highlight or a positive development that happened this year, the 50th anniversary of the foundation of Mercolleida. Fifty years of setting the Spanish pig price is a long time. Cumulative effort, thousands of hours, and an enormous amount of work well done have allowed Mercolleida to achieve, among other things, a well-earned international prestige. We congratulate wholeheartedly the people who have made this possible. Mercolleida is today, undoubtedly, the reference pig market in Southern Europe. And is, without a doubt, an important global reference. A good arbitrator of the Spanish price.
One negative development during the past year was the sudden reduction -without prior notice- of Chinese purchases in the European Community. The halt in purchases from China (European pork trade with this country has been reduced to a minimum, especially in the second half of the year) has caused a difficult time in the European Union, with pork surpluses everywhere and the subsequent collapse of prices. This has been the major destabilizing factor in the Community market during this year that is drawing to a close. A heavy weight that dragged everything down.
Fortunately, it was possible to avoid a strike in the Spanish meat industries; in a marathon meeting on Thursday, November 18 (seven hours of hard bargaining were necessary), it was possible to agree "in extremis" on improvements and measures enough to reverse the unions' position, which was very much inclined towards a total shutdown. The market was thus spared a historic shock at a time of extreme depression.
We must mention two significant threats for European pork in general: the penetration of the vegan philosophy in the market (gradual and unstoppable, we'd better get used to it) and the recent -and firm- initiatives of the Great German Distribution tending to implement the reign of the five D's in the pork market (born, weaned, finished, slaughtered, and deboned in Germany, the D for Deutschland). We believe that the latter circumstance will greatly disrupt the European market. Germany consumes much more pork than pigs strictly born there. This is a measure contrary to the founding spirit of the EU and it will have to be seen whether it complies with European law.
We could say that the market is still in the Valley of the Calm; the Christmas holidays will cause significant delays in pigs leaving the farm (as happens every year) and it will take a good part of January to reabsorb these pigs. Once they have been reabsorbed and the flows to the slaughterhouse are back to normal... it could happen that at the beginning of February a first modest increase could arrive... as long as there is no surprise or unforeseen crisis.
We believe that all these months of prices being well below cost price (in the EU as a whole) will have -irrefutably- very tangible consequences in the market. We think that no later than April of next year we will feel the absence of the thousands and thousands of animals that were slaughtered as piglets or euthanized. Somewhat later, the unborn pigs from sows sent prematurely to slaughter will be missing. And this absence will cause prices to rebound. As long as China continues to buy cereals on a massive scale, a fall in feed prices is not to be expected. And with expensive feed... farms can only be profitable on the basis of a pig price in the high range. Pigs must be worth more than their cost price, otherwise a persistently negative situation can be described as abnormal or unnatural.
The pig price in China is reacting dramatically upwards. In the last two months it has risen by no less than 58%, although admittedly it was at a very low level. This sharp rise could mean that small producers (with exaggeratedly high costs) are abandoning the business. The Chinese New Year season already seems to be almost over without significant contributions of European pork; China will probably consume part of its own reserves; it could be that it will resume its purchases before the spring in the wake of this rise in the price of live hogs.
This atypical year, if ever there was, is coming to an end. Production is in severe losses and there is no easy way out of this crisis; the distance between the current price and the cost price is very significant and it will take months to compensate for this difference. Let us hope that February will bring us hope with price increases.
Let us have faith that in 2022 the average price at the end of the year will be above the average cost price. We see this as very likely; we believe that in the second half of the year prices will be clearly above costs. We will see.
It's Christmas. We wish all readers and friends a happy holiday season with family (to those who can enjoy it: make the most of it!) and we convey our sincere wish for peace and prosperity for all. Let's relax our spirits; let us soak up the cozy atmosphere and postpone the headaches and worries for later.
We would like to paraphrase the great Charles Dickens by recalling what he once said: "Happy, happy Christmas, that can win us back to the delusions of our childhood days, recall to the old man the pleasures of his youth, and transport the traveler back to his own fireside and quiet home!"
Guillem Burset
