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It was not to be. The potential for the price to remain the same in August (as farmers hoped) was not realized. The market could not resist the downward pressures and began falling in the second session of the month in Mercolleida. Germany dropped 10 cents in carcasses in its first market session of the month, and Spain had no choice but to follow in its wake.
We have embarked on the path of decreases and will surely remain on it for several months. There will be sustained and significant price decreases.
According to Mercolleida, the theoretical conversion of uniform quality quotations on August 16 of this year in euros/kg live would be:
| Spain | 1.82 |
|---|---|
| France | 1.69 |
| Belgium | 1.61 |
| Germany | 1.57 |
| The Netherlands | 1.57 |
| Denmark | 1.31 |
From data published by Pig333, we extract the official prices (equivalences in euros/kg live) on the same date for:
| Mexico (National) | 2.13 |
|---|---|
| Mexico (Sonora) | 1.81 |
| Brazil (average) | 1.43 |
| USA (Iowa - Minnesota) | 1.31 |
| Canada (average) | 1.10 |
The diversity of prices and situations is striking. Especially in the EU, in theory a Single Market. As almost always, the Spanish price is perched at the top of the podium in Europe. Mexico has a significant structural deficit (it imports more than 40% of the pork it consumes) and is a case apart. As can be seen, Spain's price is at a stratospheric level if we compare it with the major American exporters. Denmark is an extreme case, within the EU, of dependence on exports to third countries.
Months and months with European prices completely disconnected from those of the rest of the world have meant that our exports, outside the EU, have fallen sharply (with the exception of bellies) and that not all the pork produced can be sold. The fall in the price of pork is what is causing and will cause the sharp drop in the pig price. The reduction observed in slaughterings in the EU as a whole (8% in the last 10 years) is not enough to bring us closer to a 100% self-sufficiency rate. We are still around 115%, which obliges us to continue exporting, and to do this we must have attractive prices. Pig prices have to go down in search of that level that will allow us to recover exports to place the surpluses. Especially from now on, when temperatures will be milder and pigs will grow fast in a favorable environment: as every year it is foreseeable that many more pigs per week will arrive for slaughter than in the last two months.
The fact that it is impossible to sell all the pork produced is like a blinking orange light: it is an urgent alarm signal that cannot be ignored. A word to the wise is enough and “The Market” has understood that there is no other alternative to the downturns and is applying itself to them.
It is true that there aren't enough pigs to satisfy the enormous installed slaughter capacity in Spain; it is no less true that the carcass weights have continued to drop at full speed due to the heat... BUT everything has a limit and these objective factors have lost specific weight in the face of the abysmal difference in our price compared to the rest of the EU. Our pigs cannot be, for a long time, as expensive as they have been compared to the other EU countries. We sell more than 50% of the pork exported in the rest of the EU; it seems logical that our prices should be competitive.
The evolution of feed raw material prices has been very favorable so far this year; Spanish farmers have been (and are) fortunate. Although pig prices can do nothing but fall sharply, it seems clear that this year's minimum price (perhaps 1.50?) will remain comfortably above average production costs in Spain. Or so we think. In the end, 2024 will be a very good year for Spanish pig farmers.
As for the long-suffering meat processors, it seems their business environment will change radically towards much kinder conditions. After two difficult years, a breath of fresh air is finally arriving that should allow this link in the chain to breathe a little more comfortably. We think that this autumn will be very profitable for them. We also believe that it is about time.
We will end this month with some statements from Plato: “Apply yourself both now and in the next life. Without effort, you cannot be prosperous. Though the land be good, You cannot have an abundant crop without cultivation.” No comment needed.
Guillem Burset
