0
Yesterday marked nine consecutive weeks of the Spanish price decreasing. From the lavish price of 2.025 to yesterday's 1.803, what on earth is going on?
The current market is nothing like the market was from May to July, when our price was sky-high. Several events have erupted with force to shake the foundations of the status quo, namely:
- We have recently learned of the closure of two medium-sized Spanish slaughterhouses, one in Girona and the other in Valencia.
- Many important Spanish players assume that another slaughterhouse will be gone before Christmas of this year, although we will see about that.
- For a few months now, PRRS has been benign and piglets are surviving the infection. Undoubtedly, more pigs are and will be arriving for slaughter. In addition, in the last spring census, the Spanish herd showed a 4% growth compared to last year and a 16% growth in pigs from 20 to 49 kilos.
- The four months in which Spain maintained its price at the highest level in the world have caused losses in the millions in all Spanish slaughterhouses, without exception. The aftermath and consequences are becoming significant and serious.
- The balance sheets of the major Spanish sausage manufacturers for the year 2022 are not at all buoyant; in some cases, very severe losses can be observed.
- Exports to Southeast Asia are really low; this lack of sales is being felt and the increase in intra-EU sales is not enough to compensate. Brazil is surprisingly aggressive in its export prices.
Each of these factors is negative, from the first to the last, as far as the market is concerned: it is the sum of all of them that has caused this sharp market turnaround. It seems as if the market has done a 180; nine consecutive weeks of consistent price decreases attest to this.; nine consecutive weeks of consistent price decreases attest to this.
We all know the importance of human psychology in market behaviors; the pig market is no exception. Right now there is a thick cloud of uncertainty about the near future that drenches every pore. Moreover, it should not be forgotten that the current price of 1.803 is the most expensive in history if we look from January of this year backward. Keep an eye on this fact.
We are far from being in a panic situation. However, the short-term future is far from clear.
We believe that the market is coming down in search of a price level that is competitive to boost exports. As we know, Spain exports more than 50% of the pork it produces and we need to export at a good pace at all times. We depend on it.
The pig price will go down until the slaughterhouse has a sufficiently attractive margin to stimulate its business. We must bear in mind that in the four months from April to July what they have lost has been historic, real weekly fortunes. When the slaughterhouses start slaughtering, the price will not go down any further. We have not yet reached this point.
At the time of writing this commentary the price of pigs in Germany (its live equivalence according to Mercolleida) is 1.77 €/kg live. As you can see, it is cheaper than in Spain. We have to remember that Germany is still the leading market in Central Europe. Nowhere is it written that Spanish pigs should always be more expensive than German ones...
For the farmer, the "four excellent months" with unimaginable prices (touching the sky with their fingers) are over. Now it's time to wait and see what happens. For the slaughterhouse it seems that the bleeding has stopped and that it has gotten out of the unbearable hell; we will see if it can fix its balance sheet before the end of the year.
At the tail end of the whole chain are the long-suffering processors. Pig prices have dropped significantly, however, pork and cut prices have hardly moved at all. The fact that people have returned from their summer vacations has supported the pork market, in addition to the shortage of slaughter in Central Europe, whose pork surpluses are missed in Italy.
It seems to us that pork and cut prices will go down; on the international market, the prices that are being set have nothing to do with the European ones. Although the communicating vessels between the EU and the World Market are imperfect (the EU is very protectionist in our field), they exist. And they will be felt soon.
We do not know where and when a firm floor for the price of our pigs will appear. We think that a price of around 1.65 could mark the limit, perhaps at the end of November? Let's wait and see.
Whatever happens between now and the end of the year, the year will be good or very good for farmers. Not for slaughterhouses, since it seems impossible to recover what has been lost. Processors continue to suffer.
Peter Marshall, a well-known American TV actor, said: “When we long for life without difficulties, remind us that oaks grow strong in contrary winds and diamonds are made under pressure."
Guillem Burset
