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We'd like to begin by thanking our readers for their steadfast loyalty. In 2024, one of our commentaries achieved a remarkable milestone by ranking #2 in the Top 10 most-read articles on Pig333. Many thanks to all our readers for their consistency and perseverance.
On Friday, January 10, the shocking news broke that a case of foot and mouth disease (FMD) had been reported on a water buffalo farm not far from Berlin. This is the first case detected in Germany in 37 years. Certainly, this has been the news of the month and it will probably be the news of the year in the European swine industry. When it rains, it pours in Germany.
The seriousness of the current situation, with the added potential risk of disease spread, has prompted us to publish this commentary well before our usual end-of-the-month.
The first post-holiday market session in Germany was held on Wednesday, January 8. The session ended with a radical drop of 10 cents per kilogram carcass: many pigs were delayed due to the holidays and the slaughterhouses' capacity to absorb them was (and is) hindered by the lack of personnel.
On Friday the 10th, the presence of FMD was reported in Germany; the following week's market session closed with another 10-cent drop per kilogram carcass.
In Spain, our reference market fell 1 euro cent on Thursday the 9th and another 1.5 cents on Thursday the 16th. January was expected to be calm and smooth, with consecutive price repetitions waiting for the abundant slaughter to absorb the delayed pigs. The repetition has not been possible for two main reasons:
- The average carcass weight is breaking records, getting dangerously close to 98 kg; such large pigs result in pieces that are very difficult to market. Such high weights seriously hinder the work of slaughterhouses and cutting plants.
- On Friday, January 17th, the theoretical conversion of the German price for equivalent quality was 1.34 euros/ kg live (according to Mercolleida); the Spanish price was 1.54. Such a significant difference is an excessive burden for the local price.
The European Union, as a whole, is holding its breath right now waiting to see how the spread of the disease evolves; if no new cases arise and the disease is confined to the single detected outbreak, the market will not suffer any further deformation; if, on the other hand, the disease spreads with several outbreaks, the situation will get out of control and anything can happen. A disorganized chaos could ensue where “every man for himself” would prevail.
Be that as it may, the consequences of the German problem (supervened by the still existing presence of African swine fever there) will immediately and directly affect the neighboring countries, while the distance will protect, only in part, the Spanish market.
The current difference of 20 euro cents per kg live (equivalent to about 27 cents in carcass, i.e. in pork) between the German and Spanish prices is not sustainable over time; within the EU, markets function as communicating vessels (imperfect, but communicating) and the failure to correct this difference would lead to a massive influx of cheap or very cheap German pork into Spain.
If FMD were to spread, there would be problems in ALL EU member countries, mainly in Germany and satellite countries; to a lesser extent in Spain, due to distance.
We do not know what the future holds; we can only cross our fingers and hope that this new sanitary problem does not escalate.
Germany has lost the possibility of exporting to almost all third countries. Whatever happens, we already know that it won't be able to regain these destinations for a few months at best. The trade disruptions resulting from this situation are guaranteed. The presence of FMD in Germany will act as a drag on all European prices, influencing them and limiting their potential for appreciation. In one way or another, prices in 2025 will not reach the levels they could have achieved under normal circumstances.
Since the beginning of the year, pork prices have been falling (especially in Eastern Europe) much faster than the modest decreases in Spanish live prices; the first consequence is that Spanish slaughterhouse margins are deteriorating significantly. If things continue this way, difficult (or very difficult) times are ahead for slaughtering and cutting companies.
No two years are ever the same; 2025 has started with price declines and the fatal news we have mentioned. We will see what the months ahead will bring.
We will end today with a saying from the timeless Spanish proverb: “More is learned in two months of adversity than in ten years at university”. It is necessary to stand up to problems and face them; most of the time they are unforeseen.
Guillem Burset
