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We started October with a price of €1.30/kg LW and we ended it with €1.16. The seasonal drop has been delayed by almost a month this year, very probably due to the persistence of the heat.
The fifth German abattoir in terms of volume (Vogler Fleisch, with some 40,000 pigs slaughtered weekly in three plants) started bankruptcy proceedings one month ago more or less (for the time being it is still slaughtering, but only in a plant, and with slaughterings of quite less than a third of its capacity). The resulting and logical state of panic of the farmers has triggered four consecutive drops in price for a total of €0.20/kg carcass in Germany. It is undeniable that this circumstance has dragged all the European markets.
The USA and Canada persist in having rock bottom prices. Both have a price of €0.91/kg carcass, this is, 40% lower than the European prices. Production in the USA is breaking records, and hence these prices.
For the first time in history, Spain will export, this year, more than 50% of the pork produced (all the available data show so). This is a point of no return, and it is very significant. Exporting more than 50% of the own production means a high degree of exposure to the international vicissitudes. What happens in America affects us much more now than when we only exported “the surpluses”. Once more, we verify that globalisation is a tangible and concrete fact, not only a concept.
In Europe we are being witnesses of a redistribution of production: a drop in the north (Germany and its satellites: Denmark, The Netherlands, and Belgium to a lower extent) compensated by far with an increase in Spain. It seems that in the European Union 0.50% more pigs will be slaughtered this year than in 2015, but with considerable variations between countries.
We all remember that a year ago, more or less, the Spanish price crossed the fateful line of €1.00/kg LW (in the second market session in November), keeping under that price until late April. We totally reject that something similar will happen this year. The scarce livestock supply in the north of Europe should help us to keep the price at more reasonable levels. The level of the stocks in freezer chambers (very low in comparison) will also help to avoid collapses.
As pointed out in previous comments, we are slaughtering like never before (2016 will set a record in the Spanish production), and for the moment this extra production has not penalised our price. With few exceptions we have been above The Netherlands in the last twelve months. Anyhow, the last two German repetitions predict peace, or at least a truce.
Richard Teichman, a renowned German chess player from the early 20th century said: “Genius consists in knowing how to violate the rules in the right moment.”
Guillem Burset
