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Apparent paradoxes, consequent facts. Christmas time

In 2016 the slaughterings will have been 16% higher that in 2014. Production has grown, and this growth has not been penalised yet.

We are ending a year that has been more than acceptable for all. One year before (Spanish price = €0.95/kg LW) it seemed impossible to overcome the situation, but nevertheless, 2016 ends with an average price that exceeds €1.13. Benefits not expected in the production sector.

This year will set an historic milestone in our sector, because it is the first one in which more than 50% of the pork produced in Spain has been exported. Unless there is a disaster, this is a point of no return.

December has been full of shocks in Europe. On Monday 12th the president of the Polish corporate group of abattoirs PINI (with slaughterhouses in Italy too) was arrested, and on Wednesday 14th we knew about the bankruptcy of Madame Piffaut's pork processed products corporate group (leader in France). Both corporate groups are leaders in their countries. The future is uncertain in both cases.

The price in the USA reacts quickly with a bull trend. Canada will follow suit promptly. In the next chart we can see the different evolution of the prices in North America (represented by the price in the USA), and in Europe (represented by the price in Germany, because it is with respect to the carcass weight, allowing a better comparison).

Chart 1. Comparison of the prices in the USA and Germany

Chart 1. Comparison of the prices in the USA and Germany

The chart obtained does not need commenting. Until the end of June, both prices (USA vs. Germany) acted quite similarly, and from June until the second half of November there has been a spectacular divergence. This American collapse will undoubtedly have consequences.

In week 50 there has been one of those rare “windows of opportunity”. Germany had increased its price by +€0.02, +€0.02, +€0.03 and +€0.03 and its price was high enough to justify shipments of live Spanish pigs to Germany. Now it is impossible to know how many Spanish live pigs were exported to Germany (20,000?; 40,000?). The truth is that many pigs were exported, and that contributed to the German collapse (-€0.06 on December 14th; -€0.08 on December 21st). Spain has clearly become the European leader and must assume this role without insecurities. Managing the Spanish price in January will be very complex.

In 2016 the slaughterings in Spain will have been 16% higher that in 2014. Production has grown, and the paradox mentioned in the title refers to this growth not having been penalised yet.

We are in Christmas, and this is a time of peace and good wishes. We hope and expect that 2017 will be at least as good as 2016.

As Charles Dickens said: “Merry, Merry Christmas that makes us remember the hopes of our childhood, may it make grandfather remember the joys of his youth, and transport the traveler to his chimney and his sweet home!”

We wish you all an excellent year 2017.

Guillem Burset

Guillem Burset

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