2018 ends with an average price of €1.13/kg LW for Spanish pig price. Based on what seemed, and was forecasted some months ago, we must say that this is a very good result. A growth by +6% in production and keeping an average price slightly higher that the cost price is extraordinary, although we stated all this in the previous comment.
The truth is that we will start 2019 at a substantially better level than expected. This fact will, necessarily, have an influence on next year's average price. Starting at €1.03 instead of doing it below €1.00 should lead to optimism.
It is expected that the new Aragonese mega-abattoir starts its activity in the first trimester of 2019. This will be an important destabilising factor: the demand of livestock will be systematically greater than the supply for a period of not less than a year and a half. We are convinced that the price of pigs will undergo a “ratification bonus” that will be difficult to quantify but that will be undoubtedly tangible.
In the absence of another evaluation criterion, the position of the price in Mercolleida with respect to the German price will give us clues of the real effect of this extra demand sustained throughout time.
Undoubtedly, the figures over the last years lead to optimism with respect to the profitability of pig production in Spain. Indeed, the growth has been nonstop (6%, 8%, 2%, 6% in the last 4 years!!) and there is no apparent penalty... We could think that it is possible to walk on the water, but this is not the case.
The fact is that the Spanish industrial sector (abattoirs and cutting rooms, mainly) is one of the most efficient and competitive in the world. The cornerstone of the Spanish pig sector is the extreme efficiency of its abattoirs and cutting rooms. Without going any further, in 2018, the average Spanish price has been €1.13/kg LW: €0.03 more expensive than in Germany, our main competitor. This would be impossible if our abattoirs and cutting rooms had equal or higher costs than in Germany. We export more than 50% of our production, and this is the key of our success.
2018 has been a poor year for the abattoirs (in the absence of another adjective, this one will do), and we think that in 2019 things won't improve... The industrial slaughtering and butchering sector is living its tough times as a consequence of its growth that, in turn, is the logical consequence of its success... The growth has been quick, there are no pigs for everybody, the least efficient companies disappear, and here we go again.
We are in Christmas, a time for retreat and peace. Let's forget the daily tyranny (sometimes hostility). Let's look beyond the small things and let's enjoy the warmth of home.
As Charles Dickens said: “I will honour Christmas in my heart, and try to keep it all the year.”
MERRY CHRISTMAS AND HAPPY NEW YEAR TO ALL.