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Managing scarcity with wisdom. Unstable but agreed balance

We think that the price will remain where it is now. We don't exclude any rise: the “beep” of the electrocardiogram, but without a real projection.

Wednesday 3 July 2019 (16 days ago)
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The three last market sessions in June at Mercolleida have almost repeated their prices (a mere 0.002€ more in the antepenultimate market session in June) as a shred of evidence that we have arrived to a balance point accepted by both the sellers (farmers) and the buyers (abattoirs).

Stricto sensu, the price at Mercolleida could be above the current price according to the low supply. What happens is that the spanish market is increasingly interconnected with the foreign markets (remember that since some years ago, Spain exports more than 50% of its production), and those times when Spain was disconnected from Europe, holding higher prices are long gone. Undoubtedly, the producers manage timings wisely and the decisions are taken cautiously. If the spanish price was much higher than that of its neighbors, urgent pork imports that would collapse the market would enter Spain, as it happened in a not very distant past.

Right now, Spain, as a whole, is slaughtering 83% of what it slaughtered in January, when absorbing the Christmas holidays delays was necessary. There are no more pigs and it is futile to look for them. One cannot slaughter inexistent pigs.

Pig price rose a lot and very quickly three moths ago, in the wake of important purchases by China, in all the EU. Pork prices rose in parallel without any difficulty, but as soon as China has moderated its demand, some prime cuts have reduced their price substantially (loins and collars for barbecues have not sold well in Europe, firstly due to the bad weather and now of the excessively high temperatures; fatty hams have been reducing their price for weeks in search of a reference level). The abattoirs move forward with great difficulty, with a margin that loses a bit every week.

June has ended with an impressive heatwave with historic temperature records. The low supply will drop even more, and we will have to live with it.

The obvious lack of pigs for slaughter will favour an increase in prices. Pressing lack of pigs for slaughter..Persistent lack of pigs for slaughter (until September, as always).

Favouring the endurance of the current statu quo we have:

  • China's apathy regarding purchases
  • The weakness of the price of some prime cuts
  • The fragility of the abattoirs' margin
  • The stability of the EU neighbours
  • The self-discipline of the abattoirs, that had to accept, that pigs that are not there, can not be slaughtered.

We think that the price will remain where it is now. We don't exclude an occasional upturn (the “beep” of the electrocardiogram), but without a real projection.

In the first six month of 2019 Spain has slaughtered 1% more than in the same period in 2018. It's not much, but the country is growing one more year. Also, the average weight of the whole of the carcasses slaughtered so far this year is higher than in the same period in 2018, although it is true that by only 45 grams, despite the fact that this last week the carcasses weight 900 grams more than in the same week in 2018.

2019 will undoubtedly be a year with extraordinary results for the Spanish pig production sector.

Let's end with a quote by the great Aristotle: “A wise man never says all he thinks, but always thinks all he says.”

Guillem Burset

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