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Riding a powerful diesel engine

Since late January until today, the price at Mercolleida has regained €0.066. We could say that the Spanish price is riding a powerful diesel engine that is propelling it upwards inexorably.

Thursday 2 March 2017 (2 years 7 months 20 days ago)

Since late January until today, the Spanish price has regained €0.066, going from €1.132 to €1.198/kg LW. Week after week, one cent after another is being gained in a firm and contained, but constant upward trend. We could say that the Spanish price is riding a powerful diesel engine that is propelling it upwards inexorably.

The pig herd has grown, but the slaughtering capacity has grown too. The supply is very plentiful (we are slaughtering more than ever), but it falls short against the current slaughtering capacity. The Spanish price has gone from the bottom end in Europe to an outstanding leadership. The cumulative rise in February has been obtained entirely at the expense of the abattoirs' margin, because pork has not reacted.

Spain exported, in 2016, more than 52% of the total slaughtered volume. The strength of the Spanish market is based, increasingly, on the exports (let us remember here the globalisation concept, mentioned so many times), and without it, nothing that is being mentioned would be possible. If we export comfortably it all seems to tally, but if exports become affected the situation would be very different...

Teh old Europe is tired: all the pork and pork processed products consumption indicators point downwards. The global slaughterings in Europe remain more or less stable (they decrease in the North and they increase in the South —this is, in Spain), and the surpluses are exported.

When writing this comment, the stevedores have called a strike in all the Spanish harbours. The strike is expected for weeks 10, 11 and 12. We do not know if it will finally be called. If it is, its impact would be undeniable and it would be very important, because all the meat exported to Asia is shipped in the harbours. We are talking about tens of thousand of tonnes... and probably of forced reductions in slaughterings. We will await for the events.

The market seems firm (the strike, if it comes, will only be an exceptional event), and the future seems clear. The current price is already satisfying, and following pure logics it will rise until Easter. Anyhow, all has a limit, and in this case we must not forget that the different European markets act as communicating vases. We can rise, it is true, but we cannot drift apart too much from Germany and its satellites. We need, above all, that the cuts and pork react. The abattoirs' margin has vanished greatly, and if it disappears the rises will be against the current and unsure. We show a calm confidence and a logical caution. We ended 2016 with a good mark and in 2017 the production profitability seems more than assured. We could hardly ask for more.

The late President of the USA, Abraham Lincoln, said: “Almost all people are as happy as they decide to be”.

<p>Guillem Burset</p>

Guillem Burset

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