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In each and every one of the four German markets, the price of pork stayed the same in June. In each and every one of the four Spanish markets, the price of pork rose in June.
We started June with a farm gate price of 1.276 euros/kg live weight and finished the month at 1.328; a rise of more than 5 cents/kg. Germany has not moved from 1.66 euro/kg carcass the whole month. Five cents is not the end of the world, but in this case it has been enough to tighten all the seams of the market.
All of Europe spent the month of June with prices staying the same (France, Belgium, Germany, Holland, Denmark,...) or dropping (Poland). Only Italy shows increases, but its live price is 23 cents behind Spain's.
It turns out that things in the world are not going the way they are in Spain. In the United States the current price is at... 0.42 euros/kg live! Yes, you read that correctly, ONE THIRD the price in Spain. Let's remember here that the United States is the second-largest producer in the world after China and slaughters about 2.5 million pigs every week. In Canada something similar, though not as extreme, is happening. Its current equivalent price is 0.75 euros/kg live; 56% of the Spanish price.
Is Spain so extraordinary, excellent, or stupendous that we can afford the luxury of walking the opposite direction of the world? Could it be that we are all falling victim to a delusion? We live in a completely flat meat market; no piece can go up and the whole of Europe is content on prices staying the same, thus the weeks go by with the belief that "making due" is enough.
All the price increases in June were made at the expense of the slaughterhouse margin. That margin has been degraded to the point where slaughtering and processing is no longer attractive because of the lack of profit. We are not going to say that further increases are impossible; we will point out that it is not at all recommended for our price to go up, and up, and up... when the prices of our neighbors and natural competitors stay the same, stay the same, and stay the same.
As we have explained several times, Spain today exports around 55% of the pork it produces. It is all very simple: if the price of pork in Spain is too high to allow for exports, then the pigs cannot be slaughtered. It would not be the first time that the market is forced to react like a pendulum due to previous errors. Let us remember here a Spanish saying meaning "man is the only animal that stumbles twice on the same stone [that makes the same mistake twice]".
It is true that the Spanish situation is very unique. The demand for pigs for slaughter is doped by the new slaughterhouse in Aragon which aspires to slaughter more than 15% of the Spanish total. It isn't hard to understand that there is a "lack of pigs" to satisfy this "new demand" which appeared out of nowhere. This is indisputable, but everything has its limits. And right now it seems we are "walking the tightrope..."
It seems to us that, between now and September, we can expect few price variations. This year is different from years prior; tourism flow is a complete mystery, US-China relations are not clear (at the moment American exports to China are allowed but...) and it doesn't seem that China will soon be able to recover its herd. We believe that the price will continue to give farmers satisfaction and happiness, but we do not think that it will allow for more substantial increases in a couple of months. It's a matter of "wait and see".
We're at mid-year. It is a good time to confirm that with an average farm gate price –so far this year– in the neighborhood of 1.40 euros/kg live weight, there is no need to suffer; there is no other option but to celebrate, and with more reason considering there are no signs of weakness wherever we look. At the moment there are no clouds on the horizon or anything major to worry about, except that the slaughterhouses must have a margin, at the risk of a traumatic disruption of the market.
Well, that's that. That's the way things are.
This month we choose the saying, "in vain it is to strive against the stream."
Guillem Burset
