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ASF risk
We believe that the ASF outbreak in Germany has been the (bad) news of the year for the European pig industry. Spain is geographically far from Germany but not - let alone - safe. Following the suggestions that have come to us in this direction, we want to call on the responsibility of each and every operator involved in the pig production and supply chain.
From those who buy weaners from other countries, through those buying live pigs for slaughter, including the operators buying feedstuff raw materials (cereal, legumes,...), everyone should check whether compliance with the health protocols and the implemented prophylaxis are adequate and according to the risk we face. We have a lot at stake
As a first estimate (gross if you want but we need to start somewhere) we can compare the potential Spanish losses in the event of an ASF outbreak, with those that Germany is suffering from. It is impossible to pin down and be fully specific, but let's imagine that spanish pig price would go down suddenly 15 cents/ kilo live weight (similar to what happened in Germany overnight). Let's imagine that Spain would take eight months to eradicate ASF and recover third-country markets (very optimistic forecast). These two premises result in global losses of:1,000,000 animals per week x 110 kg Live Weight (LW) x 0.15 euros/kg LW x 35 weeks = 577 million euros. The bill would fall for the most part, and inevitably, on the backs of producers.
Every precaution must be taken. Monitor, supervise and control, in short everything it takes to stop the virus from entering the country. Solidarity within the industry at its highest level is what it is needed. Pesimistic fatalistic views are useless, we must do our very best and fight with all means at our fingertips.
Discontinuing the trade of live pigs with foreign countries would be a drastic and draconian option that would minimize risks
Close to the ground
Since mid-October, the spanish reference price (Mercolleida) has dropped from 1,293 to 1,096 euros/kg LW. Let's stay with the cold number and we can conclude that it is not that bad. the spanish pig price is higher, or much higher, than that of all the countries around.
The activity of the slaughterhouses in November and December has been a repetitive weekly record. Such volume of slaughters has managed to absorb all the supply and the price has found its balance earlier than expected. In January there will be some pigs that were delayed because of the holidays, but nothing we have not known in previous years.
Exports to Southeast Asia have continued at top speed (Japan, Korea and, above all, China), preventing the collapse of pork that such number of slaughters seemed to foreshadow. Breeding, fattening, slaughtering, cutting and marketing pigs in Spain functions as a gigantic, high-precision mechanism. It has worked and it is working really well. But... it should be remembered that high-precision mechanisms are very sensitive to any incident; a simple grain of sand (sometimes a simple speck of dust) can make the whole thing to fall apart. And there are many grains applying: Covid, ASF,...
The price is now very close to cost of production; in January, a few more cents could be discounted due to post-Christmas abundance, but in February we would have to see a clear recovery in the spanish pig price, as long as China maintains its buying position more or less as in the second half of this year ending. If exports from Spain to China were disrupted... we can't even imagine how it could end.
Balance of an atypical year
Here we are once again, as every year, writing the last comment of the exercise. This 2020 will be remembered as the year of the Covid pandemic but it is necessary to recognize that for the spanish swine industry not only has not been a bad year but has been an excellent year.
The figures reflect the 2020 prosperity for the spanish pig industry; Indeed:
- The average annual on farm price will be around 1.35 euros/kg LW which is a luxurious average in a Europe devastated by the Covid and the ASF crisis
- The total number of animals slaughtered in 2020 will exceed 57 million animals, an absolute historical record.
- The average annual carcass weight has been far higher than the all-time record: 88.5 kilos compared to 86.3 from the previous year. More animals slaughtered with higher weight involve more meat than ever before (those 2.2 kilos extra equal the weight of about 1,500,000 carcasses). Nothing else to be desired. These objective data show that the industry is going from strength to strength.
- The number of pigs slaughtered in November and December (in weeks without bank holidays) have been closer to 1,100,000 animals per week than to 1,000,000. The slaughter capacity is firmly consolidated into more than 1,100,000 animals per week under normal conditions.
It is Christmas. Let us take advantage of the truce these days to review inside our core bubble (let us not take unnecessary risks, there will be other Christmas) how fortunate spanish are to be the European farmers with the greatest benefit this year.
We wish all readers and friends a Merry Christmas and a Prosperous New Year.
Guillem Burset
