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The end of mimicry: the floor price is near

The almost mimetic similarity between the Spanish price curve in 2015 and 2018 ends here and now. We think that it is completely impossible that the decrease in price reaches €0.95, like then.

Monday 5 November 2018 (10 days ago)
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In the five market sessions held in October, the Spanish price has lost €0.0940/kg LW, reaching €1.046/kg. We can see that the intensity of the drop has lessened with time, and that everything seems to tell that in mid-November we could reach a floor price resistance level.

The almost mimetic similarity between the price curve in 2015 and 2018 ends here and now. We think that it is completely impossible that the decrease in price reaches €0.95, like then. We are sure that the drop will end before reaching the psychological barrier of €1.00/kg.

Since January, the total pig slaughterings in Spain are being 8% higher that in 2017. An 8% is an enormous increase, and it has several interpretations:

  • The pig population has grown by 8%. We do not import a significant number of live animals to slaughter them, and if they have been slaughtered, it is because the pigs are there (this is, the pig population as grown).
  • The slaughtering and processing capacity has grown. If it were not so, it would have not been possible to slaughter these pigs.
  • They seem two platitudes, but it is the interaction between these two factors that explains, in broad strokes, the market situation. The speed with which the abattoirs have increased their slaughterings as soon as they have stopped suffering losses has made that the higher livestock supply (like every autumn) has been managed easily, reaching the current situation quickly, in which the balance seems at hand.

The production sector has managed its supply masterfully, and now, the average carcass weight of the pigs slaughtered in the last week of October is 1.60 kg lower than in 2017. This means that there is room to absorb possible delays due to holidays without the supply becoming excessive or unmanageable.

When writing these lines, the Spanish price is almost the same as the German and the Dutch prices, and it is merely €0.02 behind the French price (with equivalent qualities and according to Mercolleida).

There is no important news regarding ASF. The dribble of cases still goes on in China and Belgium, and the situation seems stable and on the way of being solved.

It seems that the sales of meat will be fluent, but at a rock bottom price, this partially due to the desperation of the Belgian abattoirs, that cannot export to third countries due to the ASF.

The most important news in October in Spain has been the 'official presentation to society', in the recent SIAL food exhibition held in Paris, of a new mega-abattoir in the province of Huesca. According to the company's sources, it will start its activity in early 2019 with the aim of reaching (in one or two years) the astonishing figure of 30,000 pigs/day.

The emergence of a new operator (and such a big one!) in 2019 will undoubtedly cause a favourable distortion for the production interests. There will be tensions regarding the purchase of livestock, and the price of live pigs will have an invisible but tangible 'scarcity bonus'. Like on many other occasions, we will wait and see.

The famous Argentinian writer Julio Cortázar wrote: “Hope belongs to life. It is life itself defending itself...”

Guillem Burset

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