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The Spanish price leads the European prices

It is obvious that the current situation cannot last much, and that a correction will be needed soon: or our European competitors increase their prices or we reduce them.

Monday 5 August 2019 (5 months 12 days ago)

July ends with the Spanish price leading the prices in the European Union unabashedly. It is even at the same level of the Italian price, this being very remarkable.

High temperature records are being broken this summer, especially in northern Europe. The excessive heat, together with the persistent health problems, is causing a very important restriction in the supply of live pigs to the abattoirs. This is what is happening both in Spain and Germany.

In July we have seen how Germany has reduced its price twice (-€0.06 on July 10th, and -€0.03 on July 17th) and has increased it once (+€0.04 in yesterday’s market session), whilst the Spanish reference market repeated its price unmoved. The German abattoirs wish the price to drop because of the difficulty regarding the valuation of pork, but the meagre supply does not allow it. Anyhow, and like many other times in summer, in the end we have remained alone in the highest place of the podium.

It is well known that Spain has been exporting for some years more than 50% of the pork it produces. It is very difficult (not to say impossible) to balance this distinctly exporting behaviour with a leading price in comparison with our competitors. Even though our abattoirs are very efficient, they cannot make miracles. It is obvious that the current situation cannot last for long, and that a correction will take place. Or our European competitors increase their prices or we reduce them. As the European Union is a single market space, pig prices are very interrelated, and most of the times they are, in practice, very similar and almost the same.

Abattoirs are restricting their activity. There’s no other solution but to adapt the slaughtering pace to the availability of the supply. Overall, we are slaughtering 16-18% less than in January. This autumn is expected to be a bit different than the previous autumns: the new giant abattoir in Binéfar will work at a considerable pace, and China could reappear as the great and aggressive buyer of last spring (its price in carcass weight has been rising for weeks).

Under normal conditions, the Spanish price should drop by late August or in September. This would be the normal behaviour in a normal year and with normal external factors, but 2019 is far from being a normal year (the most destabilising factor is ASF, that is spreading freely, especially in Southeast Asia). As a hypothesis, we cannot rule out that China renews, in a few weeks, its massive purchases, and if this happens, the European prices could even rise.

The ball is in the air, and we don’t know on which side of the net it will fall.

The great American thinker Benjamin Franklin said: “Sloth travels so slowly that poverty soon overtakes it.”

Guillem Burset

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