The Spanish pig price is approaching its yearly low

October has been a month to forget. Yesterday's market session marked 16 consecutive weeks of continuous decreases. From July 10 to today, the Spanish pig price has fallen from €1.815/kg live weight to €1.369 in yesterday's session. In total, this represents a drop of more than 44 cents, or in other words, a devaluation of more than €50 per pig in less than four months. The market has turned upside down. In these 16 weeks, the price has fallen by an average of 2.80 cents per week. Now we must be very close to the annual low.

Spain is a full member state of the European Union. The entire EU market is in decline, without exception (only Italy is holding its own). It seems as if there has been a very specific astral conjunction in which all the factors influencing the market have been negative; in previous articles, we have listed and detailed their nature. We would like to highlight here that China's imposition of new tariffs has been the final blow to an already saturated market. The weakness of the dollar has also hurt us greatly. What is happening seems to us as if a powerful gale had swept away the balls that a skilled tightrope walker was keeping in the air...

There is a large surplus of pork, and there is only one solution: to resume exports to third countries in order to breathe life into the intra-Community market. The price decline will end when the price of certain pork products allows for mass exports. The price has fallen so much that we should not be far from the low for the year.

A couple of months ago, we ventured to predict a minimum price of €1.45/kg live weight; no one knew then that China was going to impose tariffs on European pork. We will never know whether, in the absence of this heavy burden, the Spanish price would have held at the indicated level. Today, we have to face reality, which is much bleaker than expected.

The current price is clearly below cost price. We know that we cannot expect any upward movement in November or December, and that in January there will be work to absorb the backlog from the Christmas holidays. With luck, February could see a reaction, which we predict will be modest.

The situation for European pig farmers is dire wherever we look; recent history shows that Spanish prices are always a step above those of other EU countries (since 2022, at least). Knowing that farmers in the rest of the EU are worse off does not help or offer any consolation, but... it is an undeniable fact. The only exception to this sad situation, as already mentioned, is Italy, although there they have to contend with ASF, which is no easy task in a country accustomed to exporting its processed pork delicacies all over the world (moreover, Italy is not a major pig producer: it slaughters between a fifth and a sixth of Spain's numbers). Within the EU, many pig farmers will abandon their farms: there is no other alternative.

The Spanish price has fallen so much that it has reached the same level as the Brazilian price; we remain slightly above the U.S. price, but there is a shortage of supply there and domestic consumption is strong (so they do not need to push exports, which works in our favor). The sharp drop will have served, at least, to restore competitiveness in international markets. We have already mentioned that exporting is as essential to us as the water we drink.

Soon slaughterhouses should dare to freeze without fear of future price drops; pork's weakness has slowed down the creation of stocks due to the obvious risk of freezing at too high a price. The desire to sell fresh pork has accelerated the price decline by offering pork in an already saturated market. The realization that the price has bottomed out (when it happens) will end the current restraint on the quantities being frozen. This circumstance alone will provide a great deal of stability. It will be a necessary support for future price increases (which will undoubtedly come).

We believe that the concentration that has been taking place throughout the EU is a factor that has contributed to exacerbating the decreases. In a smallholder market like in the past, the multitude of small operators helped to cushion the swings, as it was a less transparent environment that made it more difficult to transmit information. Few and very large operators can more easily tip the market in one direction or another, even unintentionally.

Even with such radical drops in pork prices, Spanish slaughterhouses have paradoxically been unable to recover their margins. When pork prices bottom out and slaughterhouses have a decent (not necessarily comfortable) margin, slaughter rates will rise slightly and the market will regain its lost balance. Everything will turn out as it always does in the end.

We have probably changed paradigms; recent years have been very positive for Spanish pig farmers, and now everything indicates that the cycle has changed. Production will have to prove its resilience in the coming months. We have no doubt that the sun will shine again. We may have to wait, but it will shine brightly once more.

We will conclude today with a quote from Canadian writer Robertson Davies: “Extraordinary people survive under the most terrible circumstances.”

Guillem Burset