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African swine fever (ASF) sank the Spanish price to €1.00 per kg of live weight, well below cost price. It fell by 30 cents in just a few days. Since Thursday, 12 February, the pig price in Spain has risen: in seven weeks, it has increased by 27 cents per kg of live weight. These sharp increases are now slowing down.
The pig price has risen as swift as an arrow, but…
- It hasn't reached the level it was at before the outbreak of ASF. Not yet.
- The doors to a number of important export destinations are still closed for Spain: Japan, the Philippines, Mexico…
- ASF maintains its prominence in Spain.
- Post-Christmas slaughters have broken records. Week after week, more pigs have been slaughtered in Spain than ever before. With the pig price at €1.00 and the evident over-supply of pork, some of the main industrialists (Spanish and European) have built up strategic stocks for consumption in summer, when prices will be higher.
- To date, pork prices have risen, but nowhere near as much as live prices. The increases have come about mainly as a result of a reduction in the slaughterhouse margin. This has been the case until now, and it remains so.
The forecast is an important shortage of pigs for late spring and early summer; the uncertainty following the declaration of ASF has brought the purchase of foreign piglets to a halt, and there are many empty spaces on farms in the Iberian Peninsula. In addition, we are seeing a new, more virulent and lethal outbreak of PRRS. Everything points and adds to there being fewer pigs available in summer.
Given that consumption in the EU is not particularly good and pork stocks are higher than usual, we think the Spanish price could reach €1.50, possibly even €1.55 euros per kg of live weight in June. We also think that if prices were rise above that level, it would lead to negative margins in all Spanish slaughterhouses.
In the week before the outbreak of ASF, Spanish pig was priced at €1.30 per kg of live weight. This level was the result of both a generous supply and a pork market that was clearly tiring.
Operators are now fully aware of the fact that the availability of pigs in the coming months will be limited; every cent is a battle and many terms and conditions of sale have been redrafted. We live under the (very real) threat of ASF, but, as supply remains much lower than demand, the situation is not preventing farmers from putting their interests first. This is the present state of affairs, and for now the installed slaughter capacity is much greater than the supply of live animals.
We find ourselves in a complex and previously unknown scenario. ASF is the all-pervasive 'factor' that is flooding the market and business decisions with pessimism. The ups and downs of the market are having a negative effect on many of the forecasts made before the outbreak of the disease.
And, to make things worse, the war in Iran has had an important effect on the situation. Whether we like it or not, the repercussions on energy prices will be significant. The end of the war does not appear to be a short-term possibility. The continuity of the war and the blockade of the Strait of Hormuz will affect inflation worldwide. This is beyond all doubt and brings more difficulties to an already very complex stage.
The post-ASF scenario will most likely paint a picture with fewer pigs and the unfortunate absence or disappearance of a number of operators. Of course, we have yet to see what the future holds, but the situation does not appear to be very optimistic. The entire pig sector in Spain will have to learn to live with ASF, an uninvited guest that has arrived unannounced and one that we fear will be with us for many months to come.
On the global stage, Brazil is no longer an emerging country and has moved up to third place in the world ranking of pig-producer countries. Its exports increase year after year and it is benefitting from the difficulties Spain is currently facing.
For several months now, China has maintained a price for its pigs well below cost. The government is recommending and advising large producers to reduce the number of sows. The Chinese market doesn't need so much foreign pork and is importing much less. The days when China was our main client and our exports to it were huge are now very much part of the past. There seems to be little possibility of those times coming back.
In the United States, pigs are still more expensive than they would normally be at this time of the year. Pork domestic consumption is high and its exports are not aggressive at the present time.
The presence of ASF in our country is a major burden on the pig price; we can only hope that the efforts being made by the various administrations eventually bear fruit. The future of a large part of the sector is at stake.
By way of consolation, we offer a quote from Leo Tolstoy: "To keep going when the going is hard and slow - that is patience. The two most powerful warriors are patience and time."
Guillem Burset
