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We can only minimise damages

In Iberia, pig prices have reached this year’s peak. Now, prices can only drop… The evolution of prices is very similar to that in 2015.

Thursday 2 August 2018 (1 years 2 months 15 days ago)
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Understanding the ins and outs of the pig world market requires, above all, having an excellent information and the ability to process it. There are also and always ignored factors (diseases, political crises…) that can break apart any hypothesis, regardless of how well grounded it may be.

This introduction is relevant to explain that the former chess world champion, Anatoly Karpov, thinks that in order to express an opinion, it is always essential to have all the possible data available, to analyze them, mix them, intertwine them and, above all, digest them. After having occupied the chess throne, he doesn’t need nor want to give his opinion about swine. Well then… let’s get down to business.

In Iberia, pig prices have reached this year’s peak (€1.246/kg liveweight). We have got here after many small rises. As we have thoroughly explained in previous articles, pork does not react, as it has not allowed any increase for at least two months. All seems to tell that the current pig prices will be the highest in 2018.

In July there have been four pig market sessions. In the two first an increase in prices was reached (€0.01 on July 5th and €0.006 on July 12th), and in the next two the price remained the same, although against the norm, because the German price dropped in those two same weeks (after four price repetitions): -0.03€ and -0.02€, respectively.

Now, the difference in price (carcass weight) between the Spanish and the German market is more than 0.16€ (for an equivalent quality). It is easy to understand that this difference penalizes Spanish exports, and (as always) it will tend to be smaller once August ends.

The abattoir’s operating margin is negative right now. Due to this, there is not an interest in slaughtering pigs besides keeping the fixed costs at a reasonable level. The slaughterings will rise again after the dog days although, and certainly, not at the current prices.

We commented, a few months ago, the similarity in the prices in 2018 and 2015. In 2015, we had, during this same week, an average price of €1.15/kg liveweight. This year, the price is €1.13. In 2015, the annual average was €1.13. Let’s see if this year we reach an average price of €1.11. In any case, it will not be easy.

Autumn comes with a high supply and many mysteries. We know that our vital market is the world, and we are ignorant of its receptiveness. We do know that in the world market the livestock prices are one or two steps below our level…

From now and until the end of 2018, the prices can only drop, and we will have to see at what pace. We fear that in December the atmosphere will be pessimistic, but this is only a gut feeling. We will now the truth when it arrives.

As Seneca said: “The arms of fortune are not very long: they normally rest on those who approach her.”

Guillem Burset


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