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Whirlwhind of slaughterings. Uncertainty.

African swine fever outbreaks in Europe in 2018. Source: WOAH, updated as of January 26th, 2018

African swine fever outbreaks in Europe in 2018. Source: WOAH, updated as of January 26th, 2018

The threat of ASF in Germany causes that nobody wants to keep greats stocks because of the risk that they become ‘unsaleable’. This attitude of selling at all costs has caused a collapse of meat prices in Europe.

Wednesday 31 January 2018 (6 months 18 days ago)
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In the four market sessions held in January, the price of live pigs in Spain has dropped by €0.02. Repetitions are foreseen in February, waiting to see if the market recovers or if the meat stocks will seriously ballast the market. The lightness of the drops in January, as well as the soft landing seem to forecast weeks with more or less agreed price repetitions.

Since the second week of January, slaughterings are being carried out at full speed. The carcasses still have very high weights (we are still 2.50 kg above the weight in 2016 by this time of year), and selling all the meat produced is plain and simply impossible. There are still many pigs, and they must be slaughtered until this large supply can be brought up to date.

Meat is being taken to the deep-freezing stores at full speed. There are more slaughterings than usual, and the sales are lower than usual… The result is that the stocks are growing rapidly, although it is true that until December there were at abnormally low levels.

The German abattoirs are trying, at all costs, to sell their fresh meat production. The threat of African swine fever outbreaks at less than 500 km of the German territory publicizes and has an influence on the decisions made in this country (nobody wants to have large stocks because of the risk that they become ‘unsaleable’ if ASF appears in Germany). This attitude of selling at all costs has caused a collapse of meat prices in Europe.

As always, it will be "the market" who will pass its sentence. We think that the current situation is very similar to that seen two years ago (pigs reached a price of €0.93/kg in January 2016). Then, the appearance of China, with a large demand, suddenly solved the European problem (and it indirectly created a space for the Spanish growth: 8% in 2016 with respect to 2015).

We know that Europe has a surplus of pork, and that is why we are forced to sell to third countries the production that we cannot consume. In crucial moments, as now, it is necessary to increase the flow of this "Great Exportation". In the world market Spain competes mainly with the USA (currently having production records), that has a USD that is 15% cheaper than 12 months ago… It is lucky for us that the price of pigs has risen slightly there.

We must wait, hope and wish that the countries of destination of our exports behave buying at a good pace. We know that by late February, the cold stores will be full and that the slaughterings will keep a good pace. Easter will come in the last week of March. The road seems very long.

We shall end with a Scottish proverb: “Never allow your feet to go ahead of your shoes”.

Guillem Burset

<p>Guillem Burset</p>

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