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The current state of the Spanish swine market is, undeniably, disheartening. The reality is what it is, and we have no choice but to endure it. We shall attempt to broaden our perspective to look beyond the present.
Current news offers very little room for optimism:
- Global instability (the war in Ukraine, the conflict in the Strait of Hormuz, etc.) creates a great deal of uncertainty and drives up energy prices.
- Spain’s CPI averaged over 4.20 percentage points in July, August, and September: inflation, that silent thief, continues to rob us all.
- Raw material prices for pig feed are rising (especially soy), and production costs will increase.
- The global pork market is oversupplied: in the vast majority of pig-producing countries, the market price is below the cost of production—the swine crisis is global now.
- African swine fever (ASF) remains present in Spain; the emergence of new cases is trending downward, but the disease persists.
- The current live price at Mercolleida is trending downward and has, for several weeks now, been well below the cost of production. From now until Christmas, further declines are to be expected.
- Germany's price continues its decline, with no floor in sight; last Wednesday, prices there fell by 8 cents per kilogram (carcass weight).
There is an aphorism that aptly captures our perspective: “In the land of the blind, the one-eyed man is king.” The problems facing the Spanish sector appear less severe when we compare the situation with that in the rest of the EU. As we have noted in previous articles, the prices received by producers in other EU member states—with the sole exception of France—are lower than those in Spain. Let us examine a comparison of current prices, expressed in their equivalent values in euros per kilogram (live weight):
- France 1.38 euros / kg live
- Spain 1.17 euros / kg live
- Belgium 1.08 euros / kg live
- Germany 1.02 euros / kg live
- The Netherlands 0.98 euros / kg live
- Denmark 0.90 (*) euros / kg live
Note (*): In Denmark, this is a provisional price. The year-end bonus is currently far lower than it was in the not-so-distant past; the painful 0.90 will not be offset by a bonus of just a few cents.
In Germany, the value of a live pig was equivalent to 1.30 euros at the beginning of November last year; since then, the price has remained at or well below the cost of production, with a brief interlude in March and April of this year. A full year of hemorrhaging money is difficult to stomach.
In Denmark, the price received by livestock farmers was around 1.24 euros per kilogram (live weight) back in September of last year. Ever since then, it has remained well below the cost of production. The situation is dire—so much so that it seems impossible to hold out any longer.
In Belgium, the live pig price has been well below production costs since September last year. No matter how much optimism there may be… reality eventually sets in, and producing at a loss has no future.
In the Netherlands, the price has consistently remained below the German price since July of last year—between 5 and 10 cents lower per live kilogram—week after week, without exception. Nothing more needs to be said.
One final observation: in the months leading up to the ASF outbreak in Spain, the Spanish market had been valuing pigs more highly than Germany; with the arrival of the disease, prices collapsed and remained below German levels until March, when they reached parity. In May, German prices fell, and since then, pigs have been cheaper there than in Spain…
One does not need to be clairvoyant to realize that the various situations described in the preceding paragraphs must inevitably lead to significant herd reductions. Many European producers will choose to downsize while waiting for better times, whereas others will opt to cease operations altogether. It is also likely that some unwelcome losses will occur.
At this very moment, and despite all the challenges (read: ASF), Spanish prices are the highest among all EU member states—with the exception of France and Italy, which operate under different market dynamics. It is undeniable that we are going through a crisis; however it is less severe in Spain than it is north of the Pyrenees. There is a glimmer of light—whether bright or otherwise, it is light nonetheless—at the end of the tunnel: the anticipated production decline in Central Europe will create an opening for Spanish pigs.
Those who persevere will prevail; it is a matter of using every means at our disposal to minimize the damage. The Spanish swine industry has endured and overcome other crises before. We believe that this time the damage will be much more limited than might have been expected when ASF was first detected in Collserola.
We will conclude today with a song of hope; Martin Luther King expressed it in a profound statement.: "Only in the darkness can you see the stars.”
Guillem Burset
