The time is now... just maybe not this very instant

In Spain, the farm backlog that resulted from the Christmas holidays has been cleared up. The best evidence of this is yesterday's rise of 0.40 cents/kilo live. Pork slaughterhouses have been slaughtering at a very good pace throughout the month, and right now there are no more pigs left. It is true that the average carcass weight is increasing to a very high level (roughly two kilos more than last year for the same dates) but it seems to be more of a reality sought by both parties involved (slaughterhouse and producer) to further optimize their activity, rather than a problem of unwanted accumulation.

At this time there are several factors to consider in the European and Spanish markets, all of them coming into play in greater or lesser extents:

• Between January 1 and 19, 161 new cases of ASF were reported in Poland alone, some within 20 km of the German border. This sword of Damocles is very present.
• Belgium has not succeeded in eradicating ASF from its territory; new cases are appearing in wild boar, albeit just here and there. But they do appear.
• China has just celebrated its New Year's holiday: since before our Christmas until today their purchases have slowed. We await a speedy return to normalcy in the trade flows from Europe to China.
• The United States and the People's Republic of China have signed a trade cooperation agreement that, in essence, greatly reduces tariffs. The United States will be able to place pork in China with virtually no restrictions. The US slaughters about two and a half times more pigs than Spain. We point out that in absolute terms Spain has been the leading supplier for the Chinese market in 2019.
• The strikes in France are making it extremely difficult to load containers: it is estimated that this activity has been reduced by 90% in the last week.
• The effective implementation of the new mega-slaughterhouse in Aragon is being felt: pigs are ruthlessly being sought after and this demand "forces" the Spanish price to move higher than it would without this factor.

Over the years, more and more factors are involved in shaping the prices of each market. Globalization implies a greater dependency on facts and/or circumstances that occur thousands of kilometers away from our own land.

From Christmas until today, pork prices in Europe have been falling- far more so than the decline in pigs. Ergo: slaughterhouses have seen their margins shrink. At present, this is what is happening week after week.

We are convinced that China will continue to need huge quantities of pork. We also think that it will not make the same mistake as last year: panic or speculation drove real market prices to unbearable levels and thus thousands of contracts were broken and not respected. Now there is an alternative (the US) and Chinese traders have certainly learned a few things.

We believe that the price of pork in Spain can no longer fall until after summer. It will be difficult to exceed the price achieved in 2019, but in January live pig prices reached previously unseen levels for that period. We also think that it will be a complicated year for the slaughterhouse: a lot of struggle in purchasing and China, in the end, will not pay the levels seen last year.

So far, I have discussed the present times, but I cannot give a snapshot analysis of an instant in time. An infinite number of things can happen in an instant that could configure a radically different reality. For example, if the CPI in China were to soar and its authorities decided to ban pork except for in the military and hospitals, we would see more than radical market changes. Not to mention ASF...

As the american writer Christopher Paolini said: "Live in the present, remember the past, and fear not the future, for it doesn't exist and never shall. There is only now".

Guillem Burset