The reference market for pigs in Spain: Mercolleida

Lleida has always been a territory with a high concentration of pigs. This is probably the reason why that city's market, known as Mercolleida, serves as the reference for the Spanish pig market today.

Mercolleida (MLL) was born in the 70's in a clear attempt to homogenize and rationalize the prices of industrial slaughter pigs. Essentially, it was a matter of institutionalizing a negotiation table where both the supply of live pigs (producers) and the demand (slaughterhouses) were represented. The idea was to establish a playing field where both parties could negotiate and where the institution would arbitrate a consensus should difficulties arise. MLL is an institution dependent on and controlled by the City Council of Lleida.The Government of Catalonia (Generalitat de Catalunya) is another important shareholder.

From its hesittant beginnings to today's consolidated professional market, MLL has experienced numerous ups and downs and endless anecdotes. Currently, MLL represents the market with the highest pig slaughtering activity within the European Union.

In the 90s and into the early 2000s, the meetings were often real marathon sessions, with a lot of tension, being sometimes so long, that they were interrupted late at night to conclude the next day. These were times when emotions ruled those who had to negotiate and those same emotions prevented reasoning and reality from prevailing.

In order to rationalize and reconvert the market into what should be its sole and strict function, it was rightly thought necessary to make available accurate and verified information, neutral in itself, about the reality of the market (average carcass weight, number of animals slaughtered, the evolution of Spain's neighboring markets, etc.).

Therefore, the current MLL negotiation table is made up of 16 speakers, 8 representatives from the production sector and 8 representatives from the industrial side. When the session begins (on Thursday afternoons for normal weeks) each table member has the following information available:

• Statistical document created from real data provided by production (large integrators) and slaughterhouses (16 companies that bring together about 60% of the market). This data is auditable. It informs about the total number of animals slaughtered for the current week, slaughter forecasts for the following week, average carcass weight for the current week, and the same data for the week prior. It also includes the same data for the same week a year prior.
• The outcome of the German market for the day prior.
• The outcome of the French market for the same day (at noon).

The session begins with a discussion in which all members participate. This is followed by private negotiations between a member of production and a member of the slaughterhouses. Normally the first negotiation is unfruitful; then two simultaneous meetings of both groups are held- separately - to get a feel for things. This repeats over and again. If there is a disagreement, the "arbitration pair" (pre-established every three months, absolutely sovereign and empowered) comes out to negotiate.

If there is a disagreement, the "Technical Swine System" is called upon, which is a technical tool and a blind instrument in itself that consists of an algorithmic formula that works in a neural network (developed by mathematicians and physicists from the University of Barcelona) that takes into account- with varying degrees of consideration- a wide range of computable data:

• Price change in the same week of the previous year.
• Outcome of the German market for the day before.
• Outcome of the French market for the same day.
• Are we in a downward period? Bullish?
• Loss or gain in the average carcass weights.
• Etc, etc.

What the Technical Swine System does on its own every week is make a prediction about the market outcome. We should mention that it feeds back its own results; in case it seems that it tends to exacerbate and exaggerate the natural movements of the market.

If there are irreconcilable positions among the arbitration pair MLL calls on its "good -and wise- man" to mediate between the two protagonists. In the case of an insurmountable disagreement, two members of the MLL Board of Directors are called in (a representative from The town Hallt and another from the Catalonian Government) who, in light of the arguments of both parties, and with all the information available in their hands, decide on the final price for the week.

We should specify that MLL obtains a price that is not binding. It is a price for the current day. In the end, in practice, it becomes the reference price- with the actual price being managed by each slaughterhouse with each of its suppliers. It is a live, farm gate price per kilo.

In our opinion, it is important to highlight several facts:

• They try to work with data. Data and more data. Figures are neutral, they have no feelings, and they tell the truth. The instruments made available to those who decide are based on information. Truthful information.
• MLL as an institution has solid contacts with other European and global markets. Regular relationships have been established with other major markets and they exchange information because, as they say, knowledge is power.
• Over the years MLL has gained a well-earned professional prestige in our sector's sphere both in Europe and worldwide.

Currently, no one in the world is doubting the excellence of the Spanish pig sector: professionalism, accumulated growth, efficiency of livestock production and efficiency in slaughter and processing ..We have to say that the sector can be confident about the efficiency and professionalism of its reference market. At Mercolleida things are done well and- very importantly- there is no dissonant voice that dares to deny it.