BAS LES MASQUES ! Autumn has its way

A month ago, we noted that August was highly unusual, with sharp (and exceptional) increases in pig prices as a result of the extreme heat across the continent. That exceptional heat delayed the price drops that typically occur at the end of summer. It was a brief respite in what was, by any measure, a rather negative situation.

In the first two weeks of September, the Spanish market price still managed to edge up by a few tenths of a euro cent. The German whiplash on Wednesday, September 16 (a drop of 15 cents/kg for carcass weight in one fell swoop!) triggered price declines in our immediate region. In fact, on that day, the German price—converted to live weight—stood at around 1.11 euros/kg live weight, well below the Spanish price in effect at the time (1.365 euros/kg live weight). Such an extreme difference (more than 25 cents at the time) was unsustainable within a market that calls itself a single market: the EU.

The price declines in the last few market sessions in September follow a logical pattern: as temperatures moderate, pigs grow quickly, and those that were behind catch up. However, the reality is much more complex: average carcass weights in Spain are not increasing as one might expect at this time, and the price declines are a logical reaction to the collapse in the German market.

In any case, the market’s future trajectory seems clear: Spanish prices will fall through Christmas, with the pace of the decline varying depending on slaughter. The trend in Germany has dragged down pork prices; this fact is eroding and eating away at slaughterhouses’ profit margins; if there is no profit margin in slaughtering and cutting… then slaughter volumes will drop to a minimum until prices become attractive.

The “exceptional period” that August has represented will likely help avert the sharp price drops that were predicted for late December. It remains to be seen where the lowest price will be in the second half of the year, but we believe the decline will halt well before reaching 1.00 euro/kg live weight, as we saw in February of this year.

The international situation remains sluggish and gloomy. The three leading exporters (the U.S., Canada, and Brazil) continue to offer prices that are either lower than Spain’s (the U.S.) or have completely collapsed (Canada and Brazil). The Chinese market remains flat (with consecutive declines in August and early September) and is not going to bring us any good news.

Spain's sanitary situation appears to be gradually improving, although new cases of African swine fever (ASF) continue to trickle in in Catalonia (so far, all in wild boars). We view it as a very positive sign that in recent weeks all detected cases have been in decomposing carcasses; there have been no new cases in live wild boars… It will take time and patience to return to the normalcy that existed before the disease emerged.

As we have noted in previous comments, we believe that several things need to happen before the market regains its composure:

• The European herd must be reduced. All signs point to this happening, and the timelines are already being met. Among EU member states, the reduction will vary by region. The range of prices between countries is very wide: Danish prices are at rock bottom, while France remains at the top.
• Growing global competition (led by Russia and, above all, Brazil) will force Spanish operators to sell more in the EU and other European countries at the expense of Asian markets. We consider this an indisputable fact.
• Increasing EU legislative restrictions will inevitably undermine the competitiveness of pig production within the EU: the reductions on the horizon will be irreversible.

Now is the time to hedge our bets. The year 2026 will be remembered as the year of the Great Crisis. Unfortunately, the outbreak of ASF in Spain has coincided with a global surplus of pork. There isn’t much that can be done: this storm will pass, and we’ll be able to look back on it.

The future has yet to be written, and as far as we know, no one has a crystal ball that would allow us to predict it. We can, however, speculate about what lies ahead:

• Fewer and larger operators (this is already happening).
• Vertical integration in most major companies.
• Extreme professionalization at every link in the chain.
• An increasingly interconnected global market.
• The continued existence of artisanal businesses (small or, at most, medium-sized) that are well-established in their local markets.
• The strong and growing presence in global trade of new grain-producing countries, with Brazil and Russia as prime examples.

Not so long ago, Spain experienced a resounding success in pig farming, going from slaughtering just 29,000,000 pigs in 1989 to exceeding 58,000,000 head in 2021. Now we must fight tooth and nail to defend what we have achieved (at least a large part of it) in a highly competitive global environment that is hostile to our interests.

At this moment, there can be no other motto than to stand firm at all costs.

We’ll end today with a quote from Andrew Zolly and Ann Marie Healy: “Resilience is the capacity of a system, company, or person to maintain its core purpose and integrity in the face of radically changed circumstances.”

Guillem Burset

Note: While the text of our article was being prepared, we received news of a positive ASF test result in a live wild boar that was killed in a traffic accident. We believe it is appropriate to mention this, as it contradicts the statement that the most recent recorded cases were found only in decomposing wild boar carcasses.