According to Pig333.com, the pork market session at the Lleida pork exchange marked 13 consecutive sessions in which the reference price for pigs in Spain has fallen. From the luxurious 2.025 euros that remained unchanged for four months to the current price: 1.68 euros/kg live. Along the way, Spain's price has dropped again, this time by almost 20%.

An accumulation of circumstances

The Spanish price is falling because it is burdened by a combination of circumstances that were hardly predictable just three months ago:

• Third-country markets are inaccessible for Spanish pork; American competition (Canada, the US, and Brazil) has unbeatable prices and excludes us from all Asian destinations.
• While slaughterhouses have regained some margin, the four-month period of unimaginable losses has forced them to reflect, limiting their willingness to work more.
• As in every year, the supply of pigs for slaughter increases in the fall due to improved environmental conditions favoring growth.
• In a bear market (this is the current situation throughout the European Union), no operator wants to freeze, as pork prices will drop later. Only what can be sold fresh is being slaughtered - nothing more or practically nothing more.
• Prices for organs and products that are raw materials for gelatin have shockingly collapsed; this is another factor of uncertainty.

For months, Spain has had less supply due to PRRS (cumulative slaughters down 8% until this year); slaughterhouses have had to adapt their capacity to lower supply and it is not easy for them to suddenly increase it.

All EU countries are suffering from the same phenomenon: pig slaughter prices are constantly decreasing.

The dramatic reduction in slaughter in Central Europe (up to 14% in some cases this year, compared to last year already weak) leaves gaps for Spanish pork: Asian destinations are replaced by EU destinations.

Undoubtedly, we are witnessing an irreversible evolutionary change: Spanish exports to third countries are decreasing, and exports to EU destinations are increasing. We believe it will be challenging for us to return to exporting more than half of our foreign pork shipments to countries outside the rest of the world.

Within the EU borders, the balance between demand and supply of pork is quite uniform; so much so that pork prices remain constant, while pig prices are clearly decreasing. The truth is that such a situation is unprecedented: pork carcass prices have dropped on average by 40 cents in almost all representative European countries, and pork, at most, has only dropped by ten cents for certain cuts. The low slaughter level is offset by fixed extra-EU exports (almost nil).

Near the bottom threshold

We believe we are not far from the bottom in terms of pig prices. It could very well happen that the price stabilizes around 1.60 euros/kg live. In any case, whatever happens, 2023 will be a good year for Spanish farmers.

Not for slaughterhouses, because the four months with a sky-high price have been a burden that cannot be lifted in the remaining weeks.

The slaughterhouse from now until the end of the year should be very significant because the pigs are there, and, in the end, it should be best for the slaughterhouse to process as many kilograms as possible.

The stone guest from the entire pork processing chain is the sausage producer. Extraordinary pork prices have not been able to be reflected in processed products, and this situation has existed and persisted for months and months.

European legislation in the industry

Over the years, the EU has legislated and regulated the industry. Step by step and regulation by regulation, a legal framework has been woven that restricts the competitiveness of the European pig industry globally.

Environmental protection laws, all animal welfare legislation (important and certainly necessary, but in many cases exclusive only to Europe) create additional costs that limit our competitiveness in a globalized world. This is a fact.

We believe that in the medium and long term, the EU will have a self-sufficiency rate of 100% or a little more. The center of gravity of European pig production is moving, irreversibly, to the South.

The EU has practiced a very protectionist policy on pig issues. The obstacles and difficulties in the way of free imports of pork from outside the EU have made it impossible for cheap American pork (from Brazil, the US, or Canada) to enter on a massive scale.

In response to the requirements and pressures of the World Trade Organization, the EU was forced a few years ago to grant some individual countries some duty-free pork quotas (from Canada, Chile, etc.). Their impact on the market as a whole is quite insignificant, as demonstrated this year.

We are where we are. The reorganization of European pig production continues. And the landscape and scenarios are constantly changing. Spain, in its role as a European leader, seems called to increase its specific weight within the European Union pig industry at the expense of Germany, the former leader.