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We have spent the month of May experiencing the aftermath of the major blackout that Spain suffered on Monday, April 28th. The economic damages for the Spanish swine industry have been numerous, very serious, and significant.
We know that all kinds of risks threaten the good management of companies. Depending on how likely these risks are to materialize, it is necessary to have contingency plans that can anticipate each situation.
In this case of the blackout, many companies in our industry did not have a plan B to implement in the event of a power outage. It was unimaginable that in the 21st century, such a widespread and serious power outage would occur in a developed country, but... it happened.
Since the causes triggering the power outage are still unknown to this day, it is not possible to assume (let alone claim - to do so would be reckless) that something similar won't happen again. Each individual case must be addressed carefully to try to minimize this specific risk.
On that day of darkness, it was hardly possible to work in the slaughterhouses (in some cases, there were macabre situations, with dozens of slaughtered and uneviscerated pigs, stuck on the chains, in the dark). On the farms, all the automated systems stopped working; in many cases, they had to resort to manual feeding. Suddenly and without warning... we were set back sixty years!
On Tuesday, May 20, news broke that integrator Inga Food (a former subsidiary of the Dutch company Nutreco) had been purchased by three very significant players in the sector in Spain: Incarlopsa, Costa Brava Mediterranean Foods, and Vall Companys. This was major news that reached all corners of the world. Inga Food has 85,000 sows in production. This transaction is a new milestone in the apparently unstoppable process of sector concentration. There are fewer and fewer operators, and they are getting bigger and bigger. We may or may not like this situation, but, as they say, it is what it is. This is undoubtedly the news of the month.
During the week of the blackout, Thursday was a holiday (Labor Day in Spain: May 1st). This, together with the fact that Easter was very recent, caused an accumulated delay in slaughtering, which led to an exaggerated increase in the average carcass weights. These disturbances are gradually being corrected and will be fully corrected, but the eventual increases before the summer have necessarily been delayed.
For one reason or another, average carcass weights in Spain are still at record levels for the month of May; the systematic weekly lack of pigs (due to the endemic excess of available slaughter capacity) means that the market context does not allow penalties for excess weight. High weights are attractive for the farmer (with inexpensive feed, he optimizes his production), but they penalize the slaughterhouse in its commercialization, as the pieces produced are too big. One day, the normal weight ranges will have to be recovered...
The Trump Administration has not yet made final decisions as to which tariffs it will apply and to which countries. It seems to be practicing a type of trial and error (with sharp shifts) with no conclusion. Right now, a 90-day moratorium is in effect between the U.S. and China. It is impossible, at this time, to foresee what its final position will be and, therefore, how international pork trade will be affected.
Within the EU, there are still significant price differences between the different states, although the extreme differences have been reduced. Denmark suddenly raised its carcass price by 20 cents per kilogram (which will be deducted from the end-of-year bonus). Germany surprised us with a sharp rise of 10 cents per kilogram carcass on Wednesday, the 21st. In Spain, the market rose in the wake of Germany's impulse ... but only by a symbolic half cent on the 22nd. Yesterday's result (+0.80 cents) can be interpreted as a fierce and titanic struggle: the slaughterhouse does not want and cannot lose more than it is, and the farmer wants to ensure now that it can.
In the Swine Industry, the European Union is more like an “Aggregation of Markets” than a Single Market. We think so. An economic analysis of pig farming in the European Union cannot be made as a whole: it is necessary to go down to the individual member states. Some states have increased their herds in recent years, while others have seen them decrease.
The barbecue season in Central Europe has been weaker than expected; there is not a kilogram of meat lacking for this seasonal consumption, and prices in general have not reacted upwards, nor will they - it seems (we will be lucky if they don't go down). In Italy, hams are trending downward. With pork stagnant, it is not easy for pig prices to go much higher. Exports to Asia are still active, but at normal rates (Japan has lost momentum in its purchases of bellies).
The slaughterhouse is still alarmingly in the red and could remain so until the end of the summer. These are not easy times for slaughtering and butchering pigs in Spain.
We will end this commentary with a phrase to remember from Mario Quintana, a famous and respected Brazilian writer: “The true illiterates are those who have learned to read and do not read”.
Guillem Burset
