Genesus Global Market Report: Spanish Market

by 5m Editor
6 May 2011, at 5:04pm

SPAIN - Spain has had relatively steady prices during the last eight weeks in the order of €1.26 per kilo (US$0.84 per lb) liveweight, writes Javier Santamartina, Genesus Spain, Portugal and Italy.

Unfortunately for the producers, this is not the real price that they are getting from their buyers. While in other EU countries the official price is stimulated with a premium in the range of €0.03 to 0.06 per kg in Spain is punished with a 'penalty' discount of -€0.06 per kg ($0.04 per lb) on average, so the actual price now would be €1.20 per kg ($0.80 per lb) liveweight.

The current cost of production for a 105-kg hog with a feed conversion of 2.65 is €1.20 per kg ($0.80 per lb). Price of corn is €244 per ton ($361.0 per ton. This means that for these figures the producers are getting just their break-even. Also it is very hard for the producers to obtain financial help from banks because of the regular increasing on feed costs.

It is important to know that, from a market perspective, the current pork price is not too bad. It normally gets some increase soon when warmer weather comes because of shortage of pigs and the seasonal increasing of demand. News released by the government indicated that the tourism industry is going to be blessed this summer because of more people will pick Spain as vacation destination. This factor normally impacts positively the price of pork. The industry expects to reach prices around €1.40 per kg ($0.94 per lb liveweight). Political situation and instability in North Africa are among the reasons for European people to decide in Spain for expending their holiday's summer.

Another additional issue is the packing industry is facing small margins at this point of the year. They expect to get even bigger losses by the summer. The last year for instances, a large packing company collapsed in the middle of the summer season, causing a tremendous repercussion in hog prices. There are other global situations affecting the market collaterally like the recent natural disasters in Japan, the political situation in various African countries, etc. To be honest, nobody is optimistic about a quick recovery in the short term. On the contrary, everybody is talking about a very hard year ahead. The European Community is a traditional importer of oil and grains. Most of its industries are highly depending of these foreign resources. Spain's livestock producers are waiting anxiously the lift of the Russia and Ukraine ban for exporting grains until July.

Spain's swine inventory does not show strong signs of declining. The breeding herd numbers are virtually steady over the last two years. On the other hand higher productivity and heavier carcasses hitting the market are part of the equation as well.

The EU has a reduction of only 0.5 per cent sows from 2009 to 2010. Sow population is still around 14 million.

Sow numbers in selected EU countries
Population 2009
2,307 2,498 1,370 1,184 1,345 1,120 743 11,450 14,086
Population 2010
2,243 2,582 1,393 1,159 1,323 1,070 728 11,364 14,012
2010 vs 2009 (% -2.8 3.4 1.7 -2.1 -1.6 -4.5 -1.9 -0.7 -0.5
Source : Eurostat, prévisions de production

At the end the second semester of the year, the results will depend of feed prices. The market price for hogs is going to be strong. The question is strong enough to allow producers to buy feed at higher prices? There are still too many doubts and uncertainty for the swine producers looking at their future.