Spanish pig sector struggles to remain profitable
Production costs have squeezed the margins in the Spanish pork industry. Although the country is now the largest pig producer and exporter in the EU, with a 5% increase in the national pig herd, increased production costs, mainly in feed, electricity, and labor is impacting the sector. From January-November 2021, total Spanish pork shipments rose 5% compared to the same period of 2020, due to growth to the EU and to China, Spain’s major pork destination, particularly during the first semester of 2021. However, for the second half of the year, China's demand for Spanish pig meat has dropped by 43%.
Data presented by Mercedes Vega, Genesus General Director for Spain, Italy are Portugal, reflects a slowdown in shipments to some important markets.
A forecast for 2022 is not easy to make, warns Mrs. Vega. "2022 started with 1.02 €/kg, and risen to 1.035 €/kg, compared to 2021 when we started with 1.1€/kg and got to 1.42€/kg in the last week of January. We see a considerably lower price for this year. Cost of production as of December 2021 at €1.32/kg compared to €1.15/kg in 2020 – significantly higher for 2021.
Covid Pandemic still impacts both production costs and demand, while regarding supply/demand, at the beginning of the year there is more supply than demand. The slaughterhouses in the north of Spain have absorbed this greater supply more than those in the south. Oversupply is being frozen as packers expect to negotiate a better price for export," Mercedes Vega said in a recent market report.
China remains the big unknown in the international market and even if other Asian markets for Spanish pork developed well in 2021, it did not offset the losses from decreased Chinese demand since July 2021.
Spain has started this year with a pig herd of 33 milion head (+5%), while the sow herd grew 1%, to 2.635 million sows, according to Eurostat data. In this context, it is vital for Spain to increase its presence in the international market, as the EU single market is confronted with oversupply resulted from Germany and Italy, countries impacted by the African Swine Fever in the last year and a half.
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