September 18, 2010

 

Spain's pork breeders see difficult times amid grain rally

 

 

Spanish pig farmers are hurt by rising grain costs and falling pork prices, but expect demand will eventually recover in step with the economy.

 

Alberto Herranz, manager of producers' association Ancoporc, estimated herd numbers had already fallen by about 5% for the year to date due to weak demand and lack of credit.

 

He said it was impossible to predict trends for grain prices, but any further increases would hurt livestock producers.

 

"It's a very simple calculation. Profitability would be curtailed somewhat," Herranz said. "From now on, a possible increase in production costs may make many more firms close their doors, so we could see a steeper fall in herds."

 

Animal feed accounts for 60-70% of production costs for pork in Spain, where prices for mostly imported feed wheat <GRAES01> have risen by 33% since July as supply has tightened due to an export ban in drought-hit Russia.

 

Wholesale pork prices on the Mercolleida agricultural exchange have meanwhile fallen by 2.6% from a year ago to EUR1.14 (US$1.49) a kilogram. Pigs consume 9.5 million tonnes of the 21.6 million tonnes of feed produced in Spain each year.

 

Ancoporc estimates Spanish pork producers turn over EUR4 billion (US$5.22 billion) a year and account for 14.8% of EU output, making it the bloc's second biggest producer after Germany.

 

Spain's pig breeders entered crisis in 2008 when soaring grain costs ended several years of swift expansion. Herd numbers fell from 26 million in 2008 to 25.3 million last year.

 

Herranz said many producers had sought to fend off the credit crunch by seeking financing offered by government credit institution ICO for small businesses, and were focussing on cheaper products for consumers.

 

In Spain, pork products range from fresh meat costing about EUR5.50 (US$7.18) a kilo, to acorn-fed cured ham priced at up to EUR130 (US$170) a kilo.

 

Although demand is still weak, Ancoporc expects consumption in Spain in 2010 to hold steady over 2009 figures of 11.3 kg per head for fresh pork, and 12.2 kg for processed meat.

 

Exports were showing signs of recovery with an increase of some 4-6% in the past four to five months. Herranz hoped demand would revive amid a slow recovery in the Spanish economy, which emerged from a deep recession earlier this year.

 

"The population can leave behind a crisis mentality and boost consumer confidence," he said. "We're running a marathon. We have always said that this is about to end, although we have yet to see the finishing line."