Price Fluctuation, Protected Geographical Indications and Employment in the Spanish Small Ruminant Sector during the COVID-19 Crisis

1. Introduction

The human pandemic COVID-19 was first identified in China at the end of 2019. Caused by the severe acute respiratory syndrome coronavirus (SARS-CoV-2), its contagiousness and the presence of asymptomatic carriers of the virus [1,2,3] epidemiologically explain the rapid spread of the infection throughout the world [4,5], as well as the differences observed in comparison with previous epidemics that occurred in this century caused by two viruses of the same genus (SARS-CoV-1 and Middle East Respiratory Syndrome -MERS-). Although potentially less pathogenic than other agents [6], SARS-CoV-2 forced many countries to adopt population-wide control measures, causing a social and economic effect which has not been sufficiently quantified to date.

Closure of borders, population confinement and interruption of non-essential economic activities were initially adopted by many countries. Later, this period of total confinement of the population has given way to the post-confinement, although restrictions on people’s movement and many economic activities continue [7], which has led to concern regarding the detrimental economic effect on very diverse sectors [8,9].

In general, livestock activities were considered essential to guarantee the food supply for the population in confinement. Consequently, the activity of small ruminants flocks was not interrupted. Moreover, ruminants are not apparently affected by SARS-CoV-2, as previously reported for MERS [10], although goats and sheep could be able to harbor and spread the virus [11]. Even without a direct effect on health, preliminary data obtained from a limited number of Spanish farms during the confinement showed that this sector suffered a short-term economic impact that resulted in lower milk and meat prices paid to producers, considering that the year 2020 started with high prices for small ruminant milk and meat, following the trend of high prices registered during the last years. [12]. Variation in prices is considered to be a normal aspect of well-functioning markets, but price volatility becomes problematic when price movements are large and unpredictable [13]. In this sense, the unexpected disruption of restauration and tourism caused by COVID-19 could partially explain this effect on prices reported by farmers [12]. However, interestingly, results also showed unpredictable differences of price for the same product depending on the geographical area studied in Spain, a fact previously reported in the literature [14]. In this sense, preliminary data provided by the farmers when the crisis started suggested that the presence of a protected designation of origin (PDO) or a protected geographical indication (PGI), quality labels linked to a geographical origin promoted by the European Union (EU) [15], may play a protective role in price maintenance in comparison with non-protected ones [12]. The EU quality policy aims at protecting the names of specific products to promote their characteristics linked to their geographical origin as well as traditional know-how. Differences between both products (PGI and PDO) are linked primarily to how much of the product’s raw materials must come from the area or how much of the production process has to take place within the specific region. This recognition could help producers to better market their products [15,16]. In this sense, recent data suggested that PGI may be an efficient tool to protect lamb farmers from fluctuating prices, thus assuring the fulfillment of positive externalities [17]. Moreover, the role of agrarian markets around the country, which set weekly meat prices and are also used as reference for commercial transactions [18], could also be the reason for price differences. All these factors should be analyzed in depth.

COVID-19 has dramatically affected employment in Spain. The Labour Force Survey (LFS) showed a sharp decline in employment in the second quarter of 2020, with an inter-annual decrease of 6.1% (equivalent to 1,198,000 employed), following the 1.1% increase observed in the first quarter of the year. In quarterly terms of the seasonally adjusted series, employment is estimated to have fallen by 6.7%, after the 0.4% fall in the first quarter of the year. In addition, during the second quarter, a very high percentage of workers were affected by temporary short-time work compensation schemes (TSTWCS), or they were self-employed in a situation of inactivity. Overall, workers in this situation increased to 3.4 million workers, representing 18.3% of total employment [19].

The small ruminant sector contributes in Spain only a 0.2% of the country’s gross domestic product (GDP) (2.7 for the primary sector as a whole), far from sectors such as the automotive industry (9%) or tourism (12%), which are non-essential activities. Specific data about the employment dynamic are scarce for this sub-sector. However, the global data on agrarian activities showed a continuous problem of generational replacement, reflected by a decrease in livestock units from 2005 to 2017 (58%). Employment decreased by 17% in the period 2000–2017, although registering better data than from 2015 to 2017. This decline has mainly occurred in family work, with a decrease in the total number of family units involved in agricultural work of 36% in the period 2000–2017 (an annual average of around 2%), while employed workers have increased by 12.5% in the same period [20]. According to the LFS data for the primary sector, at the end of the second quarter of 2020m the number of employed persons was 763,400, with employment below the level reached in 2019 and also with respect to the average for the period 2015–2019. Compared to the previous quarter, employment fell by 21,400 people (2.7%) [19]. When an economic crisis occurs, prices and employment are often affected [20]. In the context described, we have taken into account this economic precept to study whether the arrival of COVID-19 and its effect on small ruminant activities had any impact on employment.

Despite the above data, there are no in-depth studies on how this social and health crisis is affecting specific sectors that are qualified as essential to economic activity and, hence, provide the opportunity for our research. This work analyses the evolution of prices during the COVID-19 pandemic on small ruminant milk and meat markets in Spain during the first half of 2020, based on national and local official sources. Three periods have been defined (pre-COVID-19, total confinement and post-confinement), and the seasonality in prices and the correspondence between the sources of information were described and analyzed. The influence of marketability linked to PGI on lamb price fluctuation was also analyzed in detail as a factor of interest in maintaining prices during the health crisis. Thus, the data of sales and prices provided by three selected PGI lamb meat marketers facilitated the study of the differences with their non-PGI reference counterpart when the products are sold under these quality labels in a context of crisis. Finally, the effect of COVID-19 on employment in small ruminant flocks was examined.

2. Materials and Methods

3. Results

4. Discussion

The analysis of official prices for the first 7 months of 2020 confirmed that the crisis caused by the coronavirus had a relevant economic impact on the small ruminant sector. These data also showed that the impact was not only limited to the confinement period, but also it was maintained during the post-confinement months in some sub-sectors. Indeed, prices in the post-confinement period showed that, while the effect was constant until July in dairy goat, meat market prices recovered rapidly to pre-coronavirus crisis levels for both ruminant species. Data collected also showed the seasonality of milk and meat prices [32]. In this line, although the pandemic reached Spain in a phase of seasonal decline in prices, the drop was greater in comparison with the previous year.

Variation in prices is considered to be a normal aspect of well-functioning markets [13]. In fact, not all price variations are problematic, and agricultural prices vary because production and consumption are changing [33]. In addition, other factors such as fuel price volatility or policy decisions may also lead to higher price fluctuations [13,33,34]. In economic theory, price volatility involves two principal components: variability and uncertainly, the former describing overall movement and the latter referring to movement that is unpredictable [35]. It is a way of measuring the variability of the price or quantity of a product over time [13]. The results obtained suggested that the extreme measures adopted to control the pandemic COVID-19 caused an unpredictable shock of consumption of some products that may have been transmit into price variability [33], although further in-depth economic analysis of all the possible factors associated should be conducted. These data highlight the need to develop measures and policy responses to help producers fight price volatility [13,33,34,36,37]. In this regard, the efficiency degree of the markets is also important in order to adopt stabilizing measures that can dissipate any shocks with no degree of persistency of volatility [17].

Milk price fluctuation analyses, using data provided by the Spanish Interprofessional Dairy Organisation [23], showed differences between both small ruminant species during 2020, and not only during the strict confinement period in March–April, as previously pointed out by some producers [12]. These differences persisted from May to July for dairy goats. In contrast, sheep milk price remained stable or even increased in 2020 vs. 2019. This negative effect on goat milk prices during confinement, attributed to inexistent consumption of livestock products linked to restauration and tourism, could not be enough to explain why the prices did not rise when economic activities returned. Interestingly, 2020 prices of this product showed that, although they fell by around 15 cts EUR per liter in April vs. February, they were still higher than the average price for the period 2015–2019, thus opening the door to a price adjustment in this sub-sector. In fact, the year 2020 began with the highest historical prices in the dairy goat sector.

Lamb and goat kid meat prices recovered in May–June after the period of strict confinement in Spain. In some cases, they even overpassed 2019 prices. These data seem to rule out the hypothesis of a permanent effect on the small ruminant meat sub-sector following the sharp fall in sales and activities in March–April 2020 [12]. This fast recovery could be supported to several factors: (1) the gradual increase in domestic consumption [38]; (2) the opening of new distribution channels such as “close contacts” or B2C models to sell and distribute products directly to the consumer, as well as the e-commerce boom triggered by COVID-19 [38,39,40]; and/or (3) the partial recovery of tourism, mainly domestic, during the post-confinement phase [41]. The analysis of meat prices provided by several agricultural markets also showed differences among them, even for the same product in nearby geographical areas. In this sense, differences among regions and products in the speed and degree of price movements in regional or local markets were previously reported, thus suggesting that both price levels and degrees of variability may differ from place to place [41]. In our case, the weekly price fluctuation seemed to also be important inside the same market, especially for some products such as the lighter lamb (10–12 kg LW). Differences linked to destination of these lambs (slaughterhouses vs. feedlots), or the quality of the lamb sold in certain areas (depending on the breed of origin) [42], may explain these variations. Price fluctuations tended to be minor for goat kids and heavier lambs. Heavier lambs can be sold at different weights, and commercial outlets linked to international markets can influence their versatility and price stability. On the other hand, goat kids are commonly produced and sold with similar age and weight all over the country.

The pre-COVID-19 period was exceptional for lamb prices, although they fell in March–April. This drop in prices occurred despite the coincidence of two religious festivals that usually cause an increase in demand (Easter and the beginning of Ramadan). In this context, results suggested that selling lamb meat products under the protection of a PGI had a beneficial effect on maintaining prices and sales during the period of crisis studied. This finding is in line with the much weaker price volatility recently reported for the lamb Cordero de Navarra in the PGI vs. non-PGI system for the period 2011 to 2018 [17]. Furthermore, these data are in agreement with previous results showing that the PGI product is better able to stand up to consumer confidence crises [43]. In this sense, a designation of origin (DO) linked to milk or cheese had a positive influence on prices paid to producers, as reported in Manchego sheep flocks [12]. Conversely, this protective effect during a health crisis has been scarcely studied for meat products. Regardless of the geographical area and particularities of each PGI, the lamb meat sold under the protection of a PGI pointed to better prices for all the periods studied and cushioned its fall during the total confinement. In addition, sales suggested better relative results during the total confinement for PGI lambs, where sale reductions were 3% compared to 33% for non-PGI lambs. This positive effect was probably due to the strong promotional campaigns undertaken by the three Regulatory Councils, focused on both direct and local sales (Extremadura and Segureño lambs) and traditional shops and supermarkets (Ternasco de Aragón and Extremadura lambs), or even the consumer trust in the added value of these products [16,19,43]. This fact is valuable because promoting PGI lamb could protect the farmer from fluctuating prices [19]. Therefore, competitive advantages of each PGI linked to the greater consumer knowledge should be considered by producers when developing and managing their flocks with one or another breed, as a form to obtain added-value products [17,29,44,45]. Despite this, in terms of the number of lambs sacrificed in 2018 in Spain, PGI vs. non-PGI lamb accounted for 7.3% [26,46]. Regarding this, some authors suggested that the public information available describing the characteristics of geographical indication products is still scarce [37].

On the other hand, this research suggests that the readjustment of the workforce in sheep and goat farms was minimal or non-existent, despite the negative economic effect observed for the first months of the pandemic. A similar situation was observed following the financial crisis that began at the end of 2007, in the sense that the employment trend in the primary sector in those years was not influenced by the negative effects of that crisis [14]. Specific employment data for the small ruminant sector are scarce in the literature, although it is well-known that agrarian activities suffer from a persistent problem of generational replacement [20]. Despite this, it is remarkable that while employment linked to other sectors (e.g., tourism and the automotive industry) or even other areas of the primary sector was affected by the crisis, layoffs in the small ruminant sector were minimal according to the data analyzed. This fact should be considered in order to promote employment in this sector, where it is sometimes considerably complex to find qualified workers. In this respect, according to the primary sector data from Spanish LFS [19], it should be mentioned that agriculture and livestock employed 763,400 people at the end of the second quarter of 2020, having decreased by 21,400 people (2.7%) compared to the first quarter of this year and by 44,000 (5.9%) compared to 2019.

5. Conclusions

Official data showed a negative effect of the pandemic on the goat milk market, where there was no sign of recovery, while the meat market recovered rapidly after the end of strict confinement. Moreover, current results also suggested that the production of lamb meat under the protection of a PGI had a positive effect on maintaining prices and sales. The impact of the crisis on employment on farms was non-significant, despite the negative effects reported.

Author Contributions

Conceptualization, C.d.l.F., J.O. and B.B.; methodology, C.d.l.F.; B.B.; J.M.G. and J.O.; software, J.O.; J.M.G.; validation, I.V.; J.O.; J.M.G.; Á.G.-M. and C.d.l.F.; formal analysis, I.V.; J.O.; J.M.G. and C.d.l.F. investigation, I.V.; J.O.; Á.G.-M.; C.d.l.F.; J.M.G. and B.B.; resources, I.V.; Á.G.-M.; C.d.l.F. and B.B.; data curation, J.O.; C.d.l.F.; J.M.G. and B.B.; writing—original draft preparation, I.V.; J.O.; C.d.l.F.; J.M.G.; and B.B.; visualization, C.d.l.F.; J.O. and B.B.; supervision, B.B. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Conflicts of Interest

The authors declare no conflict of interest.