Today’s hog market was quite a ride.
First, futures—the anxiety is making my heart jump into my throat.
Yesterday it fell sharply, dropping from 5 digits to 4 digits. I’m really worried it will hit a new low again today.
But Amitabha Buddha, by the afternoon it had finally been pulled back up to the 5-digit range.
But what a thrilling process that was.
That was close.
But the spot market isn’t doing well; it’s still falling. Although the decline isn’t large, even a one-cent drop feels awful right now.
Before we’ve even recovered from those two things, two more things have happened.
The first thing is the frozen pork from the central reserve rotation, which has been put up for sale 4 times and still hasn’t sold out.
On the 9th day of the 15th month, 15500 tons of frozen pork from the central government reserve were offered for sale for the first time, but not all of it sold. It was offered again for a second and third time, right up until the fourth trading session on the 10th day of the 12th month, and there were still 1200 tons that nobody wanted.
What does this mean?
Even channels that specialize in taking frozen meat are unwilling to step in at this point.
Whether buying or selling, the chill coming through is the same. The market is once again focused on tomorrow’s 1.38 ten thousand tons of reserve purchases, but the impact may be negligible.
The second issue is that the market was not convinced once the production capacity data came out.
On 10 month 20 day, the hog production capacity data for the end of the third quarter finally came out after much anticipation.
As of the end of 9 month, the national population of breeding sows stood at 3602 ten thousand head, down 433 ten thousand head year on year, a decrease of 10.7%, officially falling below the regulatory red line of 3750 ten thousand head.
What does 3602 ten thousand head mean?
Below the normal holding level, equivalent to 96% of the normal holding level, and in the green zone.
Even lower than the forecasts from various institutions previously.
Previously, institutions forecast 3610 to 3670 ten thousand head, but the official figure was 3602 ten thousand head, 13 ten thousand head below even the most pessimistic forecast.
You would think this was very good news, but when it came out, the market did not react.
I initially thought it just hadn't registered, but today the pig price still fell as usual.
Why isn't the market buying it?
First, the timing doesn’t line up.
A decline in the number of sows takes about 10 months to translate into fewer pigs being sent to slaughter. The current reduction in production capacity will truly affect supply only after the second quarter of 2027.
It has nothing whatsoever to do with the current market, so a distant solution cannot address an immediate need.
Second, they do not believe it.
Why do you say you don't believe it?
Hog production capacity data keeps declining, but what about hog prices?
It didn’t rise. Not only did it not rise, it actually fell back into the 4-yuan range.
This is a bit like the story of the boy who cried wolf: it’s been said too many times, and the market no longer believes it.
On the other hand, PSY has also improved too quickly.
As efficiency improves, the number of sows decreases, but meat production does not.
In the first three quarters, the number of pigs sold for slaughter still increased by 1.4%, and pork production increased by 3.2%.
So this time, the market was not buying it.
On top of that, the average slaughter weight remains elevated at 124 to 128 kilograms, while frozen meat storage capacity utilization is around 32%, more than ten percentage points higher than the same period last year. As soon as spot prices rise even slightly, frozen meat is immediately released from storage, putting downward pressure on the market.
So how could prices possibly rise!
But the most frightening period has probably passed, and the most extreme lows in pork prices have probably passed.
Today, futures fell below ten thousand before rebounding, deferred-month contracts collectively turned positive, and stocks led the rally for two consecutive days. These all indicate that some capital has begun positioning at low levels.
But getting through the extreme lows doesn’t mean an immediate reversal; there’s still a long period of bottoming out ahead.
So, as I said, hog prices may get a breather this winter, but they won’t turn around.
Capacity is genuinely being phased out, but not for the current market.
Yesterday, the Dalian Commodity Exchange even issued a special risk warning letter, reminding everyone to trade rationally.
At times like this, it’s better to be a beat late than to try to catch this falling knife.