Today's live pig market has left people stunned again, hitting a new low.
Yesterday, futures just returned to the 5-digit range, but today they fell back again, returning to the 4-digit range, even lower than last time. They fell by 215, a decrease of 2.13%.
Good grief, I can hardly bear to look.
The spot market isn't any better.
The decline in spot prices was relatively smaller, but the average price also fell to 4.77 yuan per jin, setting a new low for nearly 4 months.
How should I put it?
Despite the major boost from the announced capacity data, it still couldn’t lift pig prices—instead, they fell even more sharply.
In the short term, it really hurts, but in the long term, perhaps it may actually be a good thing.
Why?
Only after a sharp drop might a turning point in the live hog market truly arrive.
First, the market isn’t buying it.
Capacity has fallen to 3602 ten thousand head, so why isn’t the market buying it?
The main issue is that the story of capacity reduction is no longer convincing.
We’ve been talking about reducing capacity for a while, but looking at hog prices, there’s no sign of capacity being reduced.
Some might say that’s because it takes 10 months for capacity reduction to show up. In theory, yes, but in practice it doesn’t take that long.
Why?
Because the spot market can't respond, but the futures market can. Futures are, by nature, expectations about the forward market. But what are futures like?
A new low.
Can only explain it; none are recognized.
Not recognizing it doesn’t mean the data is fake. It may simply be inflated; on the other hand, the effect may have increased, and the two offset each other, so it’s hard to say.
Second, market sentiment is pessimistic.
Spot futures have hit a new low, and piglet prices have also hit a new low. What does this indicate?
This indicates that market sentiment is very pessimistic and no one is willing to take a gamble, but often this is also when the hog market begins to turn around.
What does the market fear most?
What’s most worrying is that when the data looks good, people get carried away and rush in all at once to buy the dip.
Think back—was it just like this before?
As soon as the data showed the slightest hint of a turning point, everyone rushed to restock, hold back animals from sale, and put them through a second round of fattening. The result? Prices fell even harder afterward. The reason is simple: capacity that should have been phased out was kept alive by this wave of optimism.
What about this time?
The data look so good, yet futures keep falling and spot prices keep falling. This shows that the market is remarkably calm: no one has been carried away by a single data release, and no one is rushing in to buy the dip.
Behind this calm are actually two mindsets:
First, people may genuinely have been hurt by the downturn and remain pessimistic about the hog market, no longer reacting to every rumor.
Second, after more than a year of losses, no one dares to easily believe the story that things will “turn around immediately” anymore.
It looks very pessimistic, but at the bottom of the cycle, pessimism is precisely a prerequisite for a reversal. Only when no one dares to expand and everyone diligently reduces capacity can supply and demand truly rebalance.
This is actually the most basic cyclical pattern: capacity is always driven by losses, not by slogans.
The industry is currently losing more than 200 yuan per head on a farrow-to-finish basis, and losses have continued for 14 months, setting a new record for the longest period on record.
Piglet prices have fallen to 100 yuan per head, declining for more than ten consecutive weeks. Many companies are facing tight cash flow and high debt. Even leading large-scale producers are proactively shutting down inefficient pig farms, reducing sow numbers, and slowing expansion.
As long as hog prices remain below the cost line, producers with high costs, limited funds, and low efficiency will find it increasingly difficult to hold on and will be forced to exit.
But if, at this point, capacity declines and they immediately stop reducing inventory and replenish their stock, the shortfall will soon be filled again, making a genuine reversal seem a long way off once more.
So the sharp decline, the current calm, and the fact that “good news isn’t driving prices up” are actually good things. At its core, this is accomplishing the most painful but also most necessary task—firmly squeezing out excess production capacity.
Only when production capacity is brought into line and supply genuinely contracts next year will a reversal in pig prices have a solid foundation and be sustainable, rather than being another flash in the pan.