Entering the latter part of 10 month, the domestic hog market has recently faced a mixed picture. The official third-quarter data on sow inventories showed that the national inventory of breeding sows fell 10.7% year on year to 3602 ten thousand head, already below the officially announced control line. However, sow inventories affect the supply of market hogs 10 months later. Confidence in the outlook for hog prices next year has recovered, but the hog market remains in a phase of fundamental supply-demand oversupply, and the market lacks confidence in the outlook for fourth-quarter hog prices. Prices have plunged sharply. With hog prices continuing to fall, will they drop below the “previous low” at the end of 10 month? Here is a detailed analysis:
According to the latest news, as of 10 month 22, the national average price for finished pigs of the lean-type ternary breed at farm gate was 9.61 yuan/kg. Pig prices fell by 0.12 yuan, with the decline widening significantly. Markets across the north and south were “all in the red,” and prices were down by more than 16.7% year on year. Hog-farming losses deepened, and the market showed a “super-rational” downward trend!
In particular, across the 28 key regions monitored in northern and southern China, the market is showing a broad-based decline. The average live hog price is close to 9.6 yuan per kilogram in Heilongjiang and Hainan. Live hog prices in the north and south range from 8.75 to 11.1 yuan per kilogram, with Xinjiang recording the lowest price and Guangdong the highest! In traditional production and sales markets, live hog prices in the Northeast have now fallen back to 9.35 to 9.6 yuan per kilogram. In southern markets, prices in Sichuan and Chongqing have fallen to 9.25 to 9.3 yuan; prices in Shandong and Anhui are 9.8 to 9.85 yuan; and prices in Jiangsu and Zhejiang have fallen to 9.9 to 10 yuan per kilogram……
At present, hog prices in markets across northern and southern China have generally fallen below 10 yuan per kilogram. In some regions, the average price for live hogs shipped for slaughter has fallen back to around 9 yuan per kilogram. The market is showing a broad-based decline. The analysis of the factors supporting the fall in hog prices is as follows:
It is reported that although the national sow inventory gradually declined last year, falling to 3961 ten thousand head at year-end, theoretically, hog slaughter volumes should gradually decrease during this year's “Golden September and Silver October.” However, actual feedback shows that in 9 month, hog slaughter plans increased slightly. The sample pig companies' plan completion rate was 99.01%. Under pressure from lagging capacity adjustments, the overlapping supply situation became more pronounced in 10 month! This month, the slaughter plan for the 173 large-scale pig companies was 1508.18 ten thousand head, up 1.91% month on month. The hog market's “hidden capacity” remains in a phase of concentrated release. In particular, sow inventories have declined, but production efficiency has improved, further intensifying the pressure of oversupply!
Furthermore, as temperatures fall in northern and southern regions, the pace of fattening hogs and adding weight has recovered, and average slaughter weight continues to rise, further strengthening market supply capacity!
However, unlike the high level of supply being released, marginal demand support remains weak! After the National Day holiday, consumption followed its usual downward trend. Although cooler weather is favorable for household demand, widespread substitution in the market, along with low prices for poultry, aquatic products, and eggs, has dampened residents' enthusiasm for pork. Slaughterhouse orders have seen no increase, operating rates remain low, and their capacity to take in market hogs appears somewhat insufficient!
As a result, amid changes in supply and demand, the market has recently followed a downward trend. At present, bearish and stable-market sentiment in the live hog market is strong. In theory, over the next 1-3 days, hog prices may continue to seek a bottom, potentially falling below 9.5 yuan/kg! However, in my view, hog prices are unlikely to fall below the "previous low"; there is a chance they will reach 8.63 yuan/kg in mid-4, with the market still supported by a floor! Going forward, watch for changes in hog shipments by large-scale producers and in sentiment around secondary fattening, especially as the weather cools and seasonal demand changes!