The live pig market has fallen into a “cold winter.” Although seasonal demand is nominally in its peak season, consumption this month has cooled markedly. After the Mid-Autumn Festival and National Day holidays, seasonal demand came under brief pressure, and the pace of people’s movement in the market slowed. Demand from urban catering and group meals cooled. In the domestic market, falling temperatures should benefit meat demand, but egg prices have dropped sharply, poultry prices are weak, and supplies of beef and mutton are ample. Substitution in consumption is widespread, further restricting sales of fresh pork carcasses!
With consumption sluggish, downstream market traders are mainly reducing volumes to stabilize prices, and slaughterhouses are mostly maintaining a production-to-order approach. So far, the operating rate at surveyed slaughterhouses is around 30.41%, with marginal demand at a low level. In addition, it is difficult for fresh pork carcass prices to rise. The current average price of the first three grades of fresh pork carcasses in China is 13.09 yuan/kg. Compared with the average price of standard pigs, the spread is only 3.69 yuan/kg, deepening slaughterhouse losses! According to data monitored by Mysteel, slaughterhouse losses this week were 13.4 yuan per head, up 5.6 yuan per head from the previous week. Major slaughterhouses have a strong inclination to use the opportunity to push prices down.
In particular, frozen pork inventories this week stood at 31.77%, down 0.1 percentage points from the previous week. Increased shipments of frozen pork further dampened the market share of fresh sales, exacerbating weak demand!
Meanwhile, on the domestic supply side, it is well known that the number of sows in stock at the production stage affects the number of market hogs marketed 10 months later. Based on the previous sow inventory of 3961 ten thousand head, an increase of 4 ten thousand head month over month, and sow production efficiency generally reaching 25~30 head, the substantial improvement in efficiency is strengthening market hog supply this month! In addition, some pig enterprises fell short of their marketing plans last month, and some production was consequently deferred, further increasing the actual marketing plan for 10 month! According to monitoring data from Zhuo Chuang, marketing by large-scale pig enterprises increased 2.45% month over month this month.
In addition, with the weather turning cooler recently in northern and southern regions, pigs are gaining weight faster during fattening. As of this week, the average weight of hogs marketed rose to 124.49 kilograms, an increase of 0.16 kilograms from last week. This week, the average slaughter weight per head at slaughterhouses increased by 0.15 kilograms to 93.93 kilograms, further strengthening pork supply!
As for bargain hunting, supply prospects remain ample, seasonal peak demand has failed to materialize, pig fattening has been unprofitable for a long time, and major players in secondary fattening are short of funds. There is little confidence in entering the market to replenish stocks with standard-weight pigs, while leading pig companies in both northern and southern markets are still actively selling to recover funds. The imbalance of strong supply and weak demand is becoming increasingly evident!
Citing institutional monitoring and analysis, as of 10 month 24, the national quoted price for standard-weight pigs of the Duroc-Landrace-Yorkshire crossbreed fell to 9.4 yuan/kg, down 0.1 yuan/kg from yesterday. Pig prices continue to seek a bottom, down more than 20% year on year! Compared with the peak of 11.09 yuan/kg at the beginning of 9 month, during the traditional “Golden September and Silver October,” the live pig market has shown a “strong start and weak finish.” Statistics show that pig prices have fallen by more than 15%, hitting a new low since the start of the second half of the year!
By region, among the 7 production areas and 28 provinces and municipalities in northern and southern China currently covered by data monitoring, hog quotations generally declined. The average price was in line with the level in Jiangxi. Quotations in Guizhou and Xinjiang fell below 9 yuan/kg, with Xinjiang hitting a low of 8.5 yuan/kg. Quotations in Fujian and Guangdong fell to 10.7 yuan and 10.9 yuan/kg, respectively. Hog quotations across the north and south generally fell into the “9-yuan era,” and market fundamentals were bearish!
Personally, as the supply-demand fundamentals are difficult to reverse, producers are still highly motivated to ship hogs at month-end, while marginal demand lacks support. Over the next 1-2 days, hog prices are expected to continue sliding, and the average live-hog price may fall further. However, personally, I believe the “floor” for this price decline may hover around 9~9.2 yuan per jin. The average live-hog price may have no basis for falling below 9 yuan per kilogram. Going forward, watch for changes in marginal demand and in producers’ shipping pace!