As 10 approaches, changes on the supply side of China's hog market are currently centered on the continued capacity reduction from earlier periods. Last year, the breeding sow inventory fell from 4074 ten thousand head to 3961 ten thousand head. In theory, hog supply should be trending downward at this stage. However, actual feedback shows that the supply of commercial hogs in China has increased month on month. According to an institution's survey, large-scale pig farming companies planned to ship 1494.77 ten thousand head in 9 and 1508.18 ten thousand head in 10. Actual hog supply has “risen rather than fallen”!
Factors supporting a less-than-expected decline in supply include, on the one hand, the high base of the sow herd in the previous period and improved production efficiency, which increased the number of piglets supplied per sow. On the other hand, demand support was insufficient at the margin in 9 month, and the monthly shipment plans of large-scale pig farming companies fell short of expectations. In addition, pigs placed in secondary fattening earlier in the period added considerable shipment pressure this month. As the weather gradually cools, pig fattening is accelerating further, increasing the supply of market-ready pigs at suitable weights. With these factors at play, pig supply this month showed a pattern of “increasing rather than decreasing”!
Meanwhile, in the consumer market, slaughterhouses stocked up in bulk ahead of the traditional Mid-Autumn Festival and National Day holidays. The operating rate of sampled slaughterhouses rose to 34.03%, increasing by nearly 3 percentage points during the month. Demand support gradually improved at the margin, but the increase in demand fell short of expectations! In 10 month, the festive atmosphere faded, downstream trading in white strips gradually quieted, slaughterhouse orders shrank, and operating rates continued to decline. Recently, the operating rate of sampled slaughterhouses fell back to around 30~30.5%, lower than last month, with demand support weakening month on month!
Therefore, in 10, hog supply increased month over month, while pork demand declined month over month. Against a backdrop of imbalanced supply and demand, hog prices followed a one-way downward trend during the month! At present, prices for standard-weight hogs have fallen to 9.36 yuan/kg. Bearish sentiment remains strong, and the market may continue to fluctuate downward over the next 1-2 days! However, hog prices still have some underlying support. In particular, with the end of the month approaching, leading hog enterprises in the north and south may gradually face less pressure to sell. Losses from hog fattening continue to deepen, and independent farms may become more inclined to hold back sales. Some leading hog enterprises may reduce sales volume to support prices, providing some support for hog prices!
According to the latest information, slaughterhouses have adjusted their prices. Hog quotations are expected to be 9.353 yuan/kg on 10 26. Going forward, attention will be paid to changes in the pace of market buying and selling!