10 month is nearing its end, and the traditional “Golden September and Silver October” period is drawing to a close! Recently, pig prices in China’s domestic live hog market have remained weak. Although the traditional seasonal peak in consumption has begun, supply continues to be released as a result of inertia, while seasonal demand has been “weak in peak season.” With multiple factors at play, domestic pig prices have come under pressure and fallen. In particular, since the middle and latter part of 10 month, the market has been persistently “searching for a bottom.” So, what is behind this round of price declines, and where is the “floor”? An analysis follows:
According to industry monitoring, as of 10 month 28, the national average farmgate price for lean-type three-way crossbred hogs ready for slaughter was 9.23 yuan/kg, down 0.06 yuan from yesterday. Pig prices moved lower again, falling 24.6% year on year, with the market showing a “sliding” downward trend! The gap from this year’s low is now only 0.6 yuan/kg, and pig prices have fallen by a cumulative 9.95% this month. Pig prices have “fallen sharply”!
By region, among the 28 northern and southern regions covered by the current sample monitoring, the average farmgate price for live hogs was close to the 9.25 yuan/kg quoted in Beijing, Tianjin, and Hebei. Live hog quotations in the north and south ranged from 8.6~10.8 yuan/kg. Regionally, most live hog quotations declined in East China, Central China, North China, Northwest China, and Northeast China, while quotations in Southwest and South China were mostly steady to slightly stronger. Farmgate quotations for live hogs were generally 8.9~9.7 yuan/kg!
Specifically, in northern producing regions, the average hog price for market-ready pigs in Heilongjiang, Jilin, and Liaoning has now fallen to 9.1~9.3 yuan; quoted prices in Shanxi and Hebei are 9.05~9.25 yuan, and those in Shaanxi and Gansu are 8.9~9.25 yuan. In southern markets, quoted prices in Sichuan and Chongqing are currently 9~9.05 yuan; prices in Shandong and Anhui have fallen to 9.25~9.3 yuan; quoted prices in Jiangsu and Zhejiang are 9.35~9.7 yuan; prices in Henan are 9.2 yuan; those in Hubei and Hunan are 9~9.1 yuan; and those in Guangdong and Guangxi are 9.05~10.8 yuan/kg!
Based on this analysis, on 10 month 28 day, the domestic live hog market continued its uninterrupted decline, with hog prices retreating again. Prices for standard-weight pigs fell to 9.23 yuan/kg. The factors driving the decline in hog prices are analyzed below:
On the supply side, based on sow inventory data for the first 10 months, the mainstream view is that live hog supply in the fourth quarter may follow a “increase-decrease-increase” pattern. In 10 month, planned hog marketings were relatively high! Zhuochuang data monitoring shows that marketings by large-scale pig enterprises increased by 2.45% month over month this month. However, according to Mysteel monitoring, as of the 21 day of this month, large-scale enterprises had completed less than 62% of their monthly marketing plans. Marketings have been slow, and at month-end, producers are still under considerable pressure to market their hogs!
In addition, since the start of this month, weight gain among fattening hogs has continued to accelerate, and the average market weight of hogs has climbed to 124.49 kg. Meanwhile, as seasonal changes have led to more disease outbreaks on pig farms, independent producers and second-stage fatteners have been actively selling medium and large hogs. Marketing by large-scale pig enterprises has been constrained, making it difficult to ease supply-side pressure!
In terms of demand, after the National Day holiday, pork trading and sales returned to a lull. Although cooler weather has stimulated a recovery in pork consumption, the increase in domestic sales and actual urban demand has been limited. So far, the operating rate of sampled slaughterhouses is 30.73%, and feedback on downstream market trading and sales has been lackluster! In particular, the rising average weight of pigs at slaughter has further strengthened pork supply. However, as downstream traders have reduced purchases to keep prices stable and major slaughterhouses have increased frozen pork stock clearances, the gross-to-white price spread in the market has been insufficient. Slaughterhouses have had little difficulty procuring pigs, providing strong support for pressure on purchase prices!
As a result, live hog quotations have come under pressure and fallen. At the end of 10 month, the market may remain in a volatile downward trend. However, I believe the “floor” for hog prices may hover at 9~9.1 yuan/kg, and the market may lack the basis for a further decisive break lower! In particular, as temperatures gradually cool and the southern regions approach the peak season for curing pork, demand is expected to improve gradually at the margin in the coming period, giving hog prices a chance to stop falling and recover!