The balance of 10 is running low, and month-end is approaching. In China’s livestock and poultry farming sector, the live pig market has continued to languish, with prices falling in an “out-of-control” decline. The traditional “Golden September and Silver October” period has lost its luster, and pig prices are showing a “peak season without a peak” pattern. Earlier, at the beginning of Golden September, supported by the back-to-school season, pig prices briefly rebounded to 11.09 yuan/kg. Unfortunately, prices then entered a “price slump.” Although the Mid-Autumn Festival and National Day holidays both came and went, the decline in pig prices proved difficult to stop. In particular, prices continued to edge down after National Day, and farmers entered a period of deep losses!
According to data monitoring and analysis, on 10 30, the national average price for marketed lean-type, three-way crossbred pigs was 9.08 yuan/kg, down 0.08 yuan from yesterday. The price center continued to retreat, with prices down a cumulative 18.12% from the beginning of last month. According to industry research, as of this week, the average loss per pig for China’s mainstream farrow-to-finish operations has increased to around 307 yuan, and farming has entered a “bottoming-out” phase. So how will pig prices develop from here? Can even the “Second Brother” no longer hold at 9 yuan/kg? Here is the analysis:
According to the data, at present, hog prices continue to fall across the northern and southern regions of China, including the 28 key monitored provinces and cities. Mainstream live hog quotes have fallen by 0.05~0.2 yuan/kg. The average price for hogs sold for slaughter is close to that in Shandong, at 9.1 yuan/kg. Live hog quotes in the north and south range from 8.45~10.55 yuan/kg, with Xinjiang the lowest and Guangdong the highest! In mainstream domestic markets, live hog quotes are hovering at 8.8~9.45 yuan/kg. For a time, the hog market has seen prices fall across both the north and the south!
As the saying goes, when things go against the norm, something is amiss. This time, hog prices have failed to strengthen during the peak season. In my view, the deeper reason is that the imbalance between market production and sales is worsening!
On the supply side, although the sow herd was gradually reduced last year, with the number of breeding sows falling from 4074 ten thousand head to 3961 ten thousand head, the sow herd at the end of last year, at 3961 ten thousand head, was still well above the newly revised normal holding level of 3750 ten thousand head! Based on current changes in herd numbers, and given the accelerated reduction in the sow herd in the fourth quarter of last year, hog supply pressure may ease during the “Golden September and Silver October” months this year, in theory. However, according to actual feedback, large-scale hog enterprises have increased their slaughter volumes month on month over the past two months. In 10 month, slaughter plans at large-scale hog enterprises increased by 1.91% month on month.
On the one hand, the sow herd was reduced earlier, but the production capacity base remains high, and sow productivity has risen sharply, so the market is currently under considerable pressure from hidden production capacity. On the other hand, with insufficient marginal support from demand, the market had been uniformly bullish earlier, prompting farms to hold hogs longer and increase their weight, while secondary fattening operators continued to enter the market. As the weather cools, hogs gain weight faster during fattening, and the risk of disease at pig farms increases. This further strengthens supply capacity and exacerbates the fundamentals of high production capacity being released over a short period!
From the demand side, the peak season for pork consumption has been underwhelming. Before the Mid-Autumn Festival, demand was supported by the holiday, and the operating rate of slaughterhouses rebounded. However, the increase during the month was extremely limited, household demand at the margin was insufficient, and substitution consumption increased! Some pig companies were limited in their ability to meet their average monthly shipment plans. As 10 approaches, after National Day, consumption support weakened further, and the operating rate of slaughterhouses fell to around 30%. Although orders at slaughterhouses have increased slightly since late 10, the increase has been extremely limited! In addition, frozen pork has recently been shipped out in various regions, further restricting the recovery in slaughterhouse operating rates!
Based on this analysis, on the supply and demand sides of the live hog market, supply has increased month on month during this phase, and the diverse range of farming entities has a strong need to recover funds through sales, resulting in a strong willingness to ship hogs. Meanwhile, demand has declined month on month, pork trading has been subdued, and shipments of frozen pork have increased! With these opposing trends, the fundamentals of China’s hog price market are bearish, and the price center continues to fall!
Now, with the end of 10 approaching, hog prices have fallen to 9.08 yuan/kg. With market sentiment weak, prices remain under pressure to break lower. In this decline, hog prices are highly likely to fall below 9 yuan/kg. Going forward, attention will focus on changes in the shipment pace of major pig companies!