Recently, hog prices have been falling “without pause.” Against a backdrop of strong supply and weak demand, sluggish recovery in consumer demand and high volumes of hog supply have left production and sales imbalanced, putting prices under pressure. Standard hog quotations have now fallen to 9.16 yuan/kg! Farming losses are deepening, with mainstream farrow-to-finish operations losing more than 300 yuan. In northern and southern parts of China, hog prices in the Northwest and Southwest have fallen below 9 yuan/kg. Prices in parts of the Northeast, North China, and Central China are also set to fall below 9 yuan/kg. The market is seeing declines across both the north and south, and the underlying imbalance between production and sales is difficult to reverse!
Currently, the hog market is characterized by “weak in the near term, strong in the longer term.” However, the trend of “reducing sows without reducing pork output” is becoming more pronounced. Although, based on the sow inventory of 3602 ten thousand head at the end of the third quarter, confidence in next year’s hog price outlook has recovered, pressure on the supply side remains considerable!
On the one hand, planned hog marketings are relatively high. This month, the month-on-month increase in marketings by large-scale hog companies was 1.91%, and during the month, amid weather fluctuations and deepening losses in hog farming, independent producers and secondary-fattening farms actively sold hogs, further intensifying the supply surplus! Meanwhile, hog market weights continued to climb this month, and average slaughter weights kept increasing, further adding to supply-side pressure! In addition, since the fourth quarter, domestic frozen pork inventories have remained high, and shipments of frozen pork products have gradually increased, while purchases and sales of fresh pork carcasses have been constrained. This highlights the temporary abundance of hog and pork supplies!
On the other hand, demand has recovered only slowly at the margin. After the National Day holiday, demand declined as usual, people traveled less, and residents increased their purchases of substitute products. Sales and purchases of fresh meat and white-banded pork were sluggish, putting slaughterhouse operating rates under downward pressure. Although, with the recent cooler weather, household demand has improved slightly and slaughterhouse operating rates have recovered to around 30.97%, large pig companies were slow to ship pigs during the month. At month-end, leading pig companies stepped up shipments to meet their targets, and the mismatch between production and sales remained evident!
As a result, with strong supply and weak demand, domestic hog prices are under downward pressure. At present, bearish and stable-price sentiment is relatively strong, and hog prices continue to trend weakly near the bottom. Following slaughterhouse price adjustments, the quoted price for three-way crossbred live hogs on 10 month 30 is expected to be 9.08 yuan/kg. Going forward, attention should be paid to changes in the pace of market buying and selling!
However, as demand gradually improves at the margin, if temperatures fall further and pork consumption continues to recover, the market's pessimistic sentiment may ease. In addition, with the southern region's peak consumption season approaching, bullish expectations may strengthen again. It is expected that in early 11, pork prices may have a brief opportunity to trend stronger!