The price of standard-weight pigs has fallen from 5 yuan and 3 before the National Day holiday to 4 yuan and 5. At the same time, fattened pigs weighing over four hundred jin can still sell for 6 yuan. That is a difference of one yuan and five jiao per jin. This is not an ordinary decline. At the same time, the whole market has made the same move: selling. Even more noteworthy is another figure: in many places, cull sow prices have fallen below 3 yuan, returning to the 2-yuan range. The last time we saw this figure was in the two Guang regions at the beginning of 2019. Today, we will discuss only three things: understanding the current price structure, understanding the real reasons for the sell-off, and understanding where this cycle stands.
First, let’s lay out the price structure. In areas without outbreaks, fattened pigs weighing over four hundred jin are priced at about 6 yuan per jin, while standard-weight pigs are priced at about 4.5 yuan per jin, putting the price gap at 1 yuan and 5. This gap is highly unusual. Under normal market conditions, because large pigs have a longer time to market and a higher risk of being held back, their prices are usually not significantly higher than those of standard-weight pigs, let alone separated by such a wide gap. There is only one explanation at present: a small number of buyers are still taking large pigs, while standard-weight pigs are being dumped onto the market in large quantities. Now look at the timeline: the price of standard-weight pigs has fallen from 5 yuan and 3 before the National Day holiday to the current 4 yuan and 5 to 4 yuan and 6, a drop of nearly 8 jiao. In the hog market, a drop of 8 jiao is not a gradual grind; it is a plunge. The price divergence is fundamentally not due to divergent consumption, but to divergent selling schedules.
Many people simply attribute this round of selling to outbreaks, but outbreaks are only half the story; the other half is credit. After hog prices fell below the 5-yuan mark, feed mills changed their rules: no more buying on credit; payment in cash on delivery is required. This change is more damaging than a 5-jiao drop in hog prices. That is because producers’ cash flow has long been built on a cycle of buying feed on credit, selling pigs, and collecting payment. Once upstream suppliers demand cash up front, that cycle is cut off. When cash flow tightens, pig farmers have no option to wait, so pigs of every weight class are pushed onto the market at the same time. Large pigs, standard-weight pigs, and medium and small pigs are all sent to market together, artificially boosting short-term supply and pushing prices down further. Falling prices trigger tighter credit; tighter credit triggers concentrated selling; and concentrated selling further depresses prices. This is a self-reinforcing negative feedback loop. Within this loop, outbreaks act as an accelerant: they force some regions to clear stock faster and expose financial pressures earlier.
To judge where the cycle stands, we cannot look only at the price of standard-weight pigs; we need to look at the pigs being sold even at a loss. The first indicator is the price of cull sows. In many places, cull sow prices have fallen below 3 yuan, returning to the 2-yuan range. Sows are the foundation of production capacity. When sow prices fall close to or even below the price of meat pigs, it means owners are no longer willing to pay any premium for future production capacity. The second indicator is even more important: established breeding farms have started selling pregnant sows at meat-pig prices. Pregnant sows originally carry the value of a future litter of piglets. When the market assigns no value to that potential, it shows that expectations for medium-term prices across the entire industry chain have fallen extremely low. Putting these two indicators in historical context, during the African swine fever outbreak in the two Guang regions in early 2019, cull sow prices once hit an extreme low of over 1 yuan per jin. The current price characteristics in the 2-yuan range closely resemble that cycle’s bottom. Of course, similar does not mean identical: today’s production-capacity structure, disease prevention and control, and level of industrialization all differ from those of that time, but the alignment with bottom-of-cycle characteristics is indeed very strong.
Outbreaks show a clear time lag between the south and the north. The outbreak in the south has continued for three or four months and is now nearing its end, placing it in the latter half of the process. The situation in the north is entirely different: outbreaks spread markedly after the National Day holiday. This time lag matters because outbreaks affect prices in stages, not simultaneously. During the spread phase, panic-driven sales increase, short-term supply expands, and prices come under pressure. During the final phase, culling is complete, supply contraction starts to become apparent, and prices can then begin to recover. In other words, the south has entered the later stage of its culling process, while the north is still in the middle stage of the spread. This means that the current market is not hitting bottom across the whole country at once; regions are hitting bottom in rotation. From an analytical perspective, the bottom will not form as a single, sharp V-shaped turn; it is more likely to take shape region by region and in successive batches.
Viewed in the context of the long-term cycle, this cycle’s price trend, selling structure, and sow-price characteristics show about 90% similarity to the two cycles from 2006 to 2008 and from 2018 to 2019. The figure 90% is not a precise calculation; it is an assessment based on comparing multiple characteristics, including the pace of price declines, the timing of credit tightening, the price range for cull sows, and how outbreaks overlap with selling. The same combination appeared in both of those historical cycles: prices fell below cost, upstream credit tightened, sow prices reached extreme levels, and outbreaks accelerated the culling process. This time, all four characteristics are present. From a cycle-analysis perspective, signs of a bottom reversal have appeared to the extent of nine tenths. But it must be emphasized that the appearance of signals does not mean prices will reverse immediately. Historical patterns indicate a position, not a timing. The position can be assessed; the timing can only be tracked.
In the short term, there is only one key variable: when will the concentrated selling end? Based on the current pace, farmers will most likely complete their concentrated selling before the winter solstice, with the probability put at above 90%. The logic is straightforward: the cost of holding pigs is rising, credit conditions have not eased, and the heavier the pigs, the harder it is to hold on to them. Once the concentrated selling has run its course, short-term supply pressure will ease significantly, creating conditions for prices to bottom out and rebound. Looking further ahead to the Spring Festival, the period before the holiday is the most concentrated consumption window of the year, with seasonal support on the demand side. With supply pressure easing and demand recovering seasonally, there is a relatively high probability that hog prices will return to above 6 yuan per jin before the Spring Festival. But this depends on the spread of the epidemic in northern China not substantially exceeding expectations. If the pace of herd liquidation in the north is prolonged, the timeline for regional markets to rotate through their bottoms will be pushed back.
For the long term, the two forces need to be considered separately. One is on the supply side: the capacity reduction brought about by this wave of the epidemic is real, and the extreme prices of breeding sows also indicate that production capacity is being cleared out. The greater the reduction, the greater the potential for prices to rise later. The other is on the demand side: weak consumption is the most evident constraint at present. A slower-than-expected recovery in the restaurant sector and cautious household spending will both cap prices. After these two forces offset each other, the conclusion is fairly measured: next year, hog prices are unlikely to reach 15 yuan per jin, because consumption cannot support that level. But the likelihood of breaking 10 yuan is steadily increasing. If the epidemic-driven capacity reduction exceeds expectations even further, hog prices could be pushed into double digits. Note the wording: it is possible, not certain. Cycle analysis can provide a probability distribution, not a single-point forecast. Returning to the one-and-a-half-yuan price gap mentioned at the beginning, it tells us that the market's problem right now is not that there are too many or too few pigs, but that money is too tight. When tighter credit pushes pigs of all weight ranges onto the market at the same time, prices become distorted; when historical indicators repeatedly confirm that distortion, the position in the cycle gradually becomes clear. Cull sows returning to the 2-yuan range and pregnant sows being sold at the price of meat pigs are not noise; they are the clearest signals of a market bottom. In the short term, watch the pace of selling before the winter solstice; in the medium term, watch the recovery in demand before the Spring Festival; and in the long term, watch the interplay between production capacity reduction and consumption. We will continue to track these variables. If you are interested in real data on the hog cycle, follow me; in the next installment, I will break down the differences in herd liquidation progress between northern and southern regions. This content is an analysis of market conditions and does not constitute business or investment advice.