At the beginning of 11, in China’s live hog market, prices have recently been “unable to rebound after falling.” During the traditional peak months of September and October, the live hog market has been sluggish, with the pattern of a peak season that is not busy continuing, and hog prices have kept trending lower. At the start of 11, support at the market bottom strengthened slightly. However, pressure on the supply side remains, and the market is showing a degree of “bottoming out.” After this sharper-than-expected drop in hog prices, can the market now complete its bottoming process, and can the “second brother” build momentum for a rise next? A detailed analysis follows:
As of 11 month 2, the national average ex-farm price for lean pigs of the three-way crossbreed was 9.06 yuan/kg, down 0.01 yuan from yesterday. Over the past two days, the live hog market has remained in a stalemate near the bottom, with prices slightly weaker. However, hog prices may have little room to fall further, and the market may gradually establish a bottoming trend. Currently, live hog prices are down 27.6% year over year and are at a relatively low level for the year. In particular, since the price for standard-weight pigs was 11.09 yuan/kg in early month 9, hog prices have fallen by a cumulative 18.3%.
By region, currently, across northern and southern China, the key monitored northern and southern 7 production areas and the 28 monitored regions show a broadly stable pattern in live hog quotes, with only minor fluctuations. The average domestic live hog ex-farm price is close to 9.05 yuan/kg in Guangxi, while live hog quotes across the north and south are 8.45~10.6 yuan/kg! Hog prices have strengthened slightly in parts of South China and Southwest China; however, prices have continued to trend weaker in many areas of Northeast, North, and Northwest China!
At present, the live pig market is generally stable with minor fluctuations. Although pig prices have continued to trend weakly, market support at the bottom may gradually take shape. In the first ten days of 11, pig prices may have a chance to bottom out and recover, but expectations for an increase may be limited!
On the positive side: First, hog prices are running low. At present, the quoted price for standard-weight hogs has fallen to around 9.05 yuan per kilogram, while the losses for mainstream domestic farrow-to-finish operations exceed 300 yuan. Market resistance to price cuts may increase! In particular, domestic hog-fattening operations have been losing money for an extended period this year, putting considerable pressure on producers; the willingness of small-scale farms to hold firm on prices may strengthen. In addition, as we enter early 11, large-scale hog producers may briefly reduce the number of hogs they bring to market, potentially easing supply pressure slightly. Second, cold-air activity is frequent, and temperatures are gradually falling across northern and southern regions. The Cold Clothes Festival is drawing closer, and the festive atmosphere may strengthen. Domestic demand may improve, with pork trading at rural markets picking up. Demand for autumn nourishment may also recover, potentially bolstering market sentiment in favor of holding prices!
Bearish factors: At present, bearish pressure in the live hog market is concentrated on the supply side! Last month, large-scale hog enterprises increased rather than reduced their marketings, with relatively high planned hog marketings. In addition, as the weather turned cooler, hogs gained weight more quickly during finishing. Last week, the average live hog market weight in China rose to 124.71 kilograms, further strengthening the market’s ability to supply pork! Moreover, amid sharp temperature fluctuations, the risk of stress among finishing hogs has increased substantially, potentially strengthening panic selling sentiment in the market. Commercial pig farms in the farming sector are actively seeking to sell. Some large-scale hog enterprises may face constraints in completing their marketing plans, but hog supply remains ample this month! In particular, some large-scale hog enterprises still plan to increase marketings in the first ten days of 11 month!
In addition, domestic frozen pork inventories are currently high. The frozen pork inventory rate was 31.6% last week. Frozen pork is being shipped out successively, further suppressing the buying and selling of fresh pork in the market and restricting the recovery of slaughterhouse operating rates!
Based on this analysis, amid the interplay of supply and demand, the hog market may remain range-bound in the short term. However, as market sentiment gradually improves and the peak period for southern China’s cured-meat production approaches, market confidence may gradually recover. In theory, hog prices are expected to build momentum for a rise in the coming period. Pay close attention to changes in the pace of shipments from large-scale hog producers!