Time flies; entering the fourth quarter, in month 10, domestic pig prices showed a one-way downward trend! During the month, live hog quotations continued to fall from 10.25 yuan/kg, dropping to 9.07 yuan/kg by month-end, a reported decline of 11.5%. Although pig prices have not yet hit the year’s low of 8.63 yuan/kg, the market is showing clear signs of a “double dip,” and pig prices have already reached a new low since the beginning of the second half of the year…
At present, the market may be reaching a consensus that pork prices will see a “lackluster peak season” in the fourth quarter. Although there are expectations that pork prices may recover from the bottom, from mid-11 through around the Winter Solstice, the peak season for curing meat may provide an opportunity for a slight rise in pork prices. However, supply-side pressure remains considerable, which may limit the scope for a peak-season rebound in pork prices!
On the supply side, as the weather gradually turns cooler, the pace of hog fattening is accelerating. Recently, the structure of the hog inventory has gradually changed, with the share of medium and large hogs gradually increasing. Moreover, medium and large hogs at farms are generally being sent to slaughter during the curing season, creating pressure for a concentrated release of production capacity. Recently, the average live weight of hogs sent to slaughter has continued to rise, reaching 124.71 kilograms this week. This further strengthens pork supply capacity, and the market is expected to remain loose for a time.
In particular, last month, the average monthly slaughter volume of large-scale pig enterprises increased month on month, while demand declined month on month! In addition, temperature fluctuations intensified across many areas in both northern and southern China, and pig farm disease outbreaks increased. Willingness among independent producers to sell pigs and among second-stage fattening operators to sell pigs strengthened, further suppressing the normal sales volume of major pig enterprises. In some production areas, major pig enterprises met or deviated from their average monthly sales plans, which may intensify the pressure from delayed capacity adjustments. In the first ten days of 11 month, the fundamentals point to an oversupply!
On the demand side, demand remained sluggish last month. After the National Day holiday, seasonal demand was weak, and the operating rate of slaughterhouses fell back to around 30~30.5%. Although the operating rate of slaughterhouses edged up slightly at the end of the month, the increase was extremely limited! In the first half of 11, there is no obvious catalyst for the consumer market this month. The downstream market may continue purchasing as needed, and any increase in the operating rate of slaughterhouses is likely to be limited. In addition, high domestic frozen pork inventories and the ongoing release of frozen pork onto the market are further suppressing a rebound in pork prices!
Based on this analysis, amid the interplay between supply and demand, the hog market is expected to remain in a bottom-level tug-of-war. Although at the beginning of 11 month, sentiment may briefly prompt producers to reduce the number of hogs shipped for slaughter, creating an opportunity for a slight recovery in hog prices, supply pressure remains high and demand is recovering slowly. With a mismatch between production and sales, the market still faces downside risks. Based on data monitoring and analysis, following price adjustments by slaughterhouses, the price of three-way crossbred live hogs is expected to be 9.06 yuan/kg on 11 month 2; market participants should watch for changes in the pace of buying and selling.