On 10 month 29, the hog market delivered a suffocating report card: the national average was 9.06 yuan per kilogram, with a price gap of more than 2 yuan between Guangdong’s “island price” of 10.65 yuan per kilogram and Xinjiang’s bottom price of 8.55 yuan per kilogram, highlighting extreme regional divergence. Even more painful, the national average hog price converts to just 4.56 yuan per jin, only two jiao above the historic low in month 4. The lowest-price record in nearly 6-plus months has been broken again.
The market is in dire straits, but what truly leaves the bulls in despair is a counterintuitive paradox: the number of breeding sows is falling, yet pork supply has not decreased at all. At the end of the second quarter, the breeding sow population stood at 3780 ten thousand head, down 6.5% year on year and very close to the regulatory target. However, the industry’s PSY has climbed to around 28, with some high-performing farms even exceeding 30. Improved production efficiency has more than offset the effects of capacity reduction, and pork production in the first three quarters actually increased by 3.2% year on year. Fewer sows, but no less meat—the reality of “reducing sow numbers without reducing meat” makes the capacity-reduction narrative seem pale and powerless in the face of the spot market. In addition, previously retained heavy hogs and hogs from secondary fattening are now entering a period of concentrated release. Average slaughter weight has risen rather than fallen, effectively increasing the actual meat supply at the same headcount.
Policy action has not been absent. From 7–9, the central and local governments together listed 11.7 ten thousand tonnes of frozen pork for reserve purchases. In the second half of 10, a rotation transaction of 2.85 ten thousand tonnes was launched. The key point, however, is that this round of reserve purchases mainly followed a “buy one batch, sell one batch” rotation model, with an extremely limited net increase. There was even the awkward situation of 1200 tonnes of frozen pork repeatedly failing to attract bids. The purpose of reserve purchases has always been to provide a floor and prevent panic, not to drive prices up and engineer a reversal. Expecting reserve purchases to pull pork prices back from 9 yuan to above the cost line was the wrong bet from the outset.
Live hog futures" />
The futures market, meanwhile, put on an emotional roller coaster. The most-traded 2701 contract plunged to a record low since listing of 9550 yuan per ton last Monday, then shot straight back up on a rumor circulating online, rising more than 3% intraday and recovering the ten-thousand-yuan threshold. Its trading range was nearly 6%. But the exchange knows better than anyone what underlies this rebound: the Dalian Commodity Exchange promptly raised the margin requirement for the 2701 contract to guard against a rush to exit as sentiment fades. The fundamentals have not changed: the industry has been losing money for 14 consecutive months; the hog-to-grain price ratio has remained below the Level One warning threshold of 4.3–4.5:1; and losses for self-breeding and self-raising operations have been nearly 195 yuan per head.
In the short term, concentrated hog shipments near month-end are drawing to a close. Small-scale producers in the Northeast and Southwest are becoming more reluctant to sell, and the scope for further sharp declines in hog prices is indeed narrowing. Some areas may see a breathing space in which prices stabilize after falling. However, the concentrated pressure from secondary-fattening hog supplies scheduled for shipment in 11–12 hangs overhead. In recent years, demand from the curing season has provided less and less support, and the peak season is likely to fall short of expectations. The real turning point in the cycle will not come with a reserve purchase announcement, but after losses have driven enough inefficient capacity out of the market. The tug-of-war around 9 yuan is far from the end.