With hog prices falling to around 9 yuan/kg, most market attention is focused on the price of commercial pigs themselves, while the price of culled sows is an easily overlooked leading indicator. According to data from Mysteel, the national average price of culled sows fell to 6.44 yuan/kg on 10 month 30, down more than 4% in a single week from 6.71 yuan/kg a week earlier. As the asset with the strongest “residual value” in the hog industry chain, a rapid decline in culled sow prices often means that farmers are increasingly willing to cull low-efficiency sows, while buying-side demand is weak. The industry is thereby entering a phase of actively reducing production capacity.
The underlying calculation is as simple as it gets. The average price of commercial pigs fell from 9.80 yuan/kg in mid-10 month to 9.02 yuan/kg on 11 month 2, a drop of nearly 8% in two weeks. The further hog prices fall, the greater the losses on the farming side and the tighter the cash flow, strengthening the incentive to cull low-efficiency sows. A large number of culled sows flowing into the market at once further depresses residual-value quotes. This creates a self-reinforcing negative cycle: sustained losses prompt farms to accelerate culling, while shrinking residual values become part of those losses, together pushing farming confidence lower and driving the industry into deeper passive capacity reduction.
What is interesting, however, is that the supply-side “surplus” has not yet been fully cleared. In Mysteel’s data for last week, the national average marketing weight of commercial pigs was 124.71 kg on 10 month 30, rising by 0.22 kg rather than falling compared with a week earlier. This reveals the key timing gap for understanding the current market: the reduction in culled sows affects piglet supply four months later and commercial pig supply six months later, making it a medium-term capacity factor; by contrast, the heavy pigs held back from marketing, as reflected in average marketing weight, are pigs already in existence and therefore part of current supply. On one side, the signal of medium-term capacity contraction has already emerged; on the other, the stock of heavy pigs created by earlier delayed marketing is still being released gradually. Together, these two data points outline the core contradiction in the current market: supply associated with culled sows, six months down the line, has already begun to contract, but the short-term momentum of the existing supply of pigs held back from marketing continues.
This also explains why it is difficult to say that hog prices have bottomed out in the short term, yet there is no need to be overly pessimistic. In the short term, high average slaughter weights, increased planned shipments from large-scale farms, and continued releases of heavier hogs, combined with only a “weak recovery” in demand as slaughterhouses replenish stocks at low prices, mean hog prices will probably remain under repeated pressure near the 9 yuan level. But taking a longer view, the week-on-week fluctuation and decline of 4% in cull sow prices marks the start of an accelerated phase of production capacity reduction; the average price of piglets weighing 7 kilograms has also fallen to 82.3 yuan per head, down another 11.25 yuan from a week earlier, while willingness to restock has likewise hit rock bottom. Sows are being culled at an accelerating pace upstream, while there are no takers for piglets downstream. The forces driving a contraction in supply are building, and this is an inevitable step for the market to move past its most pessimistic point and toward rebalancing.
For hog producers, rather than fretting over which day prices will rebound, it is better to keep a close eye on two figures: how much further cull sow prices can fall, and when average slaughter weights will genuinely turn downward. The former determines the severity of this round of capacity reduction and, in turn, the scale of the cycle reversal; the latter determines the turning point in short-term supply pressure and the window for a temporary rebound. It is important to recognize that if average slaughter weights fall first, this often brings only a temporary recovery in the market. Only when both signals turn, either one after the other or at the same time, can a major cyclical bottom be considered firmly established. Until then, managing the pace of shipments and preserving cash flow matter more than betting on the direction of the market.