The decline in pig prices in 10 month is a normal pattern; market sentiment should not be overly pessimistic
Recent spot market trends have diverged from some people’s predictions, causing market sentiment to collapse over the past two weeks. Objectively, however, except for 2022, pig prices have generally fallen in 10 every year from 2021 to 2026. This is a common pattern. 10 is itself a seasonal lull in consumption. Although the increase in slaughter volume has slowed, some farming companies had overly high expectations for 10 at the end of 9, delaying shipments until the latter part of the month. This led to panic selling and accelerated the decline in pig prices. Although a short-term rebound will not happen overnight, the market has basically reached a bottom, and prices are unlikely to fall to the depressed levels seen in 4. Expectations for the market were too high in the middle of the year, and now there is excessive pessimism about the fourth-quarter market.
Production capacity indicators cannot be used for simple projections; rising industry efficiency is changing supply and demand
Many people are accustomed to following traditional cycles, using the absolute number of breeding sows as the sole indicator for determining future supply and demand. At the current stage, however, there is no direct one-to-one relationship between breeding sows and the supply of commercial pigs. On the one hand, culling low-efficiency sows improves overall production efficiency. In addition, the widespread adoption in recent years of breeding stock that increases PSY has boosted efficiency across the industry, offsetting some of the impact of the reduction in breeding sows. On the other hand, the practice of secondary fattening can also disrupt and delay the timing of hog supply to some extent. Therefore, assessing future hog price trends must be based on a comprehensive consideration of indicators such as slaughter volume, slaughter weight, and feed production.
Scaling characteristics are lengthening adjustment cycles, while value creation across the industry chain is extending downstream to processing
Looking at hog cycles over the past few years, the substantial influx of industrial capital and increased scale have significantly lengthened both fluctuations in the hog cycle and capacity adjustment periods. It is unrealistic for some overseas institutions to promote the so-called “new supercycle”; next year is more likely to see a moderate improvement in supply and demand. In the face of the new cycle, the traditional model of relying solely on hog farming to capture cyclical gains is no longer sustainable. In the future, value creation in the industry will gradually extend downstream into processing and full-industry-chain development. Companies need to change their approach to development and use tools such as hog futures to stabilize returns, making the transition from standalone farming to industry-chain coordination.
The consumer end faces substitution and inventory pressures; avoid blindly expanding production capacity
From the perspective of consumer demand, in recent years, increased meat supply and substitution by other affordable meats, such as poultry, have caused a divergence between consumer demand and actual consumption. Inventories of various types of meat remain high, and demand-side consumption cannot provide decisive, strong support for raising pig prices. As for imports, due to domestic industry overcapacity, tariffs and other factors, future demand for imported pork is expected to remain at the level of several hundred thousand tonnes. Therefore, industry players should avoid blindly following trends or expanding capacity, approach the market outlook for the second half of next year with caution, and rationally and moderately reduce production to help balance supply and demand and promote an effective recovery in pig prices.
Welcome the seasonal recovery in the fourth quarter and respond rationally and objectively to the new normal of the cycle
Looking ahead to the short-term market outlook, pig prices are still quite likely to rebound before New Year's Day. As northern China begins making sausages and southern China begins curing meat in mid-to-late 11, seasonal growth in consumer demand will support prices for heavier pigs and drive prices for standard-weight pigs higher. Pig prices are expected to gradually improve in the middle to latter part of the fourth quarter. However, this recovery will be seasonal and pulse-like, not a sharp surge. The live pig industry has entered a new stage of development, and past rules of thumb and ways of thinking are no longer fully applicable. Only by eliminating inefficient capacity, prioritizing risk management, and strengthening internal management capabilities can companies navigate future market competition steadily and sustainably.