At the start of 11, recently, the live hog market has seen ample supplies of market-ready pigs amid persistently high releases from the supply side. Seasonal changes have also brought more disease outbreaks at pig farms, further intensifying panic about sending pigs to slaughter. The live hog market has been “weak in the peak season,” with prices plunging “off a cliff”! Domestic prices for standard-weight hogs have now fallen below 9 yuan/kg, and market sentiment remains subdued. So, how low could hog prices go from here? An analysis follows:
At present, in China’s live hog market, hog prices have fallen below key levels, with prices for standard-weight hogs dropping below 9 yuan/kg. Meanwhile, prices for cull sows have continued to decline recently, with the average falling to around 3.2 yuan/jin. In some production regions, prices for low-productivity sows culled have even fallen below 2.4 yuan/jin! The continued weakening of sow prices further confirms the market’s willingness to reduce production capacity. In addition, demand is insufficient to absorb supply, and the live hog industry has entered a period of actively accelerating capacity reductions!
According to monitoring and analysis of the data, as of now, the average ex-farm price of nationwide three-way crossbred live pigs is 8.94 yuan/kg, down 0.07 yuan from yesterday. The price level has fallen, down 27.4% year on year. Pig prices are close to their lowest level of the year, and the market has once again fallen below “9 yuan/kg.” Pig prices are showing a “cliff-like” decline! Compared with the beginning of last month, pig prices have fallen by a cumulative 12.78%; compared with the beginning of month 9, they have fallen by 19.4%.
By region, among the key northern and southern regions monitored domestically, the average price of hogs sold was similar to the prices in Anhui, Guangxi, Beijing-Tianjin, and Hebei at 8.95 yuan/kg. Hog prices across the north and south were generally 8.3~10.65 yuan/kg. Guizhou had the lowest quoted price, while Guangdong had the highest. In the main hog-producing regions of the north and south, hog prices were 8.6~9.2 yuan/kg, and the market showed a steeper-than-expected downward trend!
On the supply side, during the “Golden September and Silver October” months, major pig farming groups faced considerable pressure to ship hogs. Moreover, as the average weight of shipped hogs climbed, disease risks at pig farms increased, and sellers were more willing to sell. Hog shipments from independent producers and from second-fattening operations that had restocked earlier became concentrated! However, with peak-season demand failing to materialize and consumer demand providing little support, major pig farming groups did not meet their shipment plans. Last month, pig farming enterprises above the designated size planned to ship 1508.18 ten thousand head but actually shipped 1481.75 ten thousand head, achieving 98.25% of their shipment plan; some production capacity was shipped later than planned! Data monitoring and analysis show that the shipment plan for 173 leading pig farming enterprises in China for 11 month stands at 1519.67 ten thousand head, an increase of 2.56% from the previous month. Hog supply has risen significantly. In particular, with fewer days available for shipments this month, the average daily shipment plan may increase substantially month on month, creating considerable pressure from excess hog supply!
In terms of demand, as 11 approaches, hog and pork trading enters its seasonal peak. However, this month’s consumption lacks substantial support, particularly the boost from holidays. Urban mobility is limited, and the recovery in household demand in the domestic market is weak. Substitute products are in ample supply, providing limited support for pork demand. Moreover, month-on-month growth in hog marketings and a continued rise in average marketed hog weight have further reinforced the oversupply of pork. Confidence in bargain buying for secondary fattening is low, and producers lack confidence in a price recovery, so the market largely maintains its routine marketing practices. In particular, prolonged losses in hog finishing and increased disease risks at pig farms have further heightened producers’ panic selling. Downstream slaughterhouses face little difficulty in procurement, and major slaughtering enterprises, under pressure from losses, are willing to use the situation to push prices down.
Based on this analysis, with changes in supply and demand, in 11 month, the pattern of strong hog supply and weak demand may be difficult to ease, and hog prices still face the risk of continuing to seek a bottom! Regarding the “floor” for this round of hog price declines, I personally believe prices may fall below the low recorded in the second quarter, with standard-weight hogs possibly retreating to around 8.5 yuan per kilogram! Going forward, watch for changes in market trading sentiment, especially changes in the pace of sales by large-scale hog farming companies!