At the start of 11, the live hog market continued to trade under pressure. According to Mysteel data monitoring, on 4 11, the national average ex-farm price of three-way crossbred live hogs was 8.85 yuan/kg, a cumulative decline of 3.9% from 9.21 yuan/kg on 28 10. The month-on-month decline was 13.15%, and the year-on-year decline was about 26%. The core issue behind the across-the-board fall in hog prices remains the ongoing mismatch between supply and demand.
Supply remains the main factor weighing on the market. Mysteel monitoring shows that breeding companies in key provinces plan to market a total of 1519.67 ten-thousand head of hogs in 11, a month-on-month increase of 2.56% compared with actual marketings in 10. Marketings continue to rise. Market-ready hogs are plentiful, and average market weight remains high, further expanding the meat supply represented by the same number of head. In addition, sustained deep losses across the industry have increased the willingness of small and medium-sized farms and individual farmers to sell defensively. Forced sales have also increased in some regions amid disease-related disruptions, intensifying the short-term supply shock. Although the breeding sow inventory has entered a downward-reduction phase, the production-capacity transmission cycle is about 10 months. Fattening hogs associated with the earlier inventory are still being released onto the market, creating a mismatch in which “sow numbers are declining, but hog numbers are not.” This short-term supply momentum is difficult to reverse.
The seasonal recovery in demand has fallen short of expectations and is unlikely to offset the increase in supply. According to slaughter operating rates and white-strip pork sales monitored by Mysteel, only sporadic processing orders have started, and the increase in operating rates has been limited. Downstream buyers are mainly restocking to meet immediate needs; large-scale purchases for curing have yet to begin. The recovery in the catering sector has been gradual, while ample supplies of alternatives such as poultry continue to divert pork consumption. Frozen-product storage capacity utilization stands at 31.60%, 13 percentage points higher year over year. Outbound shipments are diverting demand from fresh pork, while slaughterhouses are purchasing cautiously and applying strong downward price pressure, creating a mismatch between the increase in hog marketings and the increase in consumption.
The supply-demand imbalance is directly affecting profits. The hog-to-grain price ratio remains below the breakeven point, and both farrow-to-finish operations and operations that purchase piglets for finishing are incurring losses, highlighting cash-flow pressures on producers. Losses are forcing the accelerated culling of inefficient sows, continuing to validate the medium- to long-term capacity-reduction trend. Meanwhile, secondary fattening offers little prospect of profit, so few buyers are entering the market in significant numbers to take in hogs, leaving prices with little short-term support.
Looking ahead, the key factor shaping hog prices in 11 is the pace of purchases for curing: supply will be released in concentrated volumes in the first ten days, while demand has yet to pick up, making prices more likely to fall than rise. If curing orders are placed in concentrated volumes in the middle and latter part of the month and operating rates recover steadily, hog prices may bottom out and recover temporarily. However, high supply is likely to prevent a sustained upward trend. Key factors to monitor include whether large-scale producers proactively reduce marketings, the pace at which heavy hogs are absorbed, the persistence of demand for cured products, and the pace of frozen-product destocking. A substantive rebalancing of supply and demand will take time; the hog market is likely to remain under pressure and bottom out, while capacity reduction in the industry continues.