As 11 approaches, the Start of Winter solar term is near. Based on past experience, from the end of 11 until the Winter Solstice, the southern regions will gradually enter the peak season for curing meat, and China’s hog market will also enter its seasonal peak! However, under the influence of El Niño, temperatures in the south are falling slowly. The market lacks confidence in the outlook for the curing season peak, and there is little enthusiasm for betting on a price rise ahead!
Looking at the current supply and demand for hogs, the market remains in a state of “oversupply,” with supply capacity rising further. Although demand is also improving gradually at the margin, the increase in consumption is extremely limited, and production and sales remain unbalanced!
On the supply side, in 11, planned marketings by corporate hog producers increased 2.56% month on month, while the marketing period shortened, with average daily marketings up nearly 6% month on month. This month, leading and larger hog producers face considerable pressure to market their hogs, while production capacity is still being released at a high level! In addition, seasonal changes have increased the risk of disease at independent pig farms. Losses from hog fattening have deepened in both northern and southern regions, and the market lacks confidence in a price rise ahead. Producers face severe financial pressure, and there is strong demand to sell hogs and recoup funds. Marketings from independent pig farms have increased, which has also constrained normal marketings by corporate hog producers. Some companies are falling well short of their daily marketing plans, and price cuts to boost sales are common!
In terms of pork supply, the volume of hogs marketed has risen this month, and the average live weight of marketed hogs has increased to 124.71 kilograms, further strengthening the supply of fresh pork. In addition, frozen pork inventories fell by 31.6% last week, and frozen pork continued to be shipped, leaving pork supply at a high level for this period!
On the demand side, marginal demand support is currently limited. Demand from households in the domestic market is sluggish, and consumers are increasingly choosing substitute products. In cities, meanwhile, population mobility has declined, tourism spending has cooled, and demand from canteens and group meals is weak. The consumer market has little momentum, and the operating rate of sampled slaughterhouses has seen only a limited increase! To date, the operating rate of sampled slaughterhouses is 31.09%, and demand is insufficient to absorb the market's hog supply!
Therefore, with ample supply and weak demand growth, the hog market is facing a temporary imbalance between production and sales, and hog prices continue to slide! According to data monitoring, following price adjustments by slaughterhouses, the quoted price for standard-weight hogs is expected to fall to 8.86 yuan per kilogram on 11/5. Whether hog prices can reverse course will depend on changes in the pace of capacity release, changes in farmers' willingness to market hogs, and the extent of a marginal recovery in demand. Mainstream institutions believe hog prices may continue to fluctuate near the bottom in 11. There may be a brief opportunity for a reversal at month-end!