There was no miracle in the hog market today: prices kept falling and hit another new low.
The national average live hog price fell to 4.40 yuan per jin, equivalent to 8.80 yuan per kilogram, its lowest in 203 days. It is now only 0.05 away from this year's low of 4.35 yuan per jin in 4.
Futures are more direct.
The most-traded contract closed at 9115, but more troublingly, it hit a low of 9040.
What does 9040 mean?
This is a new low for this round and an intraday low since listing. It is also just half a step away from the round-number threshold of 9000.
Although it eventually rebounded above 9100, this shows that sentiment in the live hog market is exceptionally poor.
As we said before, although sentiment can't change supply and demand, it can affect the pace.
This is quite a problem.
Because in an upward trend, sentiment may fuel an overshoot, but in a downward trend, if sentiment builds, prices may overshoot to the downside.
And now that pig prices have already fallen to this sorry state, any further overshoot to the downside would be terrifying.
Of course, we can’t say that pigs in 11 month are dangerous just because sentiment is poor. Pigs in 11 month are dangerous for another 2 reasons:
First, the number of pigs being sold is still increasing.
Pig prices had already fallen sharply in 10 month, but looking at sales, some companies still had not fully carried out their sales plans, so this pressure was pushed back to 11 month.
Moreover, pig companies’ sales plans for 11 month increased by 2.56% compared with 10 month, while 11 month has fewer days than 10 month. If this sales pressure is spread across each day, average daily sales increase by nearly 6%.
Given the current state of the hog market, few people can afford to hold back sales in the hope of getting a better price. Even large companies are raising funds to maintain cash flow, let alone small and medium-sized farmers.
This means greater pressure to ship hogs in 11 month.
According to the recently released slaughter data, hog slaughter volume in 9 month increased both year over year and month over month, reaching its highest level in nearly 8 months.
In other words, the peak in supply for this cycle has not yet passed.
Second, the curing season may be pushed back and may fall short of expectations.
Now, the only things the live pig market can look forward to are the curing season and stockpiling for the Spring Festival. It is said that curing has already begun in a few regions.
There are 2 problems:
One problem is the warm winter.
Due to the influence of El Niño, there is a greater likelihood of a warm winter this year. If temperatures do not drop, the meat cannot be cured, so production will have to be postponed.
So the curing season, originally set to begin in 11 month, will very likely be pushed back to 12 month.
Another issue is that consumption has fallen short of expectations.
Judging from performance over the past two years, demand for cured meat does seem to have lost some momentum. On the one hand, overall pork consumption is declining; on the other, the curing period has become longer and less concentrated, so its impact on the market also seems less pronounced.
These two factors, combined with pessimistic sentiment, have put a lot of pressure on the hog market in 11.
Theoretically, hog prices are almost at the bottom. But as mentioned earlier, the problem is that sentiment still plays a role. If sentiment gets out of control, prices could overshoot on the downside.
In particular, futures have hit a new low, and pessimism and panic have surged again.
Hogs in 11 are in real danger.