On the first day of 11, the national average price of live pigs barely stabilized at just over 9.0 yuan/kg. After a cumulative plunge of more than 18% during the “Golden September and Silver October” period, the market badly needs a decent rebound to catch its breath. But reality is likely to pour cold water on that hope.
Based on the latest data from slaughtering, live weight, and inventory, from 11 to 3 to 6, hog prices nationwide are unlikely to break out of a pattern of “bottoming out within a narrow range, slight increases in some areas, and overall weakness.” What truly warrants attention is not whether prices rise by one mao or fall by five fen over the next few days, but a more fundamental assessment that the market is beginning to confirm: the increase in slaughter volume is below expectations, the large-hog market in the fourth quarter is unlikely to see a major supply gap, and the timing of a trend reversal in hog prices will be pushed back further.
I. Why can’t prices “rise further”? The threefold pressure on the supply side is heavier than imagined.
Many people focus on data on the reduction in the number of breeding sows, assuming that fewer pigs should mean higher prices. But what is weighing on the market right now is another set of more “immediate” factors.
First point: The average weight of hogs at slaughter has risen for 11 consecutive weeks. The number of hogs hasn’t increased, but the amount of meat has. By the end of 10, the national average weight of hogs at slaughter had reached over 125 kilograms, and the share of heavier hogs weighing over 150 kilograms continued to rise. For each hog slaughtered, that means more than ten extra kilograms of meat compared with a standard-weight hog.
The second layer: The widening of the price spread between heavy and standard pigs has stalled, and the “premium logic” for heavy pigs has weakened. In the fourth quarter of previous years, fattened pigs could always sell for a few tenths more per kilogram than standard pigs on expectations of curing and preserving pork. But this year, the price spread between heavy and standard pigs did not widen from the end of 9 to the end of 10; instead, it narrowed slightly. Although heavy pigs are still priced higher than standard pigs, the spread is no longer enough to cover the increased costs of holding pigs longer. Restocking for secondary fattening is extremely cautious, and pigs bought earlier are now moving out as the marketing window opens.
The third factor: frozen-product storage capacity utilization is around 32%, substantially higher year over year. The frozen-product storage capacity utilization rate at sampled slaughterhouses remains at 31.9%~32.2%, about 14 percentage points higher year over year, and is at a high level for the same period in recent years. Meat in cold storage does not disappear; it simply pushes today's supply into tomorrow. When spot prices rise slightly, the window for releasing frozen products opens. Fresh-product prices have barely taken one step up before being pushed half a step back. With these three pressures in place, the month-on-month increase in slaughter volume is bound to be modest.
II. Why should a “trend reversal” be pushed back? The real contradiction is not in the present, but in efficiency
If we look only at the data on breeding sows, a reversal seems like it “should” be just around the corner. At the end of the third quarter, the national breeding sow inventory stood at 3602 ten thousand head, with the year-on-year decline widening to 10.7%, and approximately 180 ten thousand head culled net over the quarter. The pace of herd reduction has clearly accelerated, bringing the inventory close to the lower bound of the green reasonable range. Judging by this figure alone, the “story” of shrinking supply holds up.
But the market has overlooked a quieter, more stubborn variable: PSY. The industry average PSY has risen from around 18~20 head in the past to around 28 head, while leading companies have reached 29~32 head. The number of sows has fallen by 10.7%, but the additional weaned piglets provided annually by each sow have offset a large part of the reduction. “Reducing the sow herd” has not translated proportionally into “less pork”; the supply’s rigid inertia is stronger than in any previous cycle. In addition, although large-scale pig farming groups are adjusting their targets for future marketings, they have not actively “hit the brakes” on their current marketing pace. Capacity adjustments at leading companies such as Muyuan, Wen’s, and New Hope are more structural and gradual than abrupt.
Therefore, the so-called “large-hog shortage” in the fourth quarter is unlikely to materialize as a sharp price surge caused by “too few hogs.” A more likely scenario is that large hogs are marketed in a concentrated window sometime between 11 month and 12 month, briefly pushing prices up before supply pressure becomes apparent again. Zhuochuang Information’s assessment is also clear: supported by expectations for preserved-meat production, there may be a slight rebound in 11 month, but the monthly average price will only be 9.8~10.1 yuan/kg. Once concentrated marketings pick up in 12 month, prices will come under pressure again. The question is not whether a reversal will come, but when its turn will come. For now, it is not yet time.