At the start of 11 month, the Beginning of Winter solar term arrived. Recently, in China’s live hog market, prices have fallen steadily, with declines across markets in both the north and south. With limited marginal support from demand and supply pressure difficult to ease, rising biosecurity risks at pig farms, financial difficulties among producers, and panic have all weighed on the market, prolonging its sluggish trend and pushing prices lower. Farming losses have also deepened. So far, in China’s live hog fattening sector, piglets stocked before 5.5-6 month have incurred losses of 179.33 yuan per head, while the mainstream farrow-to-finish model has incurred losses of 334.09 yuan per head. Producers are in the “darkness before dawn,” but the long-awaited turning point has yet to appear.
According to data monitoring and analysis, as of 11/7, the national average ex-farm price for lean-type pigs of the Duroc-cross three-way crossbreed was 8.61 yuan/kg, down 0.13 yuan/kg from the previous day. Pig prices hit a new low for the year, with the average falling below the previous low of 8.63 yuan/kg (at the beginning of the second quarter). The market fell to its lowest level in nearly 10 years! The year-on-year decline was 27.8%, while the price was down 16% from 10 at the beginning of the month, at 10.25 yuan/kg. Pig prices showed a pattern of “a peak season that is not peaking”!
Regionally, across the 7 production regions in the north and south of the country and the 28 key monitored areas, the market on 11/7 was “all in the red.” Live pig prices fell in most northern and southern areas, and declines widened in many areas. The average ex-farm price for live pigs was close to 8.6 yuan/kg in Zhejiang, Shanghai, and Heilongjiang. In traditional production and sales markets, there was little effective regional price differentiation. Data monitoring showed that Xinjiang had the lowest quote, at 8 yuan/kg, while Guangdong had the highest, at 10.2 yuan/kg. Live pig quotes across the north and south were generally 8.3~8.7 yuan/kg, and the market saw a greater-than-expected decline!
Currently, hog prices are under pressure and falling, hitting a new low for the year. The market decline has been “too steep.” The main reason supporting the fall in hog prices is the severe mismatch between supply and demand in the live hog market!
According to monitoring by an industry organization, the operating rate of major domestic slaughterhouses is currently 31.28%. Demand is recovering slowly at the margin. In particular, with the Start of Winter arriving and the Cold Clothes Festival approaching, household demand in the domestic market has improved slightly. In addition, cold air has been active across the country recently, and temperatures have dropped sharply in northern regions, increasing residents’ willingness to buy meat! Unfortunately, as China’s population continues to age and the labor-intensive construction industry, a major sector, remains sluggish, pork consumption has become less concentrated. Although student canteens are purchasing as usual, changes in dietary habits and the widespread availability of substitute products mean that the increase in pork demand is relatively limited!
In particular, recently, the weight of hogs marketed has risen, and the risk of producers holding back hogs from sale is relatively high. Producers have been actively selling medium and large hogs. This week, the average weight of hogs marketed rose to 125.22 kilograms, further increasing pork supply. Combined with frozen pork gradually being shipped out by slaughterhouses, these factors have further dampened slaughterhouses’ willingness to purchase hogs. Sample slaughterhouses are producing according to sales, with operating rates remaining low, offering limited support to the market!
From the supply-side perspective, domestic hog supplies are facing multiple overlapping pressures! On the one hand, last month, large-scale key pig enterprises achieved 98.25% of their planned marketings. The marketing plan for 11 month increased by 2.56% month on month. However, because there were 1 fewer marketing days during the month, the average daily marketings in 11 month increased by nearly 6% month on month, putting considerable pressure on supply. On the other hand, as autumn transitions into winter, cold-air activity is frequent and temperatures fluctuate sharply. Disease outbreaks have increased at pig farms in many parts of northern China, strengthening producers’ panic selling. Combined with insufficient market confidence in future price increases, secondary fattening remains focused on “selling more and buying less,” further intensifying pressure on the supply side!
Based on this analysis, with supply and demand fundamentals broadly bearish, domestic hog prices have continued to fall, and quotes for standard-weight hogs have dropped below this year’s low. Market sentiment is deeply pessimistic, and in the short term, prices are still likely to fluctuate downward. As for when hog prices will rebound and when the seasonal increase will materialize, the key factors are changes in marginal support from demand and changes in the pace of sales from the farming sector. Theoretically, after entering the middle of the month, the live hog market may gradually bottom out, and prices may resume rising in the latter part of the month. Going forward, watch for changes in the pace of market buying and selling, especially changes in the pace of sales by large-scale hog farming companies.