Recently, the domestic livestock and poultry farming sector has been particularly worrying, especially the hog market. Although the number of breeding sows in stock continued to decline last year, with the number of breeding sows falling from 4074 ten thousand head to 3961 ten thousand head, changes in the number of breeding sows affect the number of market hogs shipped 10 months later. In theory, pressure from hog supplies will gradually ease after the third quarter of this year, and support from favorable supply-side factors will gradually take shape!
However, although sow herd reduction continued in the earlier period, the substantial improvement in sow production efficiency brought about by the industrialization and upgrading of China’s pig farming industry not only reversed the benefits of the reduction in sow numbers, but also intensified pressure on supply during certain periods. In addition, with insufficient marginal support from demand in the earlier period, demand was subdued during the traditional seasonal peak. Combined with faster weight gain among finishing pigs, continually rising market slaughter weights, and high frozen pork inventories at slaughterhouses, shipments of frozen pork have continued to increase. Under these multiple pressures, the pig market has recently been on a downward slide, with domestic prices for standard-weight pigs hitting a new annual low!
Currently, the quoted price for live pigs of the three-way crossbreed has fallen to 8.61 yuan/kg, down 27.8% year on year. Quotes across northern and southern markets have generally fallen to around 8~9 yuan/kg, with the market experiencing a sharper-than-expected decline!
From the supply side, in 11, as the group's pig farms were slower last month, some of this month's capacity was added on top, and the group's pig farms increased slaughter volumes by nearly 2.56% month over month. In particular, their average daily slaughter plans increased sharply by nearly 6%, leaving supply in surplus! Moreover, with an oversupplied pork outlook, producers lack confidence in the market outlook. The average weight of pigs shipped this week rose to 125.22 kilograms, and the average slaughter weight of live pigs climbed to 94.65 kilograms, further cementing the fundamentals of an oversupplied outlook! Market support prices lack conviction; independent producers and large-scale pig farms are actively accepting sales. In particular, pressure on producers' funds is excessive, sentiment toward forced liquidation is strong, and slaughter volumes remain high!
On the demand side, seasonal demand has entered its peak period. After a brief, habitual decline in demand following National Day, domestic market demand has slowly recovered as temperatures have fallen. The operating rate of slaughterhouses has gradually recovered to around 31.28%, but the actual increase in consumption is limited! In particular, shipments of frozen pork have increased, while the average weight of pigs shipped has risen, further constraining slaughterhouses' procurement of live pigs and making it more difficult for producers to ship their pigs!
Based on this analysis, amid excess supply and demand, domestic hog prices have fluctuated downward, and the average price of standard-weight hogs has continued to hit new lows for the period. Following price adjustments by slaughterhouses, the price of three-way crossbred hogs is expected to fall to 8.55 yuan/kg on 11/8. Going forward, market sentiment will be worth monitoring. After hog prices fall below their previous low, the market may have an opportunity to form a bottom!
Overview of live pig prices across the northern and southern provinces and regions of China (for industry exchange and reference only)