Recently, hog prices in China’s livestock and poultry farming sector have fallen under pressure. Hog prices have remained low for much of this year, and farming losses have been difficult to reverse. As the period of losses from hog fattening lengthens, major groups and smaller farms in northern and southern China are facing severe financial pressure! Hog production capacity reduction has entered a deep-water phase, and more market participants are proactively scaling back production. For example, prices for newborn piglets have continued to fall recently, sharply increasing the pressure of sow-farming losses. More producers are proactively reducing sow inventories, and the supply of low-priced sows is increasing. This is further disrupting supply and demand for market hogs and intensifying downward pressure on hog prices!
Also, regarding market hog shipments, supply of market-weight hogs in China may decline based on earlier changes in sow inventories. However, in practice, because the earlier sow inventory base was high and production efficiency rose substantially, supply capacity has “increased instead of decreased.” Meanwhile, hog prices have fallen under pressure during the traditional “Golden September and Silver October” period, and some farmers have been forced to hold hogs back, further increasing pressure on supply! This month, the average shipment weight of hogs has continued to rise, and shipment volumes have also expanded. The average daily shipments of key sample hog companies this month increased by nearly 6% month on month. In addition, losses from hog farming and heightened biosecurity risks at farms have made multiple types of producers more willing to sell during this period, while confidence in holding hogs back is weak!
In particular, the price spread between standard and heavyweight hogs in China has narrowed recently, and prices for medium and large hogs have continued to fall. The increase in average shipment weight further limits confidence in the outlook for medium and large hogs. Losses from secondary fattening are substantial, and confidence in entering the market at lower prices is weak, leaving the market facing considerable supply pressure!
As for consumption, demand has received insufficient marginal support during the peak sales season in September and October. Residents are eating lighter meals and are less inclined to consume pork. Meanwhile, supplies of beef and mutton, poultry, aquatic products and other foods are ample, leading to considerable substitution. Although temperatures have gradually fallen and slaughterhouse operating rates have slowly recovered since the start of this month, the increase in demand has been limited and is insufficient to absorb the additional supply. The market continues to face an imbalance between production and sales!
With the supply-demand fundamentals bearish, hog prices are under pressure and falling! However, with the arrival of the Beginning of Winter and cooler weather, marginal demand in the domestic market may improve. The peak season for curing meat is also approaching in southern regions. After the market’s continued decline, resistance among producers to price cuts may strengthen, providing the hog market with “weak support”!
Due to slaughterhouses adjusting prices, it is estimated that on 11 month 10, the ex-farm price for standard pigs of the three-way crossbreed will be 8.53 yuan/kg. Keep an eye on changes in the pace of market buying and selling!