Over the past two days, two major industry organizations successively released plans for sample companies’ hog marketings in 10. Both showed a slight month-on-month increase, indicating that leading hog producers have not scaled back their marketing pace and that supply pressure in the market remains. Meanwhile, the average weight of marketed hogs remains high. With the same number of hogs marketed, the actual supply of pork in the market has increased further, continuing to constrain the upside for hog prices. Let’s first look at the relevant data.
Monitoring by 卓创资讯 shows that the completion rate for planned hog marketings in 9 was only 98.74%. Some hogs were deferred for marketing in 10, resulting in a 2.45% month-on-month increase in planned marketings by sample companies in 10. Data monitored by 我的钢铁网 also show that the completion rate for actual hog marketings in 9 was 99.01%, and planned hog marketings in 10 increased 1.91% month on month. With the National Day holiday disrupting the marketing schedule, marketing pressure in 10 remains considerable.
Meanwhile, monitoring data from the Ministry of Agriculture and Rural Affairs show that since mid-to-late 8, the average post-slaughter weight of hogs nationwide has stopped falling and started rising. This means that the market supply of larger, heavier hogs continues to grow. Having incurred losses earlier, many farmers have chosen to hold hogs back in anticipation of a market rebound, repeatedly delaying marketing and pushing up the weight of marketed hogs.
From the perspective of current conditions at the farm level, the industry remains in a loss-making range, and cash-flow pressures on small and medium-sized farmers continue to intensify. Some farmers are hoping for a market rebound and are holding back sales; however, once prices rise slightly, large-scale pig farms will follow their established marketing plans and increase sales, creating a “sell as soon as prices rise” situation that makes a sustained, sharp rally difficult. Meanwhile, feed ingredients such as soybean meal remain expensive, continuing to drive up farming costs and further limiting the scope for farmers to restore profitability.
Institutional analysts believe that hog prices are likely to remain in a low-level, range-bound pattern in the first half of 10 month, with a sharp rebound unlikely. A genuine window for market recovery is most likely to come in late 10 month through 11 month, when southern China begins stocking up for the preserved-meat season, bringing a seasonal increase in end-user consumption. Combined with a marginal decline in supply, this could give hog prices an opportunity for a temporary recovery. However, even when the preserved-meat peak season arrives, the overall loose supply environment is likely to constrain prices, making a sharp one-way rally unlikely. Instead, prices are more likely to see a range-bound recovery from the bottom.