On 10 month 14, the national外三元The average live hog price fell to 9.86 yuan per kilogram, or 4.94 yuan per jin, after falling for 3 consecutive days, with a cumulative drop of 1 mao 5.
Futures were more direct: the main contract touched a session low of 10085 yuan per ton, and the ten-thousand-point threshold is under pressure again.
Consider the timing: where are we now?
There is only about one month left before the southern regions’ pickling and sausage-making season, which means we are on the eve of one of the busiest demand periods of the year.
As it turns out, before peak season even got underway, hog prices had already fallen below 5 yuan/jin.
What happened?
The mainstream explanation is: consumption is weak.
That can only be called an excuse.
Although pork consumption is declining year by year, this is not a sudden drop but a gradual process. Its impact on pork prices is a trend, and seasonal peaks and troughs in pork consumption still exist.
For example, pork prices rose by 1.2% month on month in 9 month, showing that people still bought the meat they needed before the two holidays;
After the holidays, the operating rate of slaughtering enterprises fell back to 30.22%. This is the seasonal decline that occurs every year after National Day, not something unique to this year;
Per capita pork consumption is declining gradually as a long-term trend, by five or six percentage points each year. It is not that people suddenly stopped eating pork this month.
Consumption has not plunged, but look at what has happened to pork prices.
Calls for prices to rise have been constant, but prices have barely risen. Now that we are entering the peak season, pork prices are falling instead of rising. There can only be one answer: there are simply too many pigs.
Just how many are there?
I don’t know, but there are definitely more than expected; otherwise, prices wouldn’t have fallen this badly.
First, capacity reduction may just be an "appearance."
At the end of the second quarter, the national inventory of breeding sows stood at 3780 ten thousand head, down 263 ten thousand head year on year, a decrease of 6.5%, leaving it just 30 ten thousand head short of the regulatory target of 3750 ten thousand head.
The figures look great, but the numbers don't add up, because hog prices haven't risen and the farming sector is still losing money.
What's going on?
Because two sources of growth have been overlooked by the vast majority of people.
The first source of growth is efficiency.
The industry-average PSY, or the number of weaned piglets provided by one sow per year, has risen from 2021 to 18.3 piglets to 24.3 piglets, while leading companies can even reach 29 to 32 piglets.
What does that mean?
For example, with the same 3780 ten thousand sows, at the efficiency level of 2021, about 6.9 hundred million weaned piglets would be produced in a year, while at current efficiency, theoretical capacity is about 9.2 hundred million.
So although the number of sows has decreased, each sow is more productive, meaning this is not simply a matter of reduced production.
The second increase is the time lag.
It takes about 10 months for a reduction in the sow herd to feed through to market-ready hog shipments. Nationwide, the number of newborn piglets fell year on year for the first time only in 3 this year. In other words, a genuine contraction in market-ready hog shipments in this cycle may not become visible until the end of the year or even next year.
The market hogs being sold now are still offspring from matings during the period of high herd inventories.
Another detail: 7 kilogramspigletspricesNow it has fallen to just over 100, down nearly 6 tenths from its high for the year, showing that nobody is buying. But the stalls aren’t empty—the group’s own farms are filling them.
So what we see on the surface is a reduction in breeding sows, while in reality, pork production is not falling.
Second, sentiment has been seriously overlooked.
Sentiment is a variable. Why do I say it’s a variable?
Because sometimes it doesn't make much difference, but at other times, its impact is far-reaching.
Theoretically, after such a long period of losses in pig farming, production capacity should have been reduced by now.
But the reality is, no one is willing to leave first.
Why?
Because no one is willing to accept defeat, everyone thinks they can hold on a little longer and sell during the peak season, at least to recoup some of their investment and reduce their losses.
Small-scale farmers think this way, and large corporate farms even more so. The average debt ratio of 25 listed pig farming companies has exceeded 64%. Every day they stay shut, depreciation is still calculated and interest still paid; shutting down would only make them go under faster.
So those who are actually eliminated are the ones who simply cannot hold on any longer and are forced out. Anyone with even the slightest capacity to persevere will not voluntarily exit.
So the hog market is now caught in a prisoner’s dilemma: whoever cuts production first gives up market share to others. But as long as everyone keeps holding on, supply will be hard to reduce quickly, and the result is an increasingly prolonged period of losses.
This also explains why this period of losses has lasted so long—we've been losing money for more than a year,and hog prices still can't reachthe cost line.
The more resilient the sentiment, the longer the bottom lasts. This is the most counterintuitive thing about this year.
So, looking back at the fourth-quarter trend, how much hope is there?
It still comes down to those eight words: weak at first, then strong, but only to a limited extent.
This year’s reversal has fallen through again.
Futures were more direct: the main contract touched a session low of 10085 yuan per ton, and the ten-thousand-point threshold is under pressure again.
Consider the timing: where are we now?
There is only about one month left before the southern regions’ pickling and sausage-making season, which means we are on the eve of one of the busiest demand periods of the year.
As it turns out, before peak season even got underway, hog prices had already fallen below 5 yuan/jin.
What happened?
The mainstream explanation is: consumption is weak.
That can only be called an excuse.
Although pork consumption is declining year by year, this is not a sudden drop but a gradual process. Its impact on pork prices is a trend, and seasonal peaks and troughs in pork consumption still exist.
For example, pork prices rose by 1.2% month on month in 9 month, showing that people still bought the meat they needed before the two holidays;
After the holidays, the operating rate of slaughtering enterprises fell back to 30.22%. This is the seasonal decline that occurs every year after National Day, not something unique to this year;
Per capita pork consumption is declining gradually as a long-term trend, by five or six percentage points each year. It is not that people suddenly stopped eating pork this month.
Consumption has not plunged, but look at what has happened to pork prices.
Calls for prices to rise have been constant, but prices have barely risen. Now that we are entering the peak season, pork prices are falling instead of rising. There can only be one answer: there are simply too many pigs.
Just how many are there?
I don’t know, but there are definitely more than expected; otherwise, prices wouldn’t have fallen this badly.
First, capacity reduction may just be an "appearance."
At the end of the second quarter, the national inventory of breeding sows stood at 3780 ten thousand head, down 263 ten thousand head year on year, a decrease of 6.5%, leaving it just 30 ten thousand head short of the regulatory target of 3750 ten thousand head.
The figures look great, but the numbers don't add up, because hog prices haven't risen and the farming sector is still losing money.
What's going on?
Because two sources of growth have been overlooked by the vast majority of people.
The first source of growth is efficiency.
The industry-average PSY, or the number of weaned piglets provided by one sow per year, has risen from 2021 to 18.3 piglets to 24.3 piglets, while leading companies can even reach 29 to 32 piglets.
What does that mean?
For example, with the same 3780 ten thousand sows, at the efficiency level of 2021, about 6.9 hundred million weaned piglets would be produced in a year, while at current efficiency, theoretical capacity is about 9.2 hundred million.
So although the number of sows has decreased, each sow is more productive, meaning this is not simply a matter of reduced production.
The second increase is the time lag.
It takes about 10 months for a reduction in the sow herd to feed through to market-ready hog shipments. Nationwide, the number of newborn piglets fell year on year for the first time only in 3 this year. In other words, a genuine contraction in market-ready hog shipments in this cycle may not become visible until the end of the year or even next year.
The market hogs being sold now are still offspring from matings during the period of high herd inventories.
Another detail: 7 kilogramspigletspricesNow it has fallen to just over 100, down nearly 6 tenths from its high for the year, showing that nobody is buying. But the stalls aren’t empty—the group’s own farms are filling them.
So what we see on the surface is a reduction in breeding sows, while in reality, pork production is not falling.
Second, sentiment has been seriously overlooked.
Sentiment is a variable. Why do I say it’s a variable?
Because sometimes it doesn't make much difference, but at other times, its impact is far-reaching.
Theoretically, after such a long period of losses in pig farming, production capacity should have been reduced by now.
But the reality is, no one is willing to leave first.
Why?
Because no one is willing to accept defeat, everyone thinks they can hold on a little longer and sell during the peak season, at least to recoup some of their investment and reduce their losses.
Small-scale farmers think this way, and large corporate farms even more so. The average debt ratio of 25 listed pig farming companies has exceeded 64%. Every day they stay shut, depreciation is still calculated and interest still paid; shutting down would only make them go under faster.
So those who are actually eliminated are the ones who simply cannot hold on any longer and are forced out. Anyone with even the slightest capacity to persevere will not voluntarily exit.
So the hog market is now caught in a prisoner’s dilemma: whoever cuts production first gives up market share to others. But as long as everyone keeps holding on, supply will be hard to reduce quickly, and the result is an increasingly prolonged period of losses.
This also explains why this period of losses has lasted so long—we've been losing money for more than a year,and hog prices still can't reachthe cost line.
The more resilient the sentiment, the longer the bottom lasts. This is the most counterintuitive thing about this year.
So, looking back at the fourth-quarter trend, how much hope is there?
It still comes down to those eight words: weak at first, then strong, but only to a limited extent.
This year’s reversal has fallen through again.