The hog market, which has been struggling for a long time, is showing signs of recovery as the end of July approaches. The national average price of lean meat pig has increased by over 20% compared to mid-July, reaching above 17 yuan/kg. While this surge in prices may be influenced by factors like heavy rain, it also reflects the industry’s sentiments after a prolonged period of decline. However, experts caution that a rebound does not necessarily indicate a reversal, and there are risks of a downturn as prices soar. Despite this, there is relief among industry players, as the current prices are helping to alleviate losses on the farming side. The increase in prices is driven by factors such as increased demand during summer holidays and supply disruptions due to rainstorms. However, experts believe that the capacity reduction in the pig market is not complete, and the sustainability of the upward trend is uncertain. It remains to be seen how hog prices will develop in the future.
The end of July has come, and the hog market, which has been suffering for a long time, is leading to a recovery. At the end of last week, the national average price of lean meat pig has been above 17 yuan/kg, which is an increase of more than 20% compared to the price of less than 14 yuan/kg in mid July.
Although the current surge in the pig market is affected by sudden factors such as heavy rain in many places in China, it also reflects the bottom line sentiment of the industry which has settled for over half a year. There are endless calls for reversing bikes. A significant rebound in a short time.
But a rebound is not a reversal. Most industry analysts believe that when the price of pigs soars, the risk of a downturn also accumulates. Under the disturbance of secondary finishing factors, the speed of production capacity depletion may be dragged down, and the continuous upward trend of prices is not clear.
The price of pigs has risen significantly from the bottom
“The market has been grinding for too long, and even downstream slaughter companies hope that the price of pigs will rise, otherwise it will not be conducive to the development of the entire industry chain. ” Referring to the recent increase in domestic pig prices from the bottom, listed companies in the domestic pig breeding industry Testimonials.
Since the initial price drop in the fourth quarter of 2022, the domestic pig market price has continued to fluctuate and decrease. By mid-July, the national average price of lean meat pig had fallen below 14 yuan/kg. However, since the end of July, this long-term downward trend has reversed.
According to the data from Sozhu.com, since July 18, the pig market has been rising for more than half a month, especially since the relevant departments of the state announced 31 measures to promote the development of the national economy on July 24, and the price pig has reached a new peak. At present, the national average price of lean meat pig has risen above 17 yuan/kg, and the price in most southern regions is approaching 20 yuan/kg.
Mysteel’s agricultural product data monitoring shows that last week, the average price of foreign three-yuan live pigs was 16.49 yuan/kg, an increase of 1.87 yuan/kg from the previous week, and a month-on-month increase of 12.79%.
The boost to the spot price of live pigs is also reflected in the futures market.
On August 7, the live pig contract LH2311 recorded an increase of 0.43% to close at 17,500 yuan / ton, an increase of more than 10% from the lowest price of 15,840 yuan / ton on July 14.
In this regard, Li Jing, a senior analyst of the live pig market of Zhuo Chuang Information, analyzed that after the strong increase in pig prices in late July, farmers began to adjust their expectations for the future of the market, and reached a consensus on bullish sentiment. Follow the price on the spot.
However, he also mentioned that as the current live pig price differential turns from negative to positive, it means that as the price of pigs rises, the industry’s bullish expectations for the fourth quarter market will decrease, and the emotional support on for weakened pig prices.
With the recovery of pig prices, the loss situation on the farming side has improved.
“For some enterprises with lower production costs, the current price can basically prevent losses, and even make a small profit. However, the costs of each enterprise are different, so not all producers can make a profit, but the size of the loss eased. Everyone can breathe a sigh of relief,” said the businessman above.
Souzhu.com analysts also believe that the average price of the current market has returned to close to the cost line. For farmers with low breeding costs, a pig price of 16-17 yuan/kg basically touches the cost line, with prices of 17.6 yuan/kg, 18 yuan/kg, 18.8 yuan/kg, and 19.4 yuan /kg per stage. , the pig breeding The phenomenon of home weight on the bar, corresponding value, and sitting and waiting for 20 yuan/kg also appears immediately.
Big pigs need more to form support
During the interview, people from listed companies in the pig industry mentioned that there are many factors driving this round of raising. Going into the summer holidays, the rebound in market usage is indeed more pronounced, and downstream demand has been boosted. At the same time, factors such as frequent rain storms have made it more difficult to transport live pigs, which has also hampered supply to some extent. The mismatch between supply and demand has driven up prices.
“In some areas, the enthusiasm for re-finishing and replenishment is more active, which also increases the price of live pigs.” The Shanghai Steel Union agricultural product analyst added that because the whole market remains 14-15 yuan / kg in the first half of the year, the breeding end continued to lose money , Funds are tight, farmers are desperate for growth, and generally there is no operation to stop the column. The second finishing also failed last year. This year, the second finishing group has reduced weight and carefully. The average market weight has continued to fall to around 120 kg, the lowest point in three years. However, due to the “abnormal” increase in pig prices in recent days, retail investors have re-emerged operations such as squeezing the stalls, increasing the weight of re-breeding, and increasing the weight of large-scale farms. There are rumors in the market that more than 10,000 secondary breeding pigs are being bought by large secondary breeding households in the north.
The superimposition of phenomena such as styling and re-breeding has led to a reduction in the number of live pigs being slaughtered in the market in the short term, presenting a situation of tight supply.
According to Mysteel statistics, the spread of standard fertilizer prices on July 31 was 0.44 yuan/kg, an increase of 0.19 yuan/kg week after week. Especially in many southern provinces, large pig resources are particularly scarce, which has stimulated the increase of small and medium-sized farmers still down the stalls and reluctant to sell them. There are also some large-scale farms Stop selling phenomenon.
Li Jing, an analyst at Zhuo Chuang Information, also mentioned that the slowdown in the pace of hog slaughter has led to a decrease in the supply of hogs, which is also a major factor supporting the recent increase in hog prices.
Affected by the previous epidemic, the source of small weight pigs in the south, especially in the south-west, was killed earlier than expected, leading to a significant reduction in the number of large pigs in stock recently. In addition, 2023 is still in the down phase of the 2023 pig cycle. Before that, large pigs were slaughtered and consumed one after the other, which widened the supply gap of large weight pigs in the market. At the end of July, the share of 140-160 kg pig stock in the country fell by 0.12 percentage points.
Be careful of rebounds and don’t reverse
Fueled by the recent sustained rise in hog prices, the market is bullish, and whether the hog cycle will lead to a reversal has become a hot topic of discussion.
“This round of pig price increases is more due to a lack of supply of large pigs and increased demand, and the combined pressure of farmers to increase weight. At the same time, the second fattening cuts off the supply of some standard pigs , and a large short-term gap in the supply side. However, the rebound is not a reaction. Turn. “Li Jing believes that the current capacity reduction in the pig market is not complete. During the first half of the year, the number of pig slaughters monitored by Zhuo Chuang did not increase significantly. Production capacity needs to be further reduced later, and the continued upward trend is still unclear. The increase in hog prices in July was more due to a one-way increase on the supply side, and the downstream market had no incentive to follow up. From July 24 to 31, the national average price of lean meat pig rose by 2.04 yuan/kg, while the daily slaughter volume of sample companies decreased by 3.8%. The price of large pigs in the short term sales area is relatively strong or still has strong market support. It is expected that domestic pig prices may remain high and fluctuate in the first and middle of August.
Analysts at Sozhu.com also believe that although the price of pigs continues to rise sharply, the risk of decline is accumulating, and farmers need to be vigilant. If there is no increase in this wave of hog prices, farmers will accelerate slaughter and deplete production capacity, which will help the subsequent gradual and sustained increase in pork consumption after recovery. With this rising wave, it will not only slow the pace of capacity reduction again, but may even cause a wave of secondary fattening, which will largely offset the positive increase in pig prices caused by the improvement in the use of pork in the second. half the year, therefore beneficial to pigs A sudden increase in prices would have a major negative impact.
According to Wu Menglei, an agricultural product analyst at Shanghai Iron and Steel Union, the pressure on the breeding head and the gradual increase in pressure indicate that the short-term slaughter volume will decrease and the price will rise to some extent, but it has a greater impact on the long-term pork supply.
He said that the current base of breeding sows is still very large, and demand is far from returning to a positive and optimistic state. After the price of pigs has risen, farmers are less willing to take the initiative to reduce production capacity, and given the number of piglets born in the first half of the year, the pressure on the supply of live pigs is still to be huge. At present, the market is far from a shortage of pigs or a small number of pigs, together with the slow increase in slaughter weight and the high storage capacity of frozen products, the price of pigs is expected to rise in August, but there are many limiting factors.
“De-capacity in the early stages is still moderate, and the current market is still in a situation of oversupply.” The person from the listed company in the above industry also mentioned that the breeding initiatives have become more rational in the past two years, and some construction projects have been suspended or terminated. No capacity was added. However, the production capacity that has been formed will continue to be produced, and a process is still needed for the general de-alization of the industry.
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