Analysis of the 2019 Pig Price Trend and Forecast of Next Year's Pork Market

The pork price in 2019 was something many people paid attention to. After the Spring Festival in 2019, pig prices were adjusted, and from April to May the overall trend of pig prices nationwide remained stable, after which prices stayed stable. Looking at the overall trend of pork prices, the off-season was not really off-season; instead, prices even rose, and supply and demand were indeed relatively tight.

At the beginning of 2019, profits from raising pigs were poor, and the cash flow of many small and medium-sized backyard farmers was generally bad. Before the 2019 Spring Festival, because farmers accelerated selling off, the main producing areas experienced heavy losses, with pig prices in Henan and Liaoning falling to lows of 10.3 and 8.5 yuan/kg respectively before the Spring Festival, clearly below the national average price. If the backyard farmers' full cost of 14 yuan/kg is considered, the immediate net profit margin in the producing areas fell to -64.0% to -35.9%. This means that the losses before the Spring Festival were already unbearable for backyard farmers. At the same time, considering that since 2018 the losses in the main producing areas had lasted a long time and been deep, this would put great pressure on backyard farmers' cash flow.

Pork price trend

This year, against the background of the epidemic, farmers' ability to restock was still constrained. When pork prices began to reverse and gradually approached farmers' costs, farmers began actively restocking, and industry supply would recover.

In April and May, pig prices stagnated, which also weakened the stock performance of pig-farming companies. From a fundamental perspective, we believe the stagnation in pig prices was only a change in pace, or can be understood as a delay in the price increase. On one hand, the inspection activities of live pig slaughtering enterprises, including inspecting enterprises slaughtering more than 50,000 head per year before May 1 and inspecting other slaughtering enterprises before July 1, to a certain extent squeezed slaughtering enterprises' inventories onto the market and suppressed short-term prices; on the other hand, the epidemic strengthened in the Guangdong and Guangxi areas, and selling off increased in the south, also adding to short-term supply. Looking ahead, after slaughtering enterprises' inventories decline they will have the impetus to restock, and selling off in the south means there will be no pigs to sell later, both of which will help push up pig prices in the future.

Next year's pork price may remain at the current level, or may even see a small decline. This is mainly because the state has introduced many policies on live pigs, calling on farmers to raise live pigs. With policy support, many small and medium-sized backyard farmers have begun raising pigs. As output increases, the supply of live pork on the market increases, and prices may see a small decline.