Pig prices plummet this year due to oversupply, with no hope of a short-term rebound

Reports say prices have already hit an eight-year low. As for this year's pig price decline, in the final analysis it is still caused by an oversupply of live pigs and excessive inventory numbers. Secondly, after the continuous rise in pig prices over the past few years, pig prices entering a cyclical downward channel is only reasonable.

Because of the continuous recovery in pig prices over the past few years, it was effectively a pig-farming bull market. This led a large number of farming households to swarm into the relatively narrow farming industry, and this result directly led to the current reality of an oversupply of live pigs. This is also the biggest root cause of the pig price decline.

As for our country's farming industry at present, it has gradually transitioned from traditional scattered farming to large-scale farming. The advantages of large-scale farming are obvious; first, costs drop considerably. Some statistics say the cost of large-scale farming is around 5.5 yuan per jin, yet in this sluggish farming year, the farming cost for small scattered farming households is still 6 yuan per jin. This price advantage also enables farming enterprises to more effectively buffer market shocks in the current sluggish industry.

In addition, what many farming households cannot compare with is capital investment. In the current market, many farming households will probably be unable to bear market risks due to insufficient funds and will be forced out.

But one point we must note is that although small scattered farming households are being forced out, for the current farming market this is not too significant, because today's market has gradually shifted toward farming enterprises, and market supply is already controlled by large farming enterprises. And because these enterprises have strong resistance to market shocks, they will not immediately fall into place during the market price decline, since eliminating this production capacity is not an easy matter.

In addition, another major issue is the cyclical price adjustment of the farming industry. The farming industry itself is highly cyclical, and because the breeding cycle of live pigs is relatively long, the adjustment of pig prices is also much more prolonged. At a press conference by the Ministry of Agriculture and Rural Affairs in April, it was also stated that this year's live pig supply exceeds demand, and farmers were urged to grasp the market situation and sell to market in time. This can also be regarded as an official statement.

Judging from the current supply and demand situation, pig prices will continue to hover at the bottom, and a rebound in the short term is probably hopeless. Moreover, based on the pig price trend of recent years, if pig prices can emerge from the current predicament in 2019, that would already count as a good outcome.

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