Can the high price of 8 yuan in 2017 reappear?
Around August, during internal discussions among our colleagues, we suddenly discovered that the market in the second half of the year was not the downturn previously assumed; pig prices would rebound and exceed many people's expectations. Everyone knows that what determines the level of pig prices is the relationship between supply and demand. Small and medium-sized backyard farms were accelerating their exit, the production capacity of large-scale pig farms had not yet been fully released, and in addition, the sow herds of small and medium-sized pig farms had serious reproductive disorder problems, so sow culling increased somewhat in the first half of the year. After the Golden Week, following a half-month consumption trough, pig prices began a slow climb starting in mid-to-late October. During this period I also wrote several posts repeatedly explaining the characteristics of this year's second-half market trend - a slow climb. In recent days, many netizens have again asked me whether the 8 yuan pig price will still appear. Today I will write another post to answer the doubts of many netizens.
Three favorable factors affecting this year's live pig supply:
Environmental protection demolitions: In the first half of 2018, productive sows were still recovering rapidly, but since May, the number of productive sows began to decrease again. From April to May, in major pig-raising provinces such as Henan ( agricultural land, commercial and residential land, industrial land), Shandong ( agricultural land, commercial and residential land, industrial land), Sichuan ( agricultural land, commercial and residential land, industrial land), Hubei ( agricultural land, commercial and residential land, industrial land), and Hunan ( agricultural land, commercial and residential land, industrial land), large-scale demolitions and bans on raising pigs unfolded one after another. The demolitions accelerated the exit of small and medium-sized pig farms, causing productive sows to decline year-on-year compared with last year. The expansion of many large enterprises and the strictest environmental protection orders in history also lengthened their speed of putting production into operation, so live pig production capacity did not continue to recover along the first-half trend.
Sow reproductive disorders: The second main factor promoting the increase in culling of productive sows on small and medium-sized pig farms is the actual widespread problem of sows not coming into estrus and having a high return-to-estrus rate. Since pig prices rebounded in 2015, breeding pigs from breeding pig enterprises have become increasingly popular, and many breeding pig enterprises were even sold out for a time, making the breeding pig market a mixed bag. However, breeding pig enterprises did not attach importance to breeding work during the trough period from 2013 to 2015. Breeding pigs introduced in previous years had already severely degenerated. Everyone has also seen that many breeding pig enterprises have again introduced breeding stock from abroad this year. Various reproductive disorders in productive sows are not isolated cases but a very common problem, and this is another main reason for the increase in sow culling.
Sharp drop in imports: The third favorable factor should be imported meat. Since the sharp drop in pig prices in May caused most import traders to fall into losses, imported meat was seriously unsalable, and the volume of imported meat decreased significantly year-on-year compared with last year, with the full-year total expected not to exceed 1.2 million tons.
The above 3 points all directly affected this year's second-half live pig supply and pork output. The fact that supply itself is not abundant has already shown itself since late August. The relationship between live pig supply and demand has remained in a state of tight balance. Both sides of supply and demand, for their own interests, have repeatedly played games, and pig prices have hovered around 7 yuan, neither rising sharply nor falling sharply. The balance of supply and demand and the game between both sides will eventually be broken, and pig prices will certainly rise.
Next, pork consumption will receive favorable support
Since October, everyone has begun hoping for pig prices to rise, but more people understand that the prerequisite for pig prices to rise is stimulation from seasonal consumption, and enterprise slaughter volume has become an important indicator for evaluating consumption. According to monitoring data from Ruiqi Data, since late November, slaughter volume at slaughtering enterprises in northern regions has already increased noticeably, and in recent days cured meat production in the south has gradually begun, with slaughtering enterprises in the southwest region increasing volume significantly. Next, this will provide favorable support for pig prices.
For ordinary people, pork prices have a clear impact on their consumption. This year, pork prices fell by more than 10% year-on-year compared with the same period last year. Although total pork consumption has already become saturated, consumer enthusiasm will not decrease, especially in the vast northern regions, where relatively obvious consumption growth can be seen recently.
Recently, pig prices in various places have begun to rebound. Before the winter solstice, this slow upward trend will continue. At present, the national average price of foreign three-way crossbred pigs is 14.26 yuan/kg, and some southern regions have already broken through 15 yuan/kg. With the favorable factors for consumption still adding support, it is expected that a high price of around 8 yuan will appear in late December, but it will be relatively difficult for the national average price to break 8. Looking now, pig prices before the Spring Festival are full of uncertainty.
A correct understanding of pig prices:
1. The rise and fall of pig prices is the result of a game between supply and demand under the influence of multiple factors, but we must grasp the main factors. What currently determines the rise and fall of pig prices is no longer small and medium-sized pig farms, nor small butcher hands. Rather, it is large-scale enterprises and medium-to-large slaughtering enterprises. This is also the transfer of the right to speak on pig prices. Slaughtering enterprises are no longer simply the dominant price-setters, so the market is closer to the real relationship between supply and demand.
2. Productive sows will continue to decline. The decline in productive sows is an ongoing process. By 2020, China will probably need only about 30 million productive sows. There is still room for a decline of 3 million to 4 million head now. The decline in productive sows is accompanied by improvement in production performance. Today we cannot simply infer changes in pig prices from changes in productive sows. We should pay more attention to the culling and growth of productive sows within one year and to changes in the reproductive level of productive sows in different seasons.
3. Consumption is tending toward saturation, and slow demand growth is the broader historical background. Along with China's population aging, total pork consumption has already tended toward saturation, and demand for live pigs is also becoming increasingly saturated. In addition, the slaughter weight of live pigs is gradually increasing, so we need to establish a new supply-demand relationship for analysis and forecasting. Slaughter volume has decreased year-on-year, but that does not mean demand cannot be met.
Compared with pig prices, I have recently paid more attention to upstream raw material prices. Affected by environmental protection, feed and veterinary drug prices have entered a stage of crazy increases. Premix has already risen by 500-1000 yuan/ton, and recently raw materials such as vitamin A have continued to rise. A second price increase for premix may come in the next few days. Family pig farms still have to face the unavoidable problem of rising costs.