Where are pig prices heading during Spring Festival? Analysis of key influencing factors
Original title: Spring Festival is the biggest “trap” for pig prices
As long as you predict pig prices, there is a risk of being wrong and a risk of being criticized, because pig prices can only be forecast (or guessed) based on known information. We cannot influence government policy, we do not know how much imported pork will be released during Spring Festival, and we do not know whether large numbers of pig farms will continue to be demolished. Nor can we make farmers concentrate their marketings or hold back pigs. These three are all very important factors affecting pig prices. Here I am only expressing a personal opinion, with a reminder: the pig market rises and falls, so refer to it with caution!
If we want to figure out pig prices during Spring Festival, we first need to think about several questions:
1. Are breeding sows really decreasing?
On December 25, the Ministry of Agriculture released information on live pig inventories at 4,000 monitoring points for October 2016. In November, live pig inventories fell 0.6% month on month and 3.2% year on year, while breeding sow inventories fell 0.5% month on month and 3.7% year on year. It is said that “as of now, breeding sows have continued to decline from 50.13 million head to 36.84 million head, a drop of as much as 26.5%, and the continuous decline has hit a historic low.” I have many doubts about this data:
1. Is this figure accurate?
China's sow inventory data was inaccurate in the past, and it is even more inaccurate now. Because there is no breeding sow subsidy anymore, no one bothers to carefully verify the accurate figures. I have been visiting markets recently, and almost no one can clearly say what the local inventory (marketings) figure is, not even leaders of the animal husbandry bureau. Inaccurate figures not only fail to correctly guide production, but may also cause misleading.
2. Who would cull sows?
Everyone knows that this year has been the most profitable year for pig farming in history. If you breed and raise your own pigs, a single finished hog can even earn 1,500 yuan, and for a single sow earning 10,000-15,000 yuan is very common. Under such circumstances, even if a sow's reproductive performance is low, would anyone cull the sow? We are all normal people. Anyway, if it were me, I would not.
3. Will demolitions reduce sows?
Some people say that many pig farms were demolished this year. Yes, that makes sense. Demolitions will definitely affect pig farms, but is what is being demolished pig housing or the bones of sows? If a pig farm is demolished, will breeding sows be killed as culled sows? Surely not, right? What price do culled sows fetch? What price do breeding sows fetch? If the price is a bit lower, some people will sell them on, but I do not believe they would be slaughtered for meat at such high pig prices! At least that would not be the mainstream.
My judgment is: in theory, sow inventories will not only not plummet; because everyone will extend the productive lifespan of sows, after pig prices soar, it is impossible for so many sows to be culled.
2. Will market supply decrease?
1. Will imported pork increase?
It is generally believed that supply will affect pig prices. But this supply should include: domestic immediate marketings + imported pork = theoretical supply. The news we hear is that imported pork is continuously increasing, and there has even been news like this: “The first batch of pork products imported via the China-Europe freight train came from Germany, totaling 21.9 tonnes in 1,369 boxes. This batch of frozen pork departed from Nuremberg, Germany, on the China-Europe freight train, passed through Poland, Belarus, Russia and Kazakhstan, entered China via **Alashankou, and was shipped directly to Chengdu, a journey of 12,000 kilometers taking 13 days, which can save more than 40 days compared with sea transport.”
What does this mean? Imported pork now has a new channel, faster and more convenient! There are still about 50 days from now to Spring Festival. How much more will come in?
2. How much frozen pork is in warehouse stock?
It is reported that: “The shelf life of reserved frozen pork is generally 12 months. When the reserved frozen pork of the storing enterprises reaches 4-5 months, it will be sold as normal frozen products, and then a new round of frozen pork reserves will be made, meaning the rotation cycle of reserved frozen pork is 4-5 months.” Pig prices this year had a relatively large decline in August-September. As businesspeople, if meat product enterprises, like pig farmers, judge that pork prices will rise further during Spring Festival, then in theory they would buy low and sell high, precisely around Spring Festival. If that really happens, it is not good news.
3. Are there many held-back heavyweight pigs?
In the previous round, because there were too many heavyweight pigs, slaughterhouses collectively pushed prices down, and later panic selling caused a round of pig price declines. Now many people are optimistic about pig prices during Spring Festival, and the heavyweight pig phenomenon is emerging again. As long as heavyweight pigs exist, slaughterhouses have the motive and justification to push prices down, and this is also a major risk.
Based on the above three points, around Spring Festival, the supply of live pigs is predicted to increase considerably. If supply exceeds demand, plus bearish news factors (imported pork, heavyweight pigs, release of frozen pork, etc.), this will trigger concentrated marketings by smallholders and fattening households.
3. Is Spring Festival the last chance to escape?
1. What will happen to overweight pigs?
In fact, large-scale pig farms generally do not hold back pigs. This is because before construction, large-scale pig farms plan and build pig housing according to sows, nursery pigs and fattening pigs. If pigs that should be marketed are not marketed, it will affect the previous production stage, so in the previous round manypig fatteningoperations took 200-200 jin pigs from large-scale farms and continued fattening them. Those holding back pigs are mainly smallholders, specialized households and fattening farms, who prefer to gamble on pig prices. Each year they mainly gamble on “Mid-Autumn Festival (including National Day)” and “Spring Festival.” Now, the last chance to gamble on pig prices is Spring Festival. After Spring Festival, until May, it is all the off-season for consumption, and during this period there has been almost no record of price increases in the past.
From Spring Festival to May, that is more than 3 months in between. Can heavyweight pigs afford to wait? Therefore, no matter what, overweight pigs will be marketed around Spring Festival. This is reality. What kind of impact can it bring? Everyone can assess it.
2. How many people are gambling?
As a practitioner, of course I hope pig prices will fly a little longer, but as long as supply rises, pig prices will fall sooner or later. This is the rule, a rule no one can change. What we most want to know now is when they will fall. Raising pigs is all about making money. If we could choose, of course we would maximize profits.