Pig prices have peaked and are falling; small farmers should not rush in
The increase in slaughter volume is the main factor behind the recent decline in China's pork prices. Growth in slaughter volume has increased market supply, directly putting downward pressure on pork prices
This round of the pig price "bull market" may already be entering its final phase; small farmers must not rush in, while large operators should take the dividends earned during the "bull market" and quickly raise their level of automation to reduce breeding costs
Monitoring data from the Ministry of Agriculture show that on September 9, the average price of pork at national agricultural product wholesale markets was 25.02 yuan per kg, down 6.27 yuan from 31.29 yuan in the second week of June. "After mid-June, live pig prices began to fall. But everyone thought prices would rise after the floods, yet so far they still have not risen," Hu Jizheng, chairman of Zhennong Industrial Company in Qichun County, Hubei province, which has 5,000 hogs on hand, said in an interview with an Economic Daily reporter.
On September 9, the average wholesale price of white-striped pigs at the Beijing Xinfadi market was 21.3 yuan per kg, down 2.74% from September 2. Liu Tong, manager of the statistics department of the Beijing Xinfadi Agricultural Products Wholesale Market, believes that pig prices across the country have fallen to varying degrees, and the reason lies in ample supply.
In addition, data from the Ministry of Agriculture on slaughter volume at designated pig slaughter enterprises above a certain scale nationwide show that in July China's pig slaughter volume was 15.1018 million head, up 5.1% month on month and up 1.2% year on year. "The increase in slaughter volume is the main factor behind the recent decline in China's pork prices. Growth in slaughter volume has increased market supply, directly putting downward pressure on pork prices," said Zhu Zengyong, a market early-warning analyst at the Ministry of Agriculture and an associate researcher in the International Information Research Office of the Agricultural Information Institute of the Chinese Academy of Agricultural Sciences.
The ample supply of live pigs is also because the wide price gap between domestic and foreign markets has stimulated a sharp increase in pork imports. Customs data show that in July China imported 309,700 tonnes of pig products, up 145.3% year on year. Of that, pork accounted for 183,400 tonnes, up 209.4% year on year, close to the highest level in history. In the first seven months of this year, pork imports were 945,700 tonnes, up 149.4% year on year, 21.6% higher than the full-year import volume in 2015.
"Since March 2015, pork prices at Xinfadi have consistently run above the level of the same period the previous year. In July this year, the weighted average price of white-striped pigs at Xinfadi was 22 yuan per kg, down 9.93% from 24.36 yuan in June, and also down 2.49% from 22.5 yuan per kg in the same period of 2015. After lasting for a full year, Xinfadi pork prices have finally fallen back below the level of the same period the previous year." Liu Tong believes that the period of live pig supply shortage has passed, and the overall situation has shifted from tight to loose.
In fact, as early as September last year, pork prices had already peaked and begun to fall. After more than 20 consecutive weeks of sharp gains, in the second week of September last year, live pig prices in major consumer provinces in the south such as Guangdong, Fujian and Zhejiang fell one after another, driving pig prices down in major producing provinces such as Heilongjiang, Jilin, Shandong and Henan.
However, after the onset of winter, many places were hit by severe cold wave weather, and large numbers of newborn piglets died at farms in major producing provinces such as Hubei and Henan. This caused a shortage of live pig supply, which led pig prices to turn "bullish" again. After spring this year, as the weather warmed, piglet survival rates returned to normal, live pig supply gradually became ample, and pig prices naturally had to return to a downward channel. "It has already been half a year since the severe cold wave weather ended. Judging from the fact that it takes about half a year for piglets to be fattened and sent to market, the pigs now coming to market are all those born after the severe cold wave weather. Judging from the pattern of seasonal fluctuations in pork prices, white-striped pig prices in early August are all periodic highs, and it will be hard to break through them in the following months. There is no doubt that meat prices have entered a downward channel," Liu Tong said.
"From the import side, China's imports of pig products can be expected to continue to show large year-on-year growth, which will restrain rises in live pig prices," Zhu Zengyong said.
All kinds of signs indicate that this round of the pig price "bull market" may already be entering its final phase, and small farmers must not rush in. Large operators, meanwhile, should take the dividends earned during the "bull market" and quickly raise their level of automation to reduce breeding costs and curb the large-scale capture of the market by cheap imported pork.