Pig market outlook is bullish; farmers will make money in the second half of 2016

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Since mid-June this year, the market for meat pigs has seen a new round of decline. The national average price of lean pigs fell from 20.1 yuan per kg to 17.8 yuan per kg, a large drop of nearly 20%. However, since last week, live pig prices have stopped falling and rebounded.

In less than a week, the price rose from 17.8 yuan per kg to 18.5 yuan per kg. For a time, the market was bullish, so some people said that high prices such as 22 yuan or 24 yuan would soon appear again.

Why has this market situation occurred? Is this rise in live pig prices a temporary phased increase, or has a new round of rising prices already begun? Listen to the report by Li Xin, a reporter from China Rural Voice.

The reason pig prices fell in the past two months. Cui Xiaona, an analyst at Sublime China Information, said the reason pig prices fell in the past two months was the recovery of phased live pig supply:

Last winter, affected by cold air, the pig mortality rate was high. In some areas, piglet diarrhea was especially serious. Farmers and breeding enterprises discovered this information, and later the number of live pigs replenished for rearing increased significantly. Along with this increase, supply in the live pig market was affected. Slaughterhouses intentionally suppressed prices, which ultimately affected the market and led to a continuous decline.

So what is the reason for the recent rise in pig prices? Cui Xiaona believes the most important factor is that floods and waterlogging disasters affected pig farms. It is a manifestation of the relationship between supply and demand, an endogenous rise.

Some time ago, southern China generally had a lot of rain, and floods and waterlogging disasters occurred in many places, affecting pig farms. Some pig farms were very seriously damaged, causing heavy losses; moreover, the floods and waterlogging disasters hindered the transportation and purchasing of live pigs, causing a shortage of pig sources. At present, in many places in the south, the floodwaters have receded, the weather has cleared, and more purchasing is taking place, but there are fewer pig sources, so live pig prices have risen.

According to statistics, in recent months, the number of productive sows in China has not increased significantly. So what will the trend of the live pig market be in the second half of 2016? Feng Yonghui, an analyst at the China Live Pig Early Warning Network, believes that the current rebound is not large in magnitude, and there will be price pullbacks in the middle. Overall, the market in the second half of the year is still acceptable, and the highest and lowest points of the average live pig price are relatively easy to predict:

We expect that in the short term, the price may once again approach 19 yuan per kg. This is the short-term high point we judge. The price will reach this level before the end of August, and then there may be another pullback. The magnitude of the pullback will not be too large. We believe the low point from some time ago is the lowest degree of the pullback. A price of around 17.5 yuan is basically the low.

Feng Yonghui believes that overall, in a short period of time, it will basically be difficult for the average live pig price to again reach the high price of 20 yuan per kg.

The difficulty of this price appearing is very, very great. The main reason is that the survival rate of piglets born after March this year is still relatively high. The time for this batch of piglets to come to market starts in September, so supply will increase, while the real peak demand season is around the winter solstice at the end of the year. Therefore, during this period, it is too difficult for the price to break through 10 yuan. We believe the high point before the Spring Festival is 9.5 yuan to 10 yuan per jin. This is the live pig price. The pork price will be at most 15 yuan per jin.

Feng Yonghui said there is another important factor that large-scale breeding farms need to consider, namely the amount of imported pork. According to past statistics, many food processing enterprises would purchase pork from farmers' markets to make pork products, but this behavior has rarely appeared this year. The vast majority have switched to importing pork from abroad to make pork products. Based on the current momentum, the amount of pork arriving in August may continue the momentum of June and July and continue to increase. This factor will impose an important restraint on the rise in pig prices. Feng Yonghui believes that under such circumstances, large-scale breeding enterprises should hold still and just grasp the current profits.

Large-scale pig farms may adjust their inventory structure according to this market. Under the current market, the profit level corresponding to one pig is 800 yuan. This profit is already excessive profit. There is no need to expand scale, and no need to reduce scale. If you want to keep this level in your hands, you must have pigs on hand. For large-scale pig farms, this year is a harvest season. By no means should you expand scale on a large scale and increase production capacity. That is the most inadvisable thing.

At present, what industry insiders worry about most is that under good market conditions, farmers will expand their scale and cause the market to reverse. As long as this does not happen, under normal circumstances pig farmers can make money in the second half of the year.

Editor: Li Xin, Wang Xiaojing

Coordinating editor: Yang Ying