Pork prices hit a record high, rising nationwide to the highest level since 2008
For 4 consecutive weeks, hog prices in the national live pig market have risen continuously, with the average price exceeding 18 yuan/kg, not only setting a new high for the year but also hitting a new high since 2008. Even in the off-season for consumption, there is not the slightest sign of "cooling down." In many places in Shandong, "pig-grabbing" scenes have even appeared.
According to a report by City Express, Gao Guan, deputy secretary-general of the China Meat Association, said that in the 13 months since May 2010, domestic pork prices have continued to rise, with the national average ex-factory price of white-strip pigs rising from a low of more than 9 yuan/kg to the current 17.45 yuan/kg, exceeding the historical high of 17.16 yuan/kg in 2008 and setting a record high.
According to statistics, as of the end of May, national pork prices had risen 43.5% year-on-year. Wang Jimin, director of the Institute of Agricultural Economics and Development under the Chinese Academy of Agricultural Sciences, believes that even if farmers increase breeding now, it will still take about a year from restocking sows to the corresponding market-ready commercial pigs. Looking at the national situation, overall live pig supply in the second half of the year will be relatively tight, pork prices will remain high, and pork prices in various places may continue to rise.
China Securities Journal reported that due to the impact of disease at the end of last year, the decline in supply created a gap between live pig supply and demand, and combined with rising upstream costs, live pig prices will be difficult to pull back in the short term. Analyst estimates show that persistently high pork prices may become a new driver of inflation.
The report also cited a small-scale pig farmer in Shandong as saying he had not expected this year's market to be so good. "This year's live pig prices have gone down and up several waves." He explained that the Spring Festival was the first peak for live pig prices, when the purchase price of live pigs was more than 14 yuan/kg, after which it fell all the way, remaining at 10-12 yuan/kg in April and May. By common sense, summer is the off-season for pork consumption, but in the past month live pig prices have risen rapidly, setting a new high in several years. "There are more than 40 pigs in the pen that will soon be ready for market. Pig traders often come around asking and say they will pay 18.6 yuan/kg. Right now I am not in a hurry to sell. I will wait ten days to half a month until the pigs are fatter before selling, so I can earn a bit more."
According to data from the Ministry of Agriculture, the national live pig inventory in April this year was 436 million head, down 4.15% year-on-year. In May, the live pig inventory further declined to 434 million head, a decrease of 2 million head from April. Since the beginning of this year, the live pig inventory has been declining, with a cumulative drop of 4.68%.
Analysts pointed out that due to the impact of disease No. 5 at the end of last year, epidemic diarrhea, and low-temperature weather this spring, the farrowing rate of sows declined, leading to declines in both live pig inventory and breeding sow inventory. Based on the 6-month growth cycle of live pigs, this is precisely the time when pig supply is tightest. The decline in supply has made live pig prices unusually strong in the off-season, with prices instead climbing sharply.
A slaughterhouse owner said that due to high prices, pork inventories have clearly decreased. "Right now the market price of frozen meat is only 24,000 yuan/ton, but the cost of cutting whole meat is already as high as 27,000 yuan/ton. Keeping it as inventory is obviously too risky, so we have no choice but to reduce slaughter volume."
The report also found that the surge in pork prices drove a rapid rise in pig feed, which has risen from more than 2,600 yuan/ton at the beginning of the year to more than 3,000 yuan/ton. Taking into account the costs of feed, labor, vaccines, transportation and other links, the cost of raising one pig has exceeded 6.2 yuan/jin, whereas in the past it was only about 5 yuan/jin.
Analysts pointed out that in absolute terms alone, pig prices have already approached the historical peak, but feed costs have already set a historical high ahead of pig prices, so the rapid rise in pig prices certainly includes a cost-push factor.
According to estimates, the pig-to-grain ratio, which measures the profit of live pig breeding, has reached 7.92:1, far exceeding the break-even point of 5.5:1. The higher the pig-to-grain ratio, the better the breeding profit, and vice versa. In December 2007, the pig-to-grain ratio once reached a high of 8.78:1, but later a large amount of capital entered the pig farming market, causing supply to rise and prices to fall, and the pig-to-grain ratio moved downward, until live pig prices entered an upward cycle in July 2010. Although the pig-to-grain ratio saw a small seasonal pullback after this year's Spring Festival, the widening supply-demand gap caused it to resume its upward trend.
The rise in live pig prices has already been transmitted to the pork wholesale and retail markets, and pork below 11 yuan/jin is now hard to find on the market. Compared with the same period last year, pork wholesale prices in many places have risen by more than 40%. Taking the Beijing market as an example, by early June, the wholesale price of white-strip pigs (fat) was 11.5 yuan/jin, and the wholesale price of white-strip pigs (lean) was 12.2 yuan/jin.
The sharp rise in pig prices has triggered market concerns about inflation. In the CPI statistics, food accounts for about one-third of the weight, and pork, as a major food item, is especially an important indicator to watch. From 2007 to 2008, rising pork prices once kept inflation persistently high.