Forecast and Prospect Analysis of Hog Price Trends in 2011
Pig farming is an industry with a relatively long production cycle, and the vast majority of pig farmers in China always decide the next period's output based on the previous cycle's prices. If the previous period's prices were relatively low, farmers will reduce production, which will cause a future shortage of pork supply. This is directly related to the previous round of sharp price declines: those with little capital no longer had the strength to raise pigs, while those with sufficient capital often understood the risks of the pig farming industry well and would not stake everything on a do-or-die gamble. Therefore, the number of hogs brought to market will be greatly reduced. The key is the size of the breeding sow inventory. Looking at the reality around you, look at your own surroundings: the number of trucks hauling culled pigs has clearly increased.
Overall, the benefits of the breeding industry in the second half of the year are viewed favorably, with bright prospects, but hog prices are not expected to surge.
1. Improved benefits in the pig farming industry drive up corn and soybean prices in Henan
Recently, hog prices have rebounded noticeably, the benefits of the breeding industry have improved, and demand for feed such as corn and soybean meal has increased, driving up corn and soybean prices. In late July, the purchase prices of corn and soybeans in Henan Province were 1,866 yuan/ton and 3,978 yuan/ton respectively, up 0.32% and 0.25% respectively from late June. Analysis suggests: for corn, the situation of rebounding demand and tight supply will be difficult to change in the short term, and prices will maintain high-level fluctuations before large quantities of new corn reach the market; soybean prices are greatly affected by the international market and the market conditions in the main production areas of Northeast China, and the overall economic recovery and the slow rebound in downstream demand provide strong support for soybean prices, but the impact of low-priced imported soybeans and the sluggish edible oil market will limit the room for soybean price recovery, and soybean prices are expected to be more likely to rebound slightly amid fluctuations later on.
2. Improved piglet restocking situation shows that enthusiasm for pig farming has greatly increased
After the retaliatory rebound since June, hog prices in some domestic regions have recently fallen back from high levels, but the decline has been limited, and hog farming benefits remain at a relatively good level. Boosted by improved farming benefits, farmers' willingness to restock piglets also became more active in July, driving the gradual recovery of hog inventory.
3. Domestic hog prices have recently surged and then fallen back, but farming benefits remain stable
With the rapid rebound of domestic hog prices since June, current domestic hog prices have entered a high range, but because the hot season suppresses meat consumption, there is certain resistance to further increases in hog prices. Moreover, as the logistics situation improves, live pig prices in some regions have recently fallen back from high levels (such as Shanghai and Jiangxi). According to JCI, recent domestic live pig prices are 6.5—6.8 yuan/jin, with previously higher regions falling back by 0.2—0.3 yuan/jin. Although hog prices in some domestic regions have adjusted downward from high levels, farming profits in most regions remain stable at 100—300 yuan/head, and the hog-to-grain price ratio remains above 6.0:1 (recently 6.38:1). Short-term hog prices are expected to be mainly consolidating at high levels, and the market is generally watching the performance of the hog consumption market before the Mid-Autumn Festival and National Day.