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2022

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2023 May Witness a Resonance Rise in Prices of Livestock Products in China

Source:

SCI99

2023 may witness a resonance rise in prices of livestock products in China among which considerable attention should be given to the change in supply and demand of hogs.

Collective rise in prices of domestic livestock products

According to the data monitored by SCI99, prices of hog, white-feathered broilers, and eggs have been at a high level from Jan to Oct this year, with an extra prominent surge in livestock price index. The monthly average transaction price of DLY hogs surged from 7.09 yuan/kg to 13.65 yuan/kg, cumulatively increasing by 92.52%. The monthly average egg price in producing regions surged by 32.51%, at a highest price in Q3 compared with the same period for recent ten years. The price of white-feathered broiler increased by 15.98% at a higher level in the past five years. The data from MARA shows that livestock price index has risen from 121.07 to 148.43, up 21.96%. It can be seen from the chart below a consistent trend in livestock products price index and hog prices.

The price of animal protein products is closely related to pig prices

Based on the price data of pigs, white-feathered broilers and eggs in the past seven years, it can be found that when hog prices run at an upward trend, the correlation becomes stronger between prices of livestock products, such as in 2018, 2019 and 2022.

 

There was a supply gap of live pigs in 2018-2019, revealing an apparent substitution effect of broilers and eggs with a resonance increase. Driven by industry's self-adjustment and the policy of stable price and supply guarantee, the pig cycle bottomed out and rebounded in 2022. When pig prices have surged in Q2 and Q3, there's tight supply of broilers and eggs.

  

In the past three years, the coefficient between pig and egg price is mostly above 0.8, which belongs to a highly positive correlation. Overall, the correlation between pig and white-feathered broiler prices (0.5-0.7) is higher than that between pig and egg prices (0.5-0.55).

 

The same direction of the price ratio and correlation of livestock products in 2023

The annual ratio price of live pig and white feather chicken is mostly between 2.3-2.5, while between 2.4-2.8 between hog and egg prices, which are both at the lowest in 2018, mainly because hog prices stayed at the bottom of the cycle, yet prices of egg and broiler turn to surge, leading to a trend deviation from the price comparison.

 

In 2020, the price parity is significantly higher than the normal level, mainly for hog prices stay at the top of the cycle, while prices of egg and broilers turn to be corrected from a high point based on the supply-demand industry logic, showing a declining correlation degree.

 

Therefore, it's estimated that the average hog price in 2023 will be 11.44 yuan/kg, with a YoY rise of 18.95% in an upward stage of a new round of "pig cycle" and 2.32% YoY rise in egg prices and 6.18% in broilers. The hog price will still stand at the lead position, boosting prices of other animal protein products with a moderate or high correlation. 2023 may witness a resonance rise in prices of livestock products in China among which considerable attention should be given to the change in supply and demand of hogs.