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03

2022

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09

China's Pig Prices to Fluctuate and Rise Overall From Sept to the Spring Festival

Source:

Meat Industry New Media; OIG+X

Pig prices are expected to fluctuate and rise as a whole from September to the Spring Festival, and the specific situation will be affected by secondary fattening and pork reserves release policies.

 

Pig prices are expected to fluctuate and rise as a whole from September to the Spring Festival, and the specific situation will be affected by secondary fattening and pork reserves release policies.

 

Secondary Fattening

 

Due to epidemic normalization in recent years and increasing fluctuations of live pig prices since ASF, it has become harder to predict accurately pig prices. Meanwhile secondary fattening model is a preferred choice for farmers because of its short-term substantial profits. The increase in secondary fattening will inevitably bring about an increase in the average slaughter weight of pigs in the entire industry.

 

Big pigs were sold and slaughtered ahead of schedule in some areas due to the high-temperature weather and the water shortage in Aug this year. Correspondingly, recent supplementary suckling pigs can’t be sold or slaughtered in Nov and Dec. However, these two months are also the peak-consumption seasons for fat pigs in which Chinese people cure pork and make sausage filing. To fulfill this demand, farmers are inclined to do secondary fattening.

 

If that time sees the large-scale secondary fattening, big pigs will be sold and slaughtered by farmers, suppressing the rise of pig prices; otherwise, it will cause a supply shortage of fat pigs bringing up pig prices.

 

Policy Regulation

 

Two factors will trigger China’s early warning of excessive pig price surge: the pig-grain ratio and the year-on-year increase in pork retail prices. The second-level warning will be launched as pig-grain ratio becomes 10:1, the first-level one as pig-grain ratio turns to 12:1.

 

As for another trigger condition, the average price of the retail price of lean meat in 36 large and medium-sized cities for the week, triggering the second-level warning when it rises by 30% YoY, the first-level warning by 40% YoY.

 

According to the regulation, the state and local planners will release pork reserves with a second-level warning being triggered and will strengthen the policy enforcement with the first-level one happening. That is to say, the country’s top economic planner will continuously release pork reserves until pig prices fall back to the second-level warning line.

 

Although the state reserve embraced not many quantities in H1, COFCO has been entrusted to carry out targeted procurement from abroad, with an estimated scale of more than 300,000 tons. Its expected that relevant departments may make emergency purchases as the price of pork remains above the second-level warning for a long time.

 

The information published on September 2 targets to ensure pork supply before future festivals (Mid-Autumn Festival, National Day, New Year's Day, and Spring Festival). This kind marks negligible impact on the pig prices with not long time and not large scale.

 

However, situation will totally change after warning is triggered. First, there will be continuous policy activities, such as the one in 2020. Then there will be relevant policies and media hype. For example, in July this year CCTV and NDRC released multiple news to put great pressure on the spot and futures market although hog and pork prices were far from touching the warning level.

 

Therefore, for pig prices from September to the Spring Festival, attention needs to be paid as follows: whether pork prices trigger the early warning and the corresponding actions of relevant departments.