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04

2022

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07

NDRC’s Meeting on Hog Market Analysis

Source:

On July 4, 2022, the National Development and Reform Commission convened a meeting with pig-breeding enterprises, slaughtering enterprises and relevant associations. This meeting aims to analyze recent supply and demand of live pigs and its market price trends, and to remind pig slaughtering enterprises not to stock hoarding to gouging prices.

 

 

On July 4, 2022, the National Development and Reform Commission convened a meeting with pig-breeding enterprises, slaughtering enterprises and relevant associations. This meeting aims to analyze recent supply and demand of live pigs and its market price trends, and to remind pig slaughtering enterprises not to stock hoarding to gouging prices.

 

OIG+X analysis:

 

--Why hold such a meeting?
This meeting reflects the competent authority’s worries about the recent skyrocket in pig prices. As of July 1, the national average price of live pigs has reached 20.29 yuan/kg. Pig prices surged 30% in June, and rose 14% this week. Different attitudes towards driving factors for the recent surge in pig prices are dominated by price gouging or short supply. This chaotic market goes against the pig price uncertainty. Therefore, this meeting is partly out of concern that pig prices are skyrocketing, and partly to stabilize the production of the industry.

 

--Whether there exists price gouging?

The secondary fattening and price gouging behaviour only magnify pig price rise degree, but are not the fundamental drivers. First, pig price has been driven by the supply side since June. In the off-season of demand, the supply of pigs in north China has decreased more than that in south China, driving pig prices upward. The stock hoarding behavior is not serious. For marketing planning, the slaughtering rate of 142 large-scale enterprises in June was 97.17%, still running at a normal level. For the average market weight, as of June 30, the average weight for sale of the industry was 125.29kg, slightly lower than last week, and significantly lower than the same period last year. Therefore, reasonable stocking behavior leads to slow slaughtering progress, making pig price rise.

 

-Will the stock hoarding have an impact on the pig price in the future market?

 

Firstly, it’s difficult to do blindly stocking with increasing daily costs, because the current feed cost is at a historical high, with feed to meat ratio still increasing. Secondly, at the present stage, the demand side favors standard pigs, and large pigs in summer are prone to stress, increasing the stocking risk. The average weight for sale slowed down its growth and even fell slightly this week, which has indicated the suppression of the stock hoarding behavior. Moreover, considering the economic marginal effect adjustment, reasonable pig stock hoarding may exist for a long time, but it will not alter the upward direction.

 

Predictably, there will shine a new vision on imported pork market as domestic pig prices soar, making the stock of pig enterprises hit limit up.