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01

2023

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06

Hog Prices Cease Rising and Fall Back in May

Source:

OIG+X

As May draws to a close, pig prices in China have remained in a narrow range of 14.00-14.50 yuan/kg (US$1.97-2.04/kg, USD/CNY=7.0978), showing a tug-of-war situation. Towards the end of the month, domestic hog prices experienced a moderate week-long uptrend, leading to a slight increase in downstream pork prices. Despite farmers enduring over five months of losses, there is a strong anticipation for prices to rise, and some farmers started buy and secondary-fattening pigs driven by positive expectations for June and July. However, there has been no significant improvement in downstream demand, and reduced frozen meat inventory by slaughterhouses has weakened support for further price increases. As a result, pig prices quickly encountered resistance and declined. As of May 30th, domestic pig prices stood at 14.41 yuan/kg (US$2.03/kg, USD/CNY=7.0978), marking a halt to the previous rise.

 

As May draws to a close, pig prices in China have remained in a narrow range of 14.00-14.50 yuan/kg (US$1.97-2.04/kg, USD/CNY=7.0978), showing a tug-of-war situation. Towards the end of the month, domestic hog prices experienced a moderate week-long uptrend, leading to a slight increase in downstream pork prices. Despite farmers enduring over five months of losses, there is a strong anticipation for prices to rise, and some farmers started buy and secondary-fattening pigs driven by positive expectations for June and July. However, there has been no significant improvement in downstream demand, and reduced frozen meat inventory by slaughterhouses has weakened support for further price increases. As a result, pig prices quickly encountered resistance and declined. As of May 30th, domestic pig prices stood at 14.41 yuan/kg (US$2.03/kg, USD/CNY=7.0978), marking a halt to the previous rise. 

 

The end-of-May slight price rebound is considered a temporary sentiment-driven increase, as the supply-demand balance remains relatively abundant without significant changes. It is not advisable to blindly adopt an optimistic view in the short term, and caution is advised in secondary fattening operations.

 

Since January, pig farmers have been experiencing losses for nearly six months, with an average loss of 185 yuan/head (US$26.06/head) for self-bred and self-raised pigs and an average loss of 358 yuan/head (US$50.44/head) for purchased piglets. Prolonged losses have put substantial pressure on both large-scale pig farms and individual farmers. Intense competition between large-scale pig farms and individual farmers has been observed. However, with the prolonged duration of losses, financial pressure is increasing for all parties involved. Consequently, a phase of concentrated sell-offs may occur in the coming months.

 

In May, pig supply was relatively abundant, while downstream demand remained flat. As a result, pig prices were under pressure. Pig farmers have been passively resisting price reductions for an extended period, leading to the pig prices fluctuating around the critical point of state reserves of pork. Mysteel predicts that pig supply will remain ample in June, particularly among individual farmers, which will continue to weigh down prices. Consequently, a weak fluctuation in prices is expected to persist. However, as we approach the middle and late parts of the month, with the average weight of pigs decreasing, the pressure from individual farmers' sell-offs is likely to gradually alleviate. Additionally, there may be intervention from pig farmers and traders during price increases, potentially leading to a modest price rebound.