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05

2023

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07

Chinese Pork Prices May Reach a Turning Point in September Amid Improved Supply and Demand Situation

Source:

OIG+X

Since July, pork prices have been consistently declining, with a 27% decrease YoY. The pig prices in Q1 showed a pattern of starting at a high level and then dropping to a lower level afterward, falling short of expectations. The continuous decline in pork prices is primarily driven by market supply and demand dynamics.

 

Since July, pork prices have been consistently declining, with a 27% decrease YoY. The pig prices in Q1 showed a pattern of starting at a high level and then dropping to a lower level afterward, falling short of expectations. The continuous decline in pork prices is primarily driven by market supply and demand dynamics. On July 4th, the price of DLY live pigs was 13.88 yuan/kg (1.92 US$/kg, USD/CNY=7.24), a decline of 21% compared to the end of last year at 17.64 yuan/kg (2.44 US$/kg). "The continuous decline in pork prices this year is mainly driven by market supply and demand relationship," said Feng Lin, a senior analyst at Dongfang Jincheng. From the supply side, some breeding companies had engaged in excessive stocking and secondary fattening behaviors. However, since the beginning of this year, with the continuous decline in pork prices, part of breeding companies have weakened their expectations of future pork prices, leading to accelerated sales and an increase in the supply of live pigs. On the demand side, the recovery in overall moderate consumer spending since the beginning of the year has had a weak impact on the growth of pork demand. In particular, the recent outbreak of swine diseases in the southern region has prompted an acceleration in sales. This has offset the impact of recent adjustments in pig production capacity and exacerbated the situation of oversupply, resulting in a recent downturn in pork prices.

 

According to the latest data released by the Price Monitoring Center of the National Development and Reform Commission (NDRC) on July 3rd, the national feed-to-pork ratio was 4.07 for the week of June 26th to 30th, a 1.93% decrease compared to the previous period. Based on current prices and costs, it is estimated that the average loss per head of pig farming will be 179.92 yuan (24.85 US$).

 

Given that the current feed-to-pork ratio is already below 5:1, NDRC announced on July 3rd the initiation of the second batch of central pork reserve within the year. They have also instructed national regions to synchronize their reserves to promote the return of pig prices to a reasonable range. It is expected that this measure will improve the balance of pork supply, curb the downward trend in prices, stabilize price expectations for breeding companies, and adjust the pace of sales in a rational manner.

 

It is predicted that a turning point in pork prices may occur in September. In the context of ample pig supply, pork prices may continue to face short-term pressure. In the second half of the year, the supply-demand relationship in the pig market may shift from loose to tight, resulting in a potential decrease followed by an increase in pork prices. It is expected that pork prices will continue to fluctuate downward in July and August, while the overall trend from September to December may be an upward trajectory. Additionally, the intensified macroeconomic policy regulation and strengthened economic recovery will enhance consumer purchasing power, thereby accelerating the adjustment of pig production capacity. Therefore, it is expected that the turning point in pork prices may occur in September.