Hog Market Makes a Recovery as Prices Soar
Late July has brought good news for the hog market, which has been struggling for a long time. The national average price of lean-meat hogs has seen a significant increase of more than 20% compared to mid-July. This surge in prices is influenced by factors such as heavy rains in various parts of China, but it also reflects the industry’s optimistic outlook after months of settling at the bottom.
While the rebound in the hog market is encouraging, experts warn that it does not guarantee a long-term reversal. Most industry analysts believe that with the rise in pig prices comes the risk of decline. Factors such as secondary fattening could disrupt production, potentially slowing down the upward trend in prices.
The recent increase in pig prices has been welcomed by the industry, as it has been struggling for a while. Downstream slaughter companies have been hoping for a rise in prices to support the entire industry chain. Since the fourth quarter of 2022, the domestic hog market price has been fluctuating and falling. However, since late July, there has been a reversal in this downward trend.
According to data from Sozhu.com, the hog market has been rising since July 18, especially after the issuance of 31 measures by the relevant state departments on July 24 to promote economic development. Currently, the national average price of lean-meat hogs has risen above 17 yuan/kg, with prices in southern regions approaching 20 yuan/kg.
The boost in live pig prices is also reflected in the futures market. The live pig LH2311 contract recorded an increase of more than 10% from its lowest price on July 14.
With the recovery of pig prices, the situation for farming has improved. Some enterprises with lower production costs are able to stop losses and even make small profits. Although not all producers can make profits, the overall loss situation has eased.
Analysts believe that the current market average price is close to the cost line, providing relief for farmers with low breeding costs. However, as the price of pigs rises, the industry’s bullish expectations for the fourth quarter market may decrease, weakening the support for pig prices.
The recent rise in pig prices is driven by various factors. The rebound in market consumption during the summer vacation has boosted downstream demand. Additionally, frequent rainstorms have made it difficult to transport live pigs, resulting in a mismatch between supply and demand.
The phenomena of secondary fattening and replenishment have also contributed to the tight supply of live pigs. The number of live pigs slaughtered in the market has decreased, and the resources of large pigs are particularly scarce in many southern provinces, leading to an increase in small and medium-sized farmers holding down the stalls and reluctant to sell.
While the recent rise in pig prices is encouraging, experts caution against assuming it signals a reversal in the pig cycle. The current capacity reduction in the hog market is not complete, and further reduction is needed. The continuous upward trend in prices is still uncertain.
Despite the cautionary note, the hog market’s recovery and the increase in pig prices are positive developments for the industry, providing some relief after a challenging period.