The pig price has stopped falling and rebounded, and the best time to rebound may not come
How long can the pig price rebound last?
Since the beginning of this year, domestic live pig prices have fluctuated. Pig prices accelerated in April and fell below industry cost prices in mid-to-late May.
According to the latest monitoring data from the National Development and Reform Commission, the retail price of pork has fallen for 22 consecutive weeks.
The continuous decline in pig prices has put the entire pig breeding industry in deep loss.
In order to cope with the decline in pig prices, many pig breeding and processing companies have begun to produce bacon off-season.
Recently, pig prices have rebounded, and the A-share pork sector has performed well, and the main contract of live pig futures has risen by about 9% in the past week.
In the spot market, the NDRC's upcoming purchase and storage also boosted market confidence and brought certain support to live pig prices.
As of June 28, the average price of pork in the national agricultural product wholesale market was 22.35 yuan/kg, an increase of 3.1% from last Friday.
Jinxin Futures analyzed that in the first half of the year, the production capacity of live pigs continued to maintain a momentum of recovery, and due to the significant increase in the average weight of live pigs and the increase in imported pork, the pork supply basically returned to the level before the African swine fever epidemic.
However, after the Spring Festival, consumption is off-season, coupled with high prices to suppress demand, pork supply exceeds demand in the second quarter.
With more than half of the backlog of large pigs being slaughtered, and some areas are even approaching the end, it is expected that the slaughter volume of group breeding companies may decrease significantly in July and August.
In addition, affected by the increase in rainfall and weather, the market's pork consumption has recovered, the number of off-season enemas has increased, the delivery of white striped pork has accelerated, and the spot price has rebounded significantly.
Zhou Xiaoqiu, chief researcher of agricultural products at Guotai Junan Futures, told China Business News that after the market triggers the purchasing and storage mechanism, prices will basically rebound slightly, but long-term increases need to wait for confirmation of capacity reduction.
Fresh meat becomes bacon "in advance"
Industry sources told China Business News that the price of pigs has been declining recently. Compared with the high point at the beginning of the year, many pig breeding and processing companies have begun to produce bacon off-season.
"Usually winter is the peak season for bacon consumption, and the boost in bacon consumption will also push up the price of pigs to a certain extent. The current bacon is mainly because the price of pork is too cheap and consumer demand cannot be guaranteed." Said industry sources.
A pork processing company's bacon storage cold storage (photo source: CBN reporter Qi Qi)
Since the beginning of this year, pork prices have continued to decline. Data from the National Bureau of Statistics on June 15 showed that after the national pork price dropped for 19 consecutive weeks, the decline in pig prices in the first half of June was further expanded. The price of foreign three yuan pigs was 15.8 yuan/kg, a month-on-month comparison. A decrease of 11.2%.
In the futures market, the price of live hog futures has also repeatedly hit new lows. Since May, the main contract of live hog futures has fallen by more than 30%.
On June 22, the main contract price of live pig futures fell to 16,675 yuan/ton, a record low.
Zhu Zekun, an analyst at Zhuo Chuang Information, said that the mismatch between the supply and demand of pork is the main reason for the continuous drop in pig prices.
On the supply side, domestic pig production capacity has recovered well. The large-size fat pigs that were previously unsold for sale are concentrated in slaughter. The supply of pigs is sufficient, but the demand side is still weak, and the terminal has poor digestion of fat white strips under high temperature weather, and low-priced supplies continue The impact on the market has led to continuous downward adjustments in pig prices.
In the context of a sharp drop in the price of live pigs, the National Development and Reform Commission made two attempts to stabilize prices and guarantee supply twice within two weeks.
On June 16th, a three-level warning of excessive drop in live pig prices was issued, and it was proposed to pay close attention to the trend of live pig production and market prices, and to carry out reserve adjustments in a timely manner.
On June 28, the National Development and Reform Commission announced that from June 21 to 25, the national average pig food ratio was 4.90:1.
In accordance with the "Improving the Government Pork Reserve Regulation Mechanism and Doing a Good Job in Maintaining Supply and Stabilizing Prices in the Pork Market" jointly issued by the National Development and Reform Commission, the Ministry of Finance, the Ministry of Agriculture and Rural Affairs, the Ministry of Commerce, and the State Administration of Market Supervision, it has entered the first-level warning zone for excessive decline. (Less than 5:1), the central and local governments will start the work of purchasing and storing pork reserves.
Zhou Xiaoqiu told CBN reporters that purchasing and storage often occur at the bottom of the cycle. On the one hand, the market spontaneously reduces production capacity. On the other hand, purchasing and storage can boost market confidence. As long as there is enough time, the market will digest the phased surplus. The driving force for the rise returns to the market.
Judging from historical experience, after the market triggers the purchasing and storage mechanism, prices will basically go out of a round of small-level rebound, but long-term increases need to wait for confirmation of capacity reduction.
Pig prices stopped falling and stabilized
Pig prices rebounded significantly this week, with live pig futures rising about 9% in the past week.
The A-share pork sector also performed well. As of the close of trading on June 28, Tianbang shares (002124.SZ) and other three stocks had their daily limit, leading stock Muyuan shares (002714.SZ) rose more than 8%, Zhengbang Technology (002157.SZ) rose more than 8%. SZ) closed up 9.84%.
The gains slowed down on the 29th. As of the close on June 29, the main contract of live pig futures rose 1.18% to 19,240 yuan/ton.
According to the monitoring of Wenhua Finance, the live pig futures lacked Masukura's incremental cooperation, and continued upward momentum was slightly insufficient.
So is the recovery of pig prices bottoming out or short-lived?
In Zhou Xiaoqiu's view, the recent rebound in live hog futures prices is mainly due to the expected increase in capacity depletion. Spot prices continue to reach the level that triggers a first-level warning. The market expects that the country will start purchasing and storage, and market confidence will be restored.
Jinxin Futures expects that the price of live hogs will rebound after bottoming out in the second half of the year, and the price of live hog futures will maintain a pattern of strong near-term strength and far weaker prices.
However, since the second half of 2019 to the first quarter of 2021, pig farming is highly profitable, which makes the entire industry more tolerant of price drops.
If the price of pigs continues to be low, it will force the industry to withdraw part of the production capacity of breeding sows.
However, considering the seasonality of consumption and the high inventory of frozen products, the best time for multi-factor resonance to push the price of pigs back may be after the end of September.
Zhou Xiaoqiu believes that in the short term, the price of live pigs is still too high, and the price may be repeated. If the weight is reduced and the number of fat pigs is reduced in the later period, the seasonal increase in prices may still occur.
In terms of futures, the basis of the September contract price of hog futures and the spot has gradually narrowed, but the spot price is still premium at this stage.
Because the September contract is the closest contract to delivery, futures will continue to trade with the logic of de-premium when the spot rebound is less than expected or falls short. Therefore, the futures price has to wait for the verification of the spot price.
(Author: Qi Qi)