Responding to the super "pig cycle": if you can't control the price of pigs, then control the cost of pig raising
Although the price of pigs has experienced a long absence since October, the price of live pigs has risen by nearly 50%.
However, it is still in the cycle of falling pig prices, and the situation of easing production capacity of live pigs has not changed. The primary problem facing the pig industry is still how to reduce costs and increase efficiency.
Reasons for the drastic fluctuations in pig prices
On October 25, according to the monitoring data of Souzhu.com, the national average price of lean pigs for slaughter was 15.52 yuan/kg, an increase of 0.89 yuan/kg from 14.63 yuan/kg the day before, a single-day increase of 6.08%; compared with last year In the same period, 29.42 yuan/kg dropped by 13.9 yuan/kg, a year-on-year decrease of 47.25%.
From a rare high to this year's low, Chinese pig prices are going through a super "pig cycle".
According to Brick’s agricultural data, from January 2, 2018 to October 25, 2021, the minimum national pig price was 9.76 yuan/kg, the maximum was 40.97 yuan/kg, and the average was 21.73 yuan/kg.
In this period of time, the minimum profit of pig farming is -1333.76 yuan/head, the maximum is 3244.43 yuan/head, and the average value is 509.4 yuan/head.
At the 2021 China Agriculture and Animal Husbandry Industry (Derivatives) Conference Live Pig Forum and the first China Live Pig Trade Conference held on October 21, Qin Jun, Secretary of the Board of Directors and Chief Strategy Officer of Muyuan Co., Ltd. stated that although as a bulk agricultural product, the price of live pigs fluctuates. This is normal, but when viewed globally, it is unique that the price of live pigs in China fluctuates by such a large margin.
He believes that there are two reasons for this.
First, the industry concentration is not high.
Taking the proportion of the number of farms (households) in the number of live pig breeding in 2018 as an example, the proportion of farms (households) that produce more than 1,000 pigs per year is 69.6% in Denmark, 51.2% in the Netherlands, 24.3% in France, 19.3% in Germany, and 19.3% in the United Kingdom It was 13.8%, and Spain was 13.7%.
However, China only has 0.2%.
In the United States, the sow inventory of the top ten pig companies in 2018 accounted for about 45% of the country.
In China, after years of rapid development, the market share of the top ten pig companies will only exceed 12% in 2020.
Qin Jun said that the scattered producer group is huge, and they all hope to avoid the impact of pig price fluctuations on production and operation from their subjective wishes, but this effort eventually becomes a procyclical behavior, that is, "chasing the rise and killing the fall."
The second is pork consumption structure.
In the United States, meat consumption is dominated by processed meats such as ham and sausages, and fresh meat accounts for a relatively low proportion; fresh meat consumption accounts for only 9% of meat consumption.
But in China, meat consumption is dominated by fresh meat.
Among them, hot fresh meat occupies a dominant position in consumption, accounting for 65%.
The cold meat is only 10%.
Qin Jun mentioned that this round of super "pig cycle" has pressed the "accelerator" of the industry, such as rapid increase in concentration, integration of the industrial chain, and irregular cost distribution.
Regarding the irregular cost distribution, it refers to the current large-scale breeding enterprises. The cost of raising pigs is 18-20 yuan/kg, or even higher, while the cost of retail households is maintained at the level of 14-15 yuan/kg, which is completely different from African pigs. The situation before the epidemic has caused confusion in the industry.
Qin Jun explained that this situation is largely due to the rapid expansion of the industry brought about by high profits, which leads to the loss of management efficiency. This is only a phased phenomenon; plus equipment upgrades, management improvements, and talents. The establishment of echelon is also the tuition fee that the entire industry must pay. These are normal phenomena.
How to reduce costs and increase efficiency in the pig industry?
Fluctuations in pig prices have brought about fluctuations in the income of pig companies, especially during the rapid decline of pig prices. Because large-scale factories have capital advantages and are unwilling to reduce production, small retail investors have cost advantages and are more able to resist low pig prices, resulting in a change in the speed of this round of capacity reduction. Slow, the bottom time may be lengthened, which brings challenges to pig companies.
Xia Chenfeng, chief analyst of Rural Credit Union, believes that in the short term, the direct impact of African swine fever on production will be greatly reduced in the future, the sow structure will also use efficiency to make up for the elimination, and imported pork will decrease as the price of pigs falls.
In the long run, the supply of live pigs in 2021 will be slightly lower than the normal level, and the supply will accelerate in 2022; pork imports will remain high; pork consumption will not fully recover; the pig cycle will not disappear, and the time will be prolonged. Supply and demand will be more relaxed in 2022.
In the downward cycle of pig prices, the price of pigs has recovered recently, but the overall price is still below the cost line.
At any time, low-cost pig raising ability is the core of pig farm development.
At the 10th Leman China Pig Raising Conference held a few days ago, Zhang Conglin, the president of Yangxiang's pig raising business department, told a reporter from China Business News, "We can't control the price of pigs, but we can control the cost of pig raising."
He said that the current status of the pig industry is that there are more pigs, low prices, high costs and losses.
Low-cost production is an effective way to ensure the sustainable development of pig raising, and the control of pig raising costs will become a key factor in determining the survival of pig farms.
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How to reduce the cost of pig raising?
Zhang Conglin suggested that it can be achieved through two paths, one is to reduce direct costs in terms of feed and reducing the rate of sow deaths, and the other is to start with the sow farrowing rate and the number of healthy litters per litter to achieve more births and fewer deaths. , Quickly grow.
Li Jialian, chairman of Showbo Gene, told the CBN reporter that China's pig industry is currently affected by the African swine fever, the new crown epidemic, and the pig cycle, and the uncertainty has increased.
In the process of the transformation of China's pig industry from "quantity accumulation" to "quality improvement", the breeding system of improved breeds has been impacted, with shortage of good breeding pig resources, increased disease risks, and strong demand for improved breeding pig performance.
He believes that the current pig farming industry needs to "regenerate", eliminate low-efficiency production sows to reduce capital losses, and retain backbone production sows to stabilize the breeding system.
In the process of reducing costs and increasing efficiency, pig raising companies should review the current situation and continuously strengthen close cooperation with the emerging Internet and intelligent service industries to solve the "pig cycle" problem.
Lei Xianzhong, chairman of Wuhan Golden Dragon Group, said that intelligent pig raising and the use of Internet technology may create new development opportunities for pig companies. For a moderately large pig farm that produces 50,000-100,000 heads per year, it is more cost-effective to upgrade to digital intelligence.
Xue Suwen, chairman of Rural Credit Interconnection Group, told a reporter from China Business News that during the period of pig price shocks, the key ability of pig companies to continue their lives is the continuous supply of cash flow.
Enhancing the digital intelligence competitiveness of pig enterprises is the basis for obtaining operating, debt, and equity cash flows. From the governance of people to the governance of numbers is the core concept of the next generation of enterprise management, and it is the watershed for pig enterprises to win the next cycle.
To fundamentally improve the competitiveness of digital intelligence, large companies may be able to invest heavily in re-planning. For small and medium-sized enterprises, embracing a mature industrial digital intelligence ecological platform is the most reliable solution at present.
Jiang Renzhong, secretary general of the Tsinghua Internet Industry Research Institute, said that the agricultural industry Internet is the last blue ocean of the industrial Internet. The value of digitalization and intelligence in the future will ultimately be the entity, and the digital intelligence of agriculture and animal husbandry must be a blue ocean.
In the process of building the agricultural industry Internet, the principle of "internal digital management to achieve cost reduction and efficiency increase, and external industrial chain collaboration to improve overall efficiency" should be followed.
Fu Wenge, director of the MBA Center of China Agricultural University, believes that from the uncertainty of raw materials and sales prices, coupled with the impact of weather changes, epidemics, and industrial cycles, the agriculture and animal husbandry industry is becoming a high-risk industry.
He suggested that we should attach great importance to risk control, establish a risk control system, and cultivate risk control talents, especially to vigorously promote the construction of a digital and intelligent system in the agriculture and animal husbandry industry.
(Author: Shao Haipeng)