China Business Daily (reporter Ma Jiawen / photo) from raising a pig to earn a thousand yuan to selling a pig to lose a thousand yuan, in this round of "pig cycle", the breeding subjects are like riding a roller coaster. In November this year, the price of live pigs rose all the way, triggering a heated discussion in the industry about "pig prices have bottomed out, and a new round of 'pig cycle' is coming". However, many industry experts told the China Business Daily reporter that the price of live pigs has risen for several weeks, which does not mean that the inflection point of this round of "pig cycle" has arrived.
A full pig cycle typically lasts three to four years
The "pig cycle" has a top and a bottom
"This industry is good because the market can't go on forever." Zhang Guanglian, a pig farmer in Xinyang, Henan Province, told the China Business Daily reporter that if pigs are not profitable for two years, some people will abandon or raise less, and when the production capacity is reduced to a certain extent, the price of pigs will start to rise again. The "pig cycle" has a top and a bottom, and the market will rebound when it bottoms out.
"Pig cycle" usually refers to the law of cyclical changes in pig prices, the general operation trajectory is "pig prices rise - farmers actively supplement the fence - pig oversupply - pig prices fall - eliminate fertile sows - pig supply decreases - pig prices fall", the cycle repeats, forming a cycle. The most direct manifestation of the "pig cycle" is the wide fluctuation of pig prices, and for enterprises, the profit and loss brought by price fluctuations is more important. A relevant person in charge of a listed pig enterprise told reporters that the price of pigs on the one hand affects the profits of the breeding body, on the one hand, it affects the expansion rhythm of the breeding body, the breeding body forms a production cycle according to the price change, and strives to maximize the benefits by adjusting the population structure and the production capacity release node, but the strategic layout of the enterprise will eventually be transmitted to the price, so that the objectivity of the price can be reflected.
In June 2021, pig losses became increasingly apparent, and as of now, some pig farms are still in a state of loss. According to the data of Shanghai Steel Union - My Agricultural Products Network, a self-bred pig has an average annual profit of 2583.59 yuan in 2020, while the average loss of a standard-weight pig in the 25th week of June 2021 is 400-500 yuan; the average profit of purchased piglets in 2020 is 1478.6 yuan / head, and the average loss of a standard-weight piglet in mid-June 2021 is more than 1,000 yuan. According to data from the Ministry of Agriculture and Rural Affairs, the loss of pig farms (households) nationwide reached 76.7% in September 2021.
Zhu Zengyong, a researcher at the Beijing Institute of Animal Husbandry and Veterinary Medicine of the Chinese Academy of Agricultural Sciences, told the China Business Daily reporter that this round of "pig cycle" began in June 2018 and has lasted for 42 months. In this round of "pig cycle", the loss of the breeding end (especially the loss in early September and early October 2021) is larger than in the previous cycle. "For example, in early October 2021, a 120 kg pig bred by self-breeding may lose 700 yuan to 800 yuan, and the loss of purchased piglets is 1300 yuan - 1400 yuan." Although the losses in the previous cycle were relatively high in the environment at that time, in general, the losses were also within 500 yuan. ”
"It is indeed because the profit of raising pigs in 2020 is relatively high, and raising a pig can earn thousands of yuan, I thought of expanding production." When the market is good, there are thousands of pigs in the pig farm. Zhang Guanglian said that he also studied the "pig cycle", according to the law of "one year is good, one year is loss, one year flat", he believes that pig prices should be able to recover in 2022.
Entering November this year, hog prices rose for several weeks. According to data from Zhuo Chuang Information, a commodity analysis agency, on November 26, the profit of a pig raised by itself rose to 540.17 yuan / head, and the breeding profit of purchased piglets was 505.95 yuan / head, reaching the highest point in the year.
Does rising prices mean that a turning point is coming?
So far, hog prices have been rising for weeks. According to the National Bureau of Statistics, in late November 2021 compared with mid-November, the price of live pigs (outer three yuan) was 18.2 yuan / kg, an increase of 2.8%. According to the statistics of the Ministry of Agriculture and Rural Affairs, the price of live pigs has risen for 6 consecutive weeks until November.
Generally speaking, the reduction of pig production capacity and the rise in price mean the beginning of a round of "pig cycle", and the increase in production capacity and the decline in price mean the end of a round of "pig cycle". Industry insiders generally believe that although pig prices have risen for several consecutive weeks, from the perspective of production capacity data, the pig industry is still in the downward channel of this round of "pig cycle", and the future market trend is still confusing.
Li Ming, a pig analyst at the Agricultural Products Division of Shanghai Steel Union, told the China Business Daily reporter: "Although the current pig price has rebounded continuously, it cannot be considered that the turning point of this round of 'pig cycle' has arrived. According to the national stock of fertile sows, the current stock is still higher than about 6% of the normal standard, the release of production capacity has not yet reached a high point, and the de-capacity will continue. ”
Kong Hailan, a pig industry researcher at everbright Futures Research Institute, also believes that the current large-weight pig source is insufficient, and the end of the year is in the peak demand season, which are the factors that lead to the rise in short-term pig prices, but the problem of pig overcapacity has not been effectively solved. Therefore, in the short term, the pig market does not have the conditions for a turning point in the "pig cycle".
"At present, the rise in pig prices is a regular seasonal fluctuation, and every year at this time, the price of live pigs will rise to a certain extent." Zhu Zengyong said that the continuous rise in pig prices is first of all due to the impact of pig prices, in October 2021, pig prices have fallen below 30% of the cost line; followed by the pull of market consumption demand, in October, the north and south began to make bacon, and before the market cleared a part of the large weight pigs, the increase in consumer demand also led to the market demand for large weight pigs. At present, affected by the rise in pig prices, some pork prices have also begun to rise, which will also inhibit consumption, and by December, pig supply and demand have entered a stalemate.
Kong Liang, head of the Animal Husbandry and Veterinary Bureau of the Ministry of Agriculture and Rural Affairs, said that it is expected that the number of large-weight pigs listed in the fourth quarter of 2021 to the first quarter of 2022 will increase significantly year-on-year, and the relative oversupply of pigs will continue for a period of time, if the production capacity is not substantially reduced, the downturn in pig prices will be difficult to reverse, especially in the off-season after the Spring Festival in 2022, pig prices may continue to decline, and cause heavy losses in pig breeding.
This round of the "pig cycle" is somewhat special
"It feels like raising a pig to make a thousand yuan happened yesterday, and today it has become a thousand yuan loss by selling a pig." Zhang Guanglian said frankly that in this round of "pig cycle", the rise and fall of pig prices are somewhat extreme, and he feels like riding a roller coaster.
In this round of "pig cycle", pig giants are also suffering huge losses, and the top five listed pig companies in terms of pig output have fallen into losses. Up to now, in the first three quarters of this year, the total loss of the five major pig enterprises of Makihara Shares, Zhengbang Technology, New Hope, Wen's Shares and Tianbang Shares has exceeded 20 billion yuan. With a loss of 7.25 billion yuan in a single quarter and a total loss of 9.75 billion yuan in the first three quarters, Wen's shares have become the pig enterprises with the largest expected losses.
Head pig companies said that the downward cycle of this round of "pig cycle" is far from over. The relevant person in charge of New Hope told the China Business Daily reporter that from the perspective of the supply side and the degree of pig de-capacity, it has not yet reached the time point of the "pig cycle" reversal. Pig prices may still have a round of decline after the Spring Festival next year, and next year will still be at a low level overall, but not necessarily lower than the lowest point in the first half of this year. Tang Renshen, who previously predicted that "the price of live pigs will fall to 5 yuan a catty", also said in his reply to investors that due to the increase in feed costs and epidemic prevention costs in this round of "pig cycle", the comprehensive cost of industry breeding has increased significantly, resulting in the industry's loss margin being much higher than the industry loss margin at the bottom of the previous "pig cycle".
What makes this "pig cycle" a little special? Zhu Zengyong said that first of all, the decline in production capacity in this cycle is far more than the previous cycle of history, such as the decline in the stock of fertile sows in September 2019 to 39. 8%, in October of the same year, the pig inventory fell by 41.4% year-on-year, which is a situation that has never occurred in any previous cycle. Secondly, in this cycle, the strength and extent of government support policies are far more than in previous cycles. In addition to strengthening and improving the previous production support policies, there is also the release and storage of frozen pork, with an amount of more than 1 million tons, which has not been done in previous cycles. Moreover, the speed and magnitude of the rise and fall of hog prices are far greater than in previous cycles.
"From the perspective of the upward cycle, hog prices began to exceed the high point of the previous cycle in August 2019, and the price almost doubled in early October of the same year, and did not fall below the previous high point until May 2021. The income at the breeding end (especially when the price is at a high level) is far more beneficial than the previous cycles in history, and the highest income in this round of pig cycle has reached 2800 yuan / head. From the perspective of decline, the price of live pigs fell from 36 yuan / kg in January 2020 to about 11.5 yuan / kg in early October, which also fell to 1/3 of the original price within 6 months, and the rate of decline was much higher than that of the previous cycle, which also led to short-term losses at the breeding end much higher than in the previous historical cycle. ”
Where is the turning point of the "pig cycle"
"When the turning point will come" has become a hot topic in the industry. Kong Hailan told reporters: "The current reluctance to sell at the breeding end will lead to the pressure on the supply of live pigs to move backwards. As the demand for live pigs returns to stability in the later period, pig prices will face the risk of falling again. According to the current breeding situation, in the first half of 2022, the 'pig cycle' will be difficult to usher in a turning point. After effectively eliminating excess pig production capacity in the future, a new round of 'pig cycle' will be ushered in, and we will continue to pay attention to the elimination of production capacity at the breeding end. ”
Li Ming believes that according to the survey data, after the third quarter of 2022, the low point of the cycle stage may be reflected, but it cannot be considered to be the bottom of the cycle. By analogy with the phenomenon of some supply moving backward due to the rise in pig prices at this stage, it can be seen that when the price of pigs exceeds the cost of breeding, it will stimulate the enthusiasm of the industry to expand production and restore. In the future, under the influence of events such as the updating and iteration of breeding technology and the enhancement of breeding cost competition, this round of "pig cycle" may produce a more certain bottom.
"Now, pig production capacity is still higher than normal. In the absence of a substantial change in the supply of live pigs, it is not yet certain that the industry has entered a new cycle or a turning point. Zhu Zengyong said that after the pig price rebounds, on the one hand, the production capacity of fertile sows may decline to a certain extent, and the pig inventory will also fall. On the other hand, some large-scale enterprises have also successively increased the gilt replenishment, and this part of the commercial pig may be listed in 2023. The turning point of this "pig cycle" may occur in 2023.
At present, the breeding end is also waiting for the arrival of the turning point of this round of "pig cycle". The relevant person in charge of New Hope told reporters that at present, the company continues to do the basic work of all aspects of production and breeding, maintain the existing production scale, improve efficiency and reduce costs. Short-term pig price fluctuations will appropriately affect the advance or delay of some sales rhythms, but will not trigger major strategic adjustments. Tang Renshen also said that it is difficult to predict the price of live pigs and the trend of "pig cycle". At present, what the company needs to do is to practice internal strength, reduce costs and increase efficiency.
What else can be done than looking forward to a "turning point"
Like Zhang Guanglian, many pig farmers are deeply trapped in the "pig cycle" law of "one year is good, one year is loss, and one year is flat". Every three or four years, the "make money-loss" market will be staged in the pig industry. Can the "curse" of price surges and plummets brought about by the "pig cycle" be broken?
Zhu Zengyong said: "According to the past research cycle, many people's attention is on 'how to seize the cycle of pig price increases in the production management process', in fact, to really understand the law of the 'pig cycle', more is through the calculation of the cost and benefits of the entire cycle, through the establishment of the whole industry chain benefit sharing mechanism, stable income, stable production." ”
"On the one hand, the main body of aquaculture has achieved the adjustment of the organizational structure within the industry. First of all, it is necessary to achieve stable production and realize the separation of market price fluctuations and production. Whether it is a single enterprise, or an organized way (such as an association breeding cooperative), through medium- and long-term production or sales contracts, or through the construction of the whole industrial chain, such as when the price of pigs is relatively low, the breeding end can either differentiate or reduce upstream production losses through downstream such as slaughtering, deep processing and sales, and can also arrange production according to the supply and demand of consumers or the whole society to achieve industrial chain integration. On the other hand, the competition for production costs in the entire industry has intensified. As the production cost of the entire industry declines, the loss at the farming end will decrease. If the industry is in a small profit or maintains normal profits throughout the cycle, the industry is relatively stable. ”
It is worth noting that in this round of "pig cycle", the Ministry of Agriculture and Rural Affairs and other six departments also proposed in the "Opinions on Promoting the Sustainable and Healthy Development of the Pig Industry" (hereinafter referred to as the Opinions) to establish a counter-cyclical regulation mechanism for pig production, with the rate of change in the stock of fertile sows as the core regulatory indicator, establish an automatic trigger control mechanism for abnormal changes, and maintain the reasonable storage level of fertile sows. Among them, the opinions also mentioned that since 2009, China's pig production and pork market supply have experienced four large fluctuations (an average of once every three years), and the reason for the sharp rise in prices is that the stock of sows that can breed in the early stage has dropped below 95% of the normal level.
Stabilize the "pig cycle" by rationally regulating production capacity. "From the perspective of macro-control, through timely intervention, it is possible to prevent a sharp decline or sharp increase in production capacity in the later stage." When farmers face the downward price of pigs or losses, different farmers have different reaction times. Some people may lose a month or two and start reducing production capacity; some farmers may lose money for five or six months before they start to reduce. In this case, it is to respect the laws of the market. The introduction of the policy is to prevent problems such as the rupture of the capital chain, and under the premise of a stable industrial policy environment, the role of the market mechanism is exerted to allow farmers to gradually adjust production capacity, while steadily promoting the transformation of the industry to scale, industrialization and modernization. Zhu Zengyong said.
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