Key takeaways:
1. Pig prices fell more than expected in the first three quarters of 2021 due to market distortions.
2, the recent pig price more than expected rebound, the nature is a repairive rise.
3. June 2021 is the peak of this round of production capacity, corresponding to the peak of April-May 2022 or the peak of the column.
4. If the trend of capacity reduction continues, a new round of cycles may be opened in the second half of 2022.
5. The epidemic is still the most uncertain factor affecting cyclical fluctuations.
Pig prices fell more than expected in the first three quarters of 2021 due to market distortions.
This year, the price of pigs will fall every festival, and every time it will fall out of a small pit around the festival. The market always believes that the decline in pig prices this year is caused by the recovery of pig production capacity beyond expectations, but in fact, the domestic pig supply is not much:
(1) Pig production capacity recovered rapidly. In general, the domestic sow inventory in the first half of the year did return to the normal level in 2017, but the actual pig supply has not yet returned to the normal level, because the breeding sow inventory to the pig put on the market lags by 10 months. The number of commercial pigs available for release this year is determined by the number of sows that can breed last year, so the overall pig supply is more than 80% of the normal level, and there is a gap of more than 10%. Therefore, there is not much supply of live pigs in the market this year.
Therefore, the rapid decline in pig prices this year is not caused by more pigs, but because of the oversupply of pork. This was mainly due to weight gain and a significant increase in imports.
(2) Pig out of the barn weight increase. At the beginning of the year, the whole industry misjudged the market situation, farmers collectively pressed the fence, and the average pork production of pig heads increased by more than 10% compared with 2017, resulting in an increase in the supply of pork in the market.
(3) Imports increased. Traders based on optimistic expectations of the future market, significantly increased the import of frozen meat, April and May average monthly imports of 400,000 tons, breaking through the record high, frozen meat inventory release impact on the pig market.
(4) Consumption is relatively weak, and the support for pig prices is weak.
The recent pig price has rebounded more than expected, and the nature is a repairive rise.
After the National Day, pig prices rebounded rapidly, rising nearly 80% from 10 yuan / kg to 17 and 18 yuan / kg, which is essentially a return to rationality in market behavior.
(1) The weight of commercial pigs out of the pen gradually returned, after the end of May, the weight of the pigs out of the market dropped rapidly, the market supply decreased, and the average weight of the white strips after slaughter was about 88 yuan / kg, and then it is expected to return to 83 yuan / kg.
(2) Imports of frozen meat decreased, and imports in September and October fell by more than 50% compared with the beginning of the year. Imports in November were only 4-5% of monthly consumption.
The weight loss and imported frozen meat have alleviated the supply pressure in the pork market to a certain extent.
(3) The weather has cooled, the recent consumer demand has improved, and the long-awaited price rebound has made the farm have a price resistance sentiment.
Is pig farming really losing money this year?
This year's industry profitability is actually very good, at the beginning of the first half of the year, there are still thousands of yuan of head profit, and the average profit of pig breeding heads in May is about 450 yuan, which is still at a good level. From the beginning of June to the entire third quarter, there was indeed a certain loss, but from the perspective of the whole industry, the weighted average income of pig breeding in the first 11 months of this year was 600 yuan per head, and the average profit of the head in normal years was generally more than 200 yuan, so the industry profit this year was very good.
There are also some breeding entities in the industry that have serious head losses, but the losses are mainly concentrated in the part of capacity expansion, rather than the original farming part, and the expansion of production capacity leads to rising costs.
Many of the production capacity expansion of listed companies are purchased piglet fattening, high-priced piglets push up the cost of losses, so the market has the illusion of serious losses in the industry, in fact, the group with breeding costs of more than 20 yuan / kg in the industry accounts for only about 4%, and some listed companies are 4%.
The average cost of the industry before the non-plague is the lowest in more than 12 pieces, normal between 13-14 yuan / kg, after the non-plague at about 16 yuan, as long as the price of feed raw materials rises and the cost of non-plague prevention and control rises. The contribution of the rising cost of non-plague prevention and control to the cost is about 1 yuan per kilogram. There is room for future costs to fall.
Supply and demand situation and price trends in 2022
This year's production capacity peak in June, corresponding to the market pig supply reached a high point in March-May next year, coupled with the entry into the meat consumption off-season after the year, pig prices in the first half of next year are not optimistic.
From the perspective of capacity de-industrialization, from July to November, it was dematerialized by 0.5%, 0.9%, 2.3%, 2.5%, 1.2%, and the decline for 5 consecutive months determined the trend of fertile sow dematerialization, corresponding to the trend reduction in the supply of live pigs in the market in the second half of next year, so the cycle reversal has a high probability of appearing in the second half of 2022.
But we don't think pig prices will be too pessimistic in the first half of next year, for the following reasons:
(1) At the end of the year, early out of the bar to overdraft next year's market commodity pigs. Because the market has formed a consistent pessimistic expectation, it may be overdrawn at the end of this year and the first half of next year's commodity pigs are out of the barn, and the situation of early release and trader shipment is likely to occur at the end of the year. In recent months, the number of newborn piglets has been slightly adjusted month-on-month, and the pigs available for slaughter in the first half of next year will not be too high.
(2) Weight loss, this year's market distortion, weight increased by more than 10% year-on-year, next year because of the expected pessimism plus feed prices will not drop significantly in the short term, weight will definitely decline, has improved, follow-up weight There is a 7-8% decline in weight, pork supply will be reduced by about 6-7%.
(3) Imports declined. This year's average monthly import of about 400,000 tons, accounting for about 10% of monthly consumption, has dropped to imports of 200,000 tons / month, next year will definitely decline, the past cycle is about 2% of monthly consumption, that is, a month to import 100,000 tons can be, that is, the monthly decline of 7-8%. Traders are pessimistic about future expectations, and imports will certainly fall sharply next year. It is not profitable to re-import traders.
(4) There is uncertainty in pork consumption. Pork consumption has been recovering since the second half of this year, and there is still a gap of about 8% in consumer demand compared with normal years.
Therefore, in the case of a decrease in the supply trend and the continuous improvement of the margin of consumer demand, the pig price will not be as pessimistic as everyone expects, but the overall price will definitely be below the pig price, but it will not cause deep losses.
Judgment of future cycles:
At present, the rhythm of capacity de-industrialization is normal, the de-industrialization speed in September and October is actually too fast, the market mistakenly believes that the recent price increase will prolong the de-capacity de-industrialization time, which in turn leads to the de-capacity de-industrialization range lower than the previous cycle, in fact, about 1-1.5% of the de-industrialization per month is a very good rhythm, and the depth of the reduction is completely sufficient in the case of continuous de-industrialization of production capacity in the next six months. If there is another deep loss, the amount of capacity reduction may exceed market expectations.
Other risks:
This year, the possibility of pig disease in the market is greater, because the price of pigs is too low, the treatment of sows is very low, and farmers are reluctant to spray seedlings, so the outbreak of epidemic is more likely.
If imported frozen meat is banned from shipment due to the impact of the new crown epidemic, it will also provide support for hog prices.
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