Sheng Laiyun, deputy director of the National Bureau of Statistics, said a few days ago that from the perspective of future trends, the CPI will slowly rise at a low level; the economy continues to improve, aggregate demand is picking up; and the prices of some agricultural products have also reached an inflection point in price adjustment, such as the price of live pigs. So, the price of live pigs ushered in the inflection point of price adjustment, will it bring a turnaround to the domestic corn feed demand?
On April 16, the Information Office of the State Council held a press conference, and Sheng Laiyun, deputy director of the National Bureau of Statistics, introduced the operation of the national economy in the first quarter of 2024, saying that as of the end of the first quarter of 2024, the number of live pigs was 408.5 million, a year-on-year decrease of 5.2%, and the number of live pigs slaughtered in the first quarter was 194.55 million, a decrease of 2.2%. With the year-on-year decline in the number of live pigs, the consumption of corn feed also declined.
The demand for corn feed has dropped significantly
Judging from the domestic feed production data released, the data previously released by the China Feed Industry Association showed that from January to February 2024, the national industrial feed output was 44.37 million tons, a year-on-year decrease of 3.6%. In the compound feed produced by feed enterprises, the amount of corn accounted for 41.1%, a year-on-year decrease of 1.5 percentage points. According to the cumulative compound feed of 41.17 million tons from January to February, a year-on-year decrease of 3.6%, the amount of corn in compound feed was 16.92 million tons, a year-on-year decrease of 1.27 million tons. This can also more intuitively reflect that with the year-on-year decline in the number of live pigs, the demand for corn feed has dropped significantly.
Table 1: National industrial feed production
Data source: China Feed Industry Association, Baocheng Futures Financial Research Institute
Pig production capacity will maintain a downward trend
According to the latest statistics from the National Bureau of Statistics, as of the end of the first quarter of this year, the number of fertile sows in mainland China was 39.92 million, a year-on-year decrease of 7.3%. Since the end of 2022, the number of fertile sows in mainland China has decreased by about 4 million. This also means that from the perspective of the trend of pig production capacity, the domestic pig production capacity will maintain the trend of decentralization in 2024, and the feed consumption of corn will decline.
However, judging from the expected decline in corn feed consumption, according to the newly revised pig control plan, the number of fertile sows in the mainland at the end of the first quarter of this year is still 2.4% higher than the benchmark holdings. At the same time, considering that the benefits of self-breeding have returned to the profit range, as of April 19, the average profit of self-breeding pig breeding was 35.64 yuan, although since March 27, the average profit level of the head has fluctuated from 90 yuan, but it is still in the profit range.
Figure 1: Breeding sow population in China
Source: National Bureau of Statistics, Baocheng Futures and Finance Research Institute
Aquaculture efficiency has improved overall
Judging from the pig feed ratio and pig feed ratio announced by the National Development and Reform Commission, as of the week of April 10, the pig feed ratio continued to climb to 6.29 from 5.61 at the beginning of the year, mainly driven by the decline in corn prices and the rise in pig prices, and the pig feed ratio also climbed to 4.82 from 4.36 at the beginning of the year. According to the pig feed price balance point of 4.34, the expected profit is 169.49 yuan / head, which is also the 11th consecutive week of profit since the profit was realized in the week of January 24, 2024, and the profit expectation continues to improve.
In the context of the continuous improvement of pig breeding profitability expectations, the process of de-production of sows in mainland China will slow down in the future. Therefore, although the overall downward trend of corn feed demand continues, the room for further decline may be limited.
Figure 2: Pig Farming Profits in China
Source: iFind Baocheng Futures Financial Research Institute
It is difficult to increase the demand for feed in stages
From the perspective of phased performance, April to May will usher in the peak of pig slaughter, and at the same time, affected by the increase in enthusiasm for the early stage of the second breeding, the number of pigs slaughtered in late April will usher in a phased increase, and the number of pigs slaughtered in some areas will increase by more than 20%. However, at the same time, under the influence of the current rising cost of secondary breeding, the seasonal demand off-season after July, and the potential increase in breeding costs brought about by high temperatures, the enthusiasm of secondary breeding is not high. This also shows that after the short-term pig slaughter peak, the changes in the self-farrowing pig inventory, the fattening enthusiasm of purchased piglets, and the enthusiasm of the second breeding will affect the phased corn feed demand.
At this stage, the annual expected breeding profit of sows has fallen from above 3,000 yuan/head in early April to 2,860 yuan/head, but it is still at a good level compared with the annual expected breeding loss of 3,800 yuan/head at the beginning of the year. The number of pigs in the group farm will remain stable, according to the current piglet cost of 345 yuan/head, the price of self-breeding and self-raising pigs is 15.5 yuan/kg. If the purchased piglets are fattened, the cost of piglets purchased is 600 yuan/head, and the price of the purchased fattening pigs is 17.5 yuan/kg.
In the early stage, the price of piglets rose for 10 consecutive weeks, mainly due to the acceleration of the head pig enterprises to sell piglets and quickly return funds, and the recovery of breeding benefits to promote the rebound of enthusiasm for purchasing fattening. With the recent rise in the price of purchased fattening pigs, the market price instability factor in the later period has increased, the enthusiasm of purchased piglets for fattening has cooled down, and the enthusiasm for entering the field is not high, and the demand for corn feed is difficult to increase.