1. Background for initiating inventory collection:

Pig prices have been relatively low recently, falling to the level of 12.5 yuan / kg after the year, and the price has been maintained for half a month. And pig prices fell faster than expected, falling from 14 yuan / kg in early February to 12.5 yuan / kg, down 2 yuan / kg in half a month. As a result, the price of pig food fell to 4.98.

According to the NDRC, the latest pig grain price fell below 5 to 4.98 (the pig price is based on the pig price, and the actual price on the market is a little lower), so the current loss in pig farming may be more serious than estimated by the NDRC.

In addition, the rise in the price of feed raw materials has also deepened the loss. According to personal judgment, the increase in the price of soybean meal in feed raw materials led to an increase of 0.4 yuan / kg in pig breeding costs; the rise in corn prices in feed raw materials led to a rise in pig breeding costs by 1.5-2 yuan / kg; therefore, the overall increase in feed raw material prices led to a rise in feeding costs of 2-3 yuan / kg (compared with those before non-plague).

Therefore, pig farming is facing the double-sided squeeze of falling pig prices and rising raw materials, and now the pig price of 12.5 yuan / kg has entered a state of deep loss for many farmers and has lasted for a long time. Although some aquaculture main body appeared the mood of price resistance, but the effect is not good.

2. Evaluation of this collection and deposit:

Storage plays a more important role on the emotional side, but does not actually change the relationship between supply and demand. The NDRC clearly announced that it had collected and stored a total of 40,000 tons of frozen meat on March 3 and March 4. However, according to the national pork consumption of 55 million tons for the whole year (about 4.6 million tons per month), the collection and storage accounts for only 0.87% of the monthly consumption, which does not significantly improve the relationship between supply and demand, but more as a signal and emotional. affect market expectations.

3. Sort out the historical collection and deposit policy:

The collection and storage policy was introduced for the first time in 2009, and it has undergone four major changes so far, and the pig grain price at the break-even point is also constantly adjusted, but in the end, it affects market psychological expectations, stabilizes prices and stabilizes production capacity through the collection and release of reserves.

1. As pig prices skyrocketed in 2006-2007, production capacity rose rapidly to excess, resulting in pig prices falling to a loss in 2009-2010. As a result, in 2009, the Ministry of Agriculture and other six departments issued the "Prevention of excessive decline in Pig prices Regulation Plan", mainly concerned about the excessive decline in pig prices.

2. In 2012, it was revised to the "Regulation and Control Plan for alleviating the cyclical fluctuation of Pig Market Price", which prevented not only excessive decline but also excessive rise. At that time, the break-even point of pig food price ratio was set at 6:1.

3. It was revised in 2015, and the "Regulation and Control Plan for alleviating the Periodic fluctuation of Pig Market Price (revised version)" adjusted the pig grain price ratio, the pig grain price ratio at the break-even point was adjusted to 5.5-5.8, and the index of sow stock was added.

4. In 2021, a new "improving the government pork reserve adjustment mechanism and doing a good job in ensuring supply and stabilizing prices in the pork market" was issued, which set a clearer early warning level for different sections, and the regulation and control was more accurate. for example, now the pig-to-grain ratio is less than 6: 1 to issue a three-level early warning, a second-level early warning is issued at 5-6:1 for three consecutive weeks (depending on the situation, start storage), and when the pig-to-grain ratio is below 5:1, issue a first-level early warning. Start collecting and storing directly.

4. the relationship between collection and storage policy and pig price.

By combing the past collection and storage situation, the collection and storage will be started strictly after reaching the target early warning, but each collection is of a small order of magnitude, usually less than 50,000 tons at a time, so the first batch of 40,000 tons belongs to a higher order of magnitude. Each purchase and storage, pig prices will have a short-term (1-2 weeks after the start of the policy) correction, but can not change the relationship between supply and demand, and then the price trend will still be determined by supply and demand.

5. judgment of pig price market.

Supply has not peaked yet and prices are likely to remain low in the first half of the year. Because capacity peaks are in May and June in 2021, the supply peak in the first half of 2022 has not yet arrived (according to the 10-month lag), and the supply peak should come in April or May this year.

The price trend is upward in the second half of the year, and the turning point of the cycle may be coming. Production capacity began to be reduced in July 2021, and it has been more than 6 months so far, and the rate of capacity reduction has reached 5%, 6%, so the effect of supply reduction can be seen in the second half of this year.

Sentiment may lead to the risk of weakening capacity reduction, and there is some uncertainty. The impact of events such as the rise of feed raw materials and the collection and storage of feed raw materials this year on the psychological expectations of breeders is a relatively uncertain factor. People are already optimistic about pig prices, which can weaken the power of active capacity removal and affect the degree of capacity removal, thus affecting the time point of the start of a new cycle, so recently, we need to focus on everyone's mood and expectations, which will be the key to affect the pig price market.

[QA link]

Q: how big is the plate? How much inventory capacity does the central and local governments have to support the collection and storage? If the price ratio of pig grain is still relatively high after this wave of storage, will it continue to be collected and stored?

A: there are currently no official data on the total plate, but judging from the order of magnitude of these pig cycles in history, the total amount of central reserves is expected to be 20-300000 tons, and the local total order of magnitude may be higher, but not more than 500000 tons. Due to financial pressure, the local authorities will not fill up all the reserves, so they may only store more than 200,000 tons.

If pig prices remain in the doldrums, the state will certainly maintain the collection and storage, and the next purchase and storage is likely to be around April or May, because according to the relationship between supply and demand in the market, April may be the most stressful time point. And now only 40,000 tons have been collected and stored, and there is still a lot of room for storage in terms of reserve capacity.

Q: apart from stock collection, are there any other policies to boost pig prices? Are there any successful cases in history to boost pig prices?

A: historically, there has been a sow subsidy policy to boost pig prices. At that time, the policy document was a subsidy of 100 yuan for raising a sow, but this policy was controversial at that time. The main controversial points are: 1) it is difficult for small farmers to determine the true number of breeding sows; 2) the subsidy of 100 yuan for a breeding sow is too small, which has a weak effect on confidence. Later, around 2013 and 2014, the subsidy policy for breeding sows was also abolished. There are basically no other policies to enhance the confidence of farmers, because the final price is still determined by the real supply and demand of the market.

Q: because African swine fever brings a lot of increases in rigid costs, the price ratio of pig food is theoretically lower than in the previous cycle. Do you think it is reasonable to use 5:1-6:1 as the early warning range? With the rise of food prices in the future, will it become more unreasonable?

A: according to the current cost of raising pigs, I think the price ratio of pig food at the break-even point is on the low side, because the rapid rise in the price of soybean meal and corn has led to a great increase in the cost of raising pigs.

Q: is there any clear benefit to enterprises for the frozen meat collected and stored? what are the main sources of collection and storage?

A: the storage enterprises are generally looking for some local slaughtering enterprises, and the state reserve countries have national reserves in some places. The national reserve goes directly to the market to collect frozen meat and enter the national reserve. More often, the state entrusts large slaughtering enterprises to store frozen meat, the meat is owned by the state, the cold storage is owned by slaughtering enterprises, and the state gives certain subsidies.

Q: how much is the purchase and storage price?

A: usually according to the market price. Now the policy stipulates bidding transactions, and after the government issued a notice, large slaughtering companies went online to bid. This bidding also reflects people's expectations for the future. Enterprises will trade if they think this price is appropriate, and the price is too low to collect.

Q: is frozen meat the same as the price of pigs on the market now?

A: collect it in the form of fresh meat and put it in the freezer. The policy stipulates that products must be produced and processed after the collection and storage trading date. In terms of purpose, the purpose of the state's collection and storage of frozen meat is to change the relationship between supply and demand in the fresh meat market, so it must be in the form of fresh meat.

Q: under the current pig-to-food ratio, is it difficult for the pig price of 12.5 yuan / kg to continue to decline?

A: you can't say that. Collection and storage can not fundamentally change the relationship between supply and demand in the market, but it has a psychological impact in the short term (a week or half a month), but the impact is not obvious in the long run. Historically, in a state of serious oversupply, even if we start the downward trend of the collection and storage policy, the price will not change. Therefore, the price of 12.5 yuan / kg is likely to fall further.

Follow-up question: is it possible for prices to break through the low point reached last October?

A: it's unlikely, because the low point in October last year is not a performance of the price of a real market supply relationship. That low is a higher-than-expected decline caused by a stack of (pessimistic) sentiment, and this year's low would not have occurred only under the influence of supply and demand. It is possible to fall to about 11 yuan / kg, but it is very difficult to fall to about 10 yuan / kg.

Q: when will you passively eliminate production capacity? If the pig price pressure is still large from April to May, will it trigger a round of passive production capacity?

A: I think from different scales, the main body of capacity elimination is mainly small-scale farmers, while the actual capacity of large enterprises is still relatively small. It is not time to passively eliminate production capacity, because farmers have made considerable profits in the past two or three years (especially in 2020 and 2021). As long as there is no significant expansion in the past two years, there will be no major problems with the current cash flow. Even if we enter March this year and begin to make deep losses, I think many farmers have not lost all the money they earned in the previous two years, so the cash flow is not a big problem. But for farmers who expanded their production capacity before, a group of such farmers may passively lose their production capacity for a period of time, accounting for about 20% and 30% of the total. However, even if it is 20%, 30%, the impact may not be small, because the production capacity of this group is not small (mainly due to capacity expansion in the early stage).

Q: in this cycle, the data of fertile sows released by the Ministry of Agriculture has been eliminated by about 7 points. The database of many experts shows that 15-20 points have been removed. How to judge the reliability of the data? Based on what judgment, the market bottomed out? Or has the production capacity bottomed out?

A: there are many channels, such as data from third-party organizations, data from the National Bureau of Statistics, etc., it is difficult to assess which data are more reliable, but it is meaningful to compare the data from the same channel vertically (with historical data). Horizontal comparison is difficult to say who is not accurate, and it is meaningless.

Q: if you only look at the data of the National Bureau of Statistics, how much do you think the cumulative removal from the high point means a reversal of the cycle?

A: according to the data of the National Bureau of Statistics, the number has dropped from more than 45 million to less than 43 million at present, which is almost 6%. I think the decline of about 10% is a big drop for the data of the National Bureau of Statistics, and I think it will begin to reverse to reach the extent of the elimination of this capacity.