Financial Services Association, April 10 (Reporter Liu Jian) “Pig farming is already profitable.” “In some regions, piglet prices have already risen above 700 yuan.” “Is the cycle going to reverse?” Recently, there seems to be a trend of emptying hot discussions in the pig industry...

CIFA reporters learned in multiple interviews that due to the continuous rise in pig prices since March, the breeding side has now officially started a profit model. Some farmers told CIFA reporters, “I currently earn about 250 yuan per pig.” Another pig company source said, “Some low-cost pig farms under the company have already entered the profit range.”

Furthermore, due to the rise in pig prices and the continuous decline in energy production, the breeding side's expectations for the future market continue to increase, and the back-up sentiment has clearly heated up, and piglet prices have also followed the trend and hit a high point in the same period of the past three years. A number of relevant people on the front line told the Financial Federation reporter, “Piglets are now more expensive, but they are still relatively easy to sell.”

Pig prices are not weak in the off-season, raising pigs out of the loss range

After a long period of loss nightmares, the pig industry recently restarted its profit model. “Recently, I was able to earn about 250 yuan with a pig, mainly because pig prices have continued to rise since March.” Mr. Huang, the owner of a pig farm, told the Financial Federation reporter.

(Picture source of fat pigs in the pig farm: Financial Services Association reporter)

The person in charge of another large-scale factory told the Financial Federation reporter, “Due to the continuous loss of energy, our confidence in the future market has increased quite a bit. Now quite a few people are entering secondary fattening, which also supports the price. At current prices, our site is profitable.”

Pig prices are rising, and the second-time fattening market is not a small profit. The person in charge of this large-scale factory further stated, “I know several of my peers have entered secondary fattening. Everyone thinks it will rise later. I feel like I can still get to 9 yuan a pound.”

Listed pig companies are also gradually breaking out of the vortex of losses. A front-line person from a listed pig company revealed to the Financial Federation reporter, “From years later until now, the cost of our farm has continued to drop, compounded by a recovery in pig prices. Now it is considered that we are gradually entering a profit model. Also, as far as I know, the company also has some lower-cost pig farms that have entered the profit range.”

According to statistics from the Shanghai Steel Union, the average weekly profit from self-growing and self-raising is currently 94.56 yuan/head, and the average weekly profit of outsourced piglet breeding is 283.13 yuan/head.

The rise in pig prices during the off-season has become an important guarantee for profits on the farming side. According to public data, national pig prices have been rising for 3 consecutive weeks since the 2nd week of March 2024. In the fourth week of March 2024, the national average pig price was 15.31 yuan/kg, up 1.8% month-on-month and 0.9% year-on-year.

Why do off-season pig prices continue to rise? “Due to the spread of swine disease in the third quarter of last year, the supply of pigs was tight in some regions. For example, in the Henan and Shandong regions, there are relatively few standard pigs and small standard pigs. In particular, there is a (decrease) in retail pig sources, which supports the price. After the holiday season, pig prices fluctuated low. Beginning in late February, a small amount of second-time fattening entered the market without interruption to seize some sources of small-weight pigs. Although the absolute amount was limited, it formed a bottom support. In addition, demand for large pigs is fair in some regions of the south. After a few years of intensive sales, the supply of large and heavy pigs in retail hands declined markedly, and the price spread of standard fertilizer widened year on year. Under bullish expectations, there was no shortage of good prices on the farming side, which was also beneficial to the market.” Guo Dandan, a pig analyst at the agricultural products division of the Shanghai Steel Union, told the Financial Federation.

It is worth noting that pig spot and futures prices have all hit new highs. The 2411 pig futures contract rose from 16,225 yuan/ton on February 8 to the current 18,505 yuan/ton, with a staggering increase of 2,280 yuan/ton.

Remediation sentiment has clearly heated up, and piglet prices have continued to rise

At the same time as the spot price is rising, the price of piglets has also started a “rocket jump”. From the beginning of the year until now, it has risen by nearly 50%, which is the highest level for the past three years.

The data shows that since the 3rd week of January 2024, piglet prices across the country have been rising for 10 consecutive weeks, with a total increase of 11.27 yuan/kg, or 49.5%. Piglet prices have risen in all of the country's 29 monitored provinces. Prices in central China are higher, at 36.16 yuan/kg; prices in southwest China are lower, at 28.45 yuan/kg.

(Piglet price chart image source: Shanghai Steel Union)

Behind the sharp rise in the price of piglets is the continuous removal of sows capable of breeding and the continuing rise in downstream scavenging sows.

A piglet dealer in Guangxi told the Financial Federation reporter, “There have been a lot of pigs being caught recently, and the situation is good for filling in, so the price of piglets has been rising all the time. The logic behind it is because people are optimistic about the future market after a long period of losses. Of course, there are also many people who have lost money for a long time and want to fight back.”

A piglet dealer in the Shanxi region revealed to the Financial Federation reporter, “My 7-kilogram piglets are now 600 yuan, but they are still relatively easy to sell. The rise in demand in the column below is an important reason.”

(Picture of piglets in sow farm image source: interviewee)

Another front-line piglet sales employee of a listed pig company revealed, “We're not selling piglets anymore because we're also filling up the column to increase the scale.”

In terms of data on breeding sows, as of the end of February, the number of breeding sows in the country was 40.42 million, a decrease of 230,000 from the previous month, down 0.6% from the previous month, and a month-on-month decline for 5 consecutive months; the year-on-year decline was 6.9%, and the year-on-year decline was reduced for 8 consecutive months. “The continuous depletion of energy has also played an important role in driving the rise in piglet prices.” Some industry insiders think so.

In response, Guo Dandan said, “Since the current market still has strong expectations for future market conditions, piglet prices have maintained a volatile upward trend since a year later. Currently, the mainstream transaction price for 7 kg piglets is around 560-620 yuan/head. However, the current high price of piglets and the phased increase in supply have an obvious limiting effect on the enthusiasm of terminal farmers to fill the list, and we need to be wary of the risk of a decline in the short-term piglet market.”

Is the green light on when the expectations of institutions, enterprises, and retail investors are turning optimistic?

As pig stocks, piglet prices, and pig futures soared, investment institutions, listed companies, and retail investors reversed their “optimistic” expectations for the recovery of the cycle. The person in charge of the aforementioned large-scale factory told the Financial Federation reporter, “It's been three years since this round of trough. Last year, we lost a bit too much, and the pressure was very high. However, based on past experience, I feel that the reversal may gradually begin in the second half of this year.”

Mr. Wong, on the other hand, thought, “I feel like I want to grow. If it doesn't work, then who dares to raise it? Also, the data on sows is probably a little less now. I am still quite confident. I feel that there is no problem with pig prices reaching 9 yuan (per catty) or more in the second half of the year.”

Listed companies are also slightly optimistic. At the recent 2023 annual results meeting, Duan Lifeng, chairman of Superstar Agriculture and Animal Husbandry (603477.SH), said, “There was a reversal in the market in the second half of this year.”

Market expectations have increased, drawing institutional optimism about the pig industry and attention to pork stocks. A Financial Services Association reporter combed through and found that in the last month, over 10 institutions have a certain optimism that the inflection point of the cycle is approaching. Among them, Changjiang Securities believes that referring to the large sample data and corresponding pig prices, compounding the current tight cash flow in the breeding industry, it is likely that sows that can breed will continue to degenerate. As the cumulative rate of production capacity removal in the industry continues to grow, the inflection point of the pig cycle is becoming more and more clear.

In addition, over 17 pork stocks were surveyed by institutions during the year. Among them, Wen's Co., Ltd. (300498.SZ), Tang Renshen (002567.SZ), Haida Group (002311.SZ), Shennong Group (605296.SH), New Hope (000876.SZ), and Superstar Farming received more than 100 institutional surveys during the year.

(Number of pig companies surveyed by institutions)

Under the unanimous and optimistic expectations of many parties, has the inflection point of the cycle actually arrived, and what will happen to the market in the second half of the year? “Currently, there is a real supply gap, especially in the Luyu region. Based on the damaged sow situation, it is estimated that there will also be a stock break in July-August, and pig prices will continue to rise. However, slaughter companies have generally lost money this year, and frozen products are difficult to sell, so demand side support for rising pig prices is weak. It is expected that pig prices will gradually rise, but there is a risk that high prices will fall back under pressure during the year.” Some industry insiders think so.

Another expert told the Financial Federation reporter, “There is a certain difference between the current cycle and the previous cycle. Due to the continuous decline of energy last year, corresponding to the improvement in supply and demand in the second half of the year, the market will gradually pick up in the second half of the year, but we may have to wait for the inflection point of the cycle.”

It should be noted that due to the current optimism of the market market in the future, the number of piglets has increased, and the enthusiasm of pig breeding farms to eliminate sows has weakened, further increasing the supply of pigs, or leading to a narrowing of the supply gap in the fourth quarter.