Nurturing a new cycle: “Earning money” in the second half of the year was a consistent expectation. Was it a small fluctuation or a big market? ·  May 12 15:25

① Breeding sows have been continuously eliminated. By the end of the first quarter, pig prices had dropped to 39.92 million, and pig prices continued to rise since March; ② Industry insiders believe that the supply and demand situation is expected to ease in the second half of this year, the market is gradually rising, and the breeding side is expected to enter a profit period, but it is more of an improvement in the supply and demand situation, and there has been no rebound in supply fundamentals.

Financial Services Association, May 12 (Reporters Liu Jian and Wang Ping An) The timeline for capacity removal is lengthening, and the pig cycle concept seems to be weakening, yet the pig industry is still thirsting for a “new cycle.” Since March of this year, pig prices have continued to rise, triggering discussions in the industry, “Is this cycle of mutation coming to an end?” “Has the cycle reached an inflection point?” “I should be able to make money in the second half of the year”...

In an interview with reporters, many industry chain experts all believed that the supply and demand situation is expected to ease in the second half of this year, the market is gradually rising, and the farming side is expected to return to a profit period. The Ministry of Agriculture and Rural Affairs also stated in April, “The supply and demand relationship in the pig market will further improve in the second quarter of this year, and pig farming may turn losses into profits.”

Furthermore, the latest data recently released by the National Bureau of Statistics shows that at the end of the first quarter, 408.5 million pigs were kept, a year-on-year decrease of 5.2%; 194.55 million pigs were released in the first quarter, a decrease of 2.2%. At the end of the first quarter, the number of breeding sows was 39.92 million, a year-on-year decrease of 3.14 million, a decrease of 7.3%; a decrease of 1.5 million over the previous year, a decrease of 3.6%.

The industry generally believes that looking back at the pig cycle over time, when pig prices, piglets, and the number of breeding sows fall to new lows simultaneously, it is a sign that appears at the bottom of the cycle.

A CIFA reporter noticed that the frontline farming side has now reached a break-even balance. A number of farmers told the Financial Federation reporter, “I currently earn about 250 yuan per pig” and “have already broken out of losses.” Recently, Wen's Co., Ltd. also stated that the company basically achieved break-even with a single head of pork in March. Of the company's 16 regional pig farming units, 9 have already achieved profit.

(Some pig companies are already close to the break-even line in March. Data source: announcement)

Against the backdrop of improved supply and demand, the market is gradually picking up. Zhu Zengyong, a researcher at the Beijing Institute of Animal Husbandry and Veterinary Medicine of the Chinese Academy of Agricultural Sciences, said in a recent interview with a reporter from the Financial Federation, “The pace of capacity adjustment has accelerated since the second half of last year. The corresponding overall supply and demand easing situation will gradually improve starting in the second quarter of this year, providing corresponding support for the rebound in pig prices this year.”

However, although the market is picking up, it may be difficult to see an inflection point in the cycle. Many interviewees believe that the second half of the year was more of a phased recovery. It was a small cycle of fluctuations, and the bottom of the big cycle has not yet appeared. Yan Meiling, a pig analyst at the Shanghai Steel Union, said, “I personally think that the inflection point of the cycle has not yet occurred. Whether in terms of current trend data or the bottom of capital from these group manufacturers, there is no inflection point of a cycle reversal.”

According to Zhu Zengyong, “The production capacity for breeding sows is more of a moderate decline, compounded by an increase in sow efficiency. This year was more of an improvement in the supply and demand situation, and there was no reversal in supply fundamentals. This means that overall in the second half of this year, pig prices experienced a moderate rebound, which will be better than the same period last year.”

It should be noted that the new cycle may take longer and longer, and the future industry will show more small-cycle fluctuations. Some interviewees in the industry chain believe that the current upward and downward cycle times will be shortened. Large-scale enterprises are generally judged based on energy trends, and once there is an upward trend in the market, a quick correction column will appear. Moreover, on the surface, the data on breeding sows is declining, but their backup sows are all ready, which may lead to an immediate reversal in the market.

Xie Zefeng, chief analyst at the National (Chongqing) Pig Data Center, said, “The original 4-year cycle of the pig cycle has been destroyed. Now a new cycle is being nurtured, and the future may become a cycle with shorter periods of time and narrower fluctuations. The market was definitely better in the second half of this year, but it wasn't a cycle reversal; it was just a seasonal recovery fluctuation. Judging from experience, pig prices will definitely rise in July, and November may be the best month of the year.”

The translation is provided by third-party software.

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