CAC 24th, Financial Union news (Reporters Liu Jian, Wang Ping'an) Piglet market has been cooling down in recent months, with prices of 7KG piglets halving from earlier this year. Financial Union reporters have recently interviewed from multiple sources and learned that as piglet prices drop, there are divergent views on restocking in the breeding sector. Some breeders and industry experts believe that the probability of losses in the early next year is relatively small, and the overall situation may still be profitable next year. However, some breeders are concerned about the flat demand period in winter disease season and post-Spring Festival, leading to a more cautious approach to restocking.

A piglet salesperson in Shandong told Financial Union reporters, "Now 15 kg piglets are 200 yuan each, 7 kg piglets are 140 yuan each, the prices have dropped a lot in the past month, and currently this price should be at its lowest." Another piglet salesperson in Guangxi told reporters, "The prices have indeed dropped a lot recently. They were over 700 yuan for a 15 kg piglet at the highest point before, now it's just over 200 yuan, which is nearly 400 yuan cheaper."

According to Mysteel data monitoring, as of the 38th week of 2024, the national average price for 7KG piglets is 342.86 yuan/head, a 50% drop from the high point of 680.7 yuan/head in the 24th week of the year.

(Piglet Price Trend Chart, Image Source: Shanghai Ganglian E-commerce Holdings)

Researcher Zhu Zengyong from the Beijing Institute of Animal Husbandry and Veterinary Sciences of the Chinese Academy of Agriculture Sciences told Financial Union reporters, "Piglet prices are influenced by multiple factors, one of which is the number of newborn piglets. The supply of piglets has been relatively abundant since the second quarter of this year."

The sentiment for restocking at the breeding end is another factor. Financial Union reporters found in recent interviews that frontline breeding restocking sentiment has diverged. Some breeders who anticipate a good market outlook after the Spring Festival still choose to steadily restock. A breeder in Shanxi told Financial Union reporters, "I currently have 500 pigs in stock, they have grown to around 330 pounds, I plan to raise them for another month before marketing. Then I will focus on piglets around 7 kilograms because piglets are cheap now. As long as there are no diseases this winter, the likelihood of loss should be relatively small."

Another breeder in Hunan told reporters, "I recently sold some pigs and bought another batch of piglets, 1150 in total."

The aforementioned piglet seller in Shandong also stated, "Recently, there are still quite a few people buying piglets. The key is that the base price has become cheaper, the price of fodder is not expensive, and the issue of making more or less money after slaughtering is the main concern. The likelihood of losses is relatively small."

However, some farmers are concerned about the flat demand period after the Spring Festival and the high incidence of winter diseases, and are cautious about restocking. A farmer in Sichuan told reporters, "After this batch of pigs is slaughtered, I plan to wait until spring before restocking. The main concern is still the issue of diseases. Diseases were quite severe last winter. Moreover, consumption is usually relatively flat after the Spring Festival, and pig prices generally tend to decline. I'm afraid that the market may not be good at that time and could incur losses."

It is worth mentioning that although there are differing opinions on restocking sentiment, most industry insiders generally have a positive outlook on the overall market for next year. A farmer in Shanxi mentioned, "Next year should be okay overall. Costs have also come down now. Although the profit may not be as much as this year, it should not be too bad either."

In Zhu Zengyong's opinion, "I think the market next year should be fine for the whole year. In terms of supply, the number of sows that can breed this year fluctuates around 40 million. After the rebound in pig prices, there has not been a significant increase in the number of breeding sows. The quantity is basically the same as the average for the whole of last year or has changed slightly, indicating that next year may be generally good. Compared to this year, the overall profits from livestock farming next year should be relatively even, without significant profits or losses. In the short term, even if pig prices fall seasonally after the Spring Festival, the likelihood of losses in breeding is relatively small due to the fact that the production cost of live pigs has now returned to levels similar to before the African swine fever outbreak."

According to the Ministry of Agriculture and Rural Affairs monitoring, the stock of breeding sows in the country in August was 40.36 million, a decrease of 0.1% compared to the previous month and a 4.8% decrease year-on-year, equivalent to 103.5% of the normal stock level of 39 million.

On the other hand, the industry has been promoting cost reduction and efficiency improvement this year. Even if pig prices fall next year, the ability of the breeding sector to resist risks will also increase. Zhu Zengyong stated, "Currently, looking at the national average total cost level, it is around 15 yuan/KG. With the subsequent improvement in production efficiency, it may drop to around 14 yuan/KG. Therefore, even if pig prices drop to around 15 yuan/KG next year, the breeding sector will basically break even, without incurring losses."

In terms of A-share listed pig companies, according to the latest information, Shennong Group (605296.SH), Muyuan Foods (002714.SZ), and Wens Foodstuff Group (300498.SZ) have already lowered their breeding costs to below 14 yuan/KG, at 13.7 yuan/KG, 13.7 yuan/KG, and 13.8 yuan/KG respectively. The cost reduction effect this year is significant, and their profit trend for this year may continue into next year.