Recently, pork prices have shown a continuous downward trend, and the industry’s prosperity cycle not only failed to continue but is also showing signs of gradual collapse. The Wind Pork Industry Index has significantly underperformed the market.

Pork prices have declined for three consecutive months.

As of November 13, 2024, the average selling price of national external three-bred lean pigs is 16.57 yuan/kg, down from 17.33 yuan/kg in the month, a cumulative decrease of 0.76 yuan/kg, a decline of 4.39%.

Since hitting a low point in January 2024, domestic hog prices began to rise, reaching a peak in August, after which they declined month-on-month. For example, Wens foodstuff group’s hog price in August was 20.45 yuan/kg, dropping to 19.05 yuan/kg in September, and 17.64 yuan/kg in October; muyuan foods’ commodity hog price in October was 17.17 yuan/kg, lower than 19.71 yuan/kg in August and 18.65 yuan/kg in September. The national average wholesale price of pork was 27.27 yuan/kg at the end of August, 25.54 yuan/kg at the end of September, and 24.66 yuan/kg at the end of October. Entering November, the hog market faced moderate performance in seasonal consumer demand, as the increase in demand was relatively limited, while the supply from the farming side was looser due to pressure from delayed capacity, leading to continued downward pressure on hog prices.

Reasons for the inability of hog prices to strengthen.

Industry information indicates that the reasons for the inability of hog prices to strengthen include changes in farmers' behavior and market demand factors. For example, when pork prices were rising earlier, farmers held back their pigs from sale and engaged in secondary fattening, which increased the supply of medium and large pigs. In recent months, these newly added medium and large pigs have gradually reached the time for sale, leading to increased market supply. Currently, there is a lack of bullish sentiment from holidays, and consumer dining and on-premise dining follow-ups are average, with limited mainstream consumer demand increases, leaving demand lacking effective support for hog prices.

In fact, the most critical factor is that this round of hog cycle capacity clarity may not be complete. Data from the Ministry of Agriculture and Rural Affairs show that as of the end of April 2024, the number of breeding sows in china is 39.86 million, which is only a decrease of 3.23 million from the peak of 45.64 million in June 2021, a decline of 12.6%.

Compared to the previous round of capacity reduction, it decreased from 50.68 million heads in 2012 to 19.13 million heads in 2019, with continuous capacity reduction and a capacity elimination rate of 62.3%.

On one hand, the capacity reduction is slow and not thorough, while on the other hand, the capacity is rebounding quickly! In the first quarter of this year, pork prices slightly increased, and the number of breeding sows quickly rebounded, maintaining around 40 million heads by the end of June.

The impressive third-quarter reports of pig companies failed to attract investors.

Currently, hog farming stocks are performing weakly, which contrasts sharply with the impressive third-quarter reports of pig companies. For example, muyuan foods achieved revenue of 96.775 billion yuan in the first three quarters of 2024, a year-on-year increase of 16.64%; achieved a net income of 10.481 billion yuan, a year-on-year increase of 668.9%; non-recurring net income was 11.221 billion yuan, a year-on-year increase of 754.04%; and basic eps was 1.94 yuan, a year-on-year increase of 670.59%;

The third quarter's performance was exceptionally remarkable: it achieved revenue of 39.909 billion yuan in that quarter, a year-on-year increase of 28.33%; achieved a net income of 9.652 billion yuan, a year-on-year increase of 930.20%; non-recurring net income of 10.342 billion yuan, a year-on-year increase of 866.04%; and basic eps was 1.79 yuan, a year-on-year increase of 894.44%.

Wens foodstuff group achieved revenue of 75.419 billion yuan in the first three quarters of 2024, a year-on-year increase of 16.56%; achieved a net income of 6.41 billion yuan, a year-on-year increase of 241.47%.

Third quarter single-quarter performance: In the third quarter, it achieved revenue of 28.662 billion yuan, a year-on-year increase of 21.95%; achieved a net income of 5.081 billion yuan, with a year-on-year increase of 3097.03%.

Zhuochuang news senior analyst Wang Yanan believes that in the first three quarters of this year, profits in the hog farming industry gradually increased, supported by rising pork prices and declining fodder costs, providing dual bullish factors for farming profits. The increase in hog supply in the fourth quarter will exceed the increase in downstream animal slaughter volume, which may be bearish for pork prices. It is expected that price rebounds may occur around late December.

This article is reprinted from "Wand stock", edited by Zhitong Finance: Li Fu.