① In the past, the pig cycle was about every 3-4 years. The upward time in this round of the pig cycle was short, and losses on the breeding side were serious, and the industry lamented “it's hard to make money!” ② The formation cycle of the pig industry is a mismatch between changes in supply and demand and the pig growth cycle.
Financial Services Association, May 12 (Reporters Liu Jian and Wang Ping An) “This pig cycle is a bit different. The time to earn money is short, and the time to lose money is long. This is probably the only pig cycle I haven't made any money in the years I've raised pigs.” Mr. Huang, who has been raising pigs for over 10 years, recently told the Financial Federation reporter.
A CIFA reporter noticed that the upward period of the current pig cycle was extremely short, and the downward period continued to be sluggish. The breeding side experienced the worst losses in history, and the debt ratio soared, causing the industry to lament: “Has the pig cycle failed?”
The formation cycle of the pig industry is a mismatch between changes in supply and demand and the pig growth cycle. “Rise in pig prices, increase in breeding profits - increase in external production - increase in supply - fall in pig prices - fall in breeding profits - push out capital from outside, reduce production in the industry - decrease in supply”. This is the supply and demand logic of the pig cycle, but pigs have a cycle of breeding and growth. “It takes 10 to 12 months from breeding to pregnancy to release. From when prices recover to when production capacity peaks, prices begin to decline, it takes about 20-24 months. The upward cycle is 20-24 months, and the downward cycle is about every 4 years.” Xie Zefeng, chief analyst at the national (Chongqing) pig data center, told the Financial Services Association.
(Pig price and breeding profit trend chart image source: wind)
Xie Zefeng further stated, “If the market is good, our farmers will expand their scale to pursue higher profits, while others who have never raised pigs will also enter the industry due to high profit expectations, further causing an increase in farming volume. However, after the increase in farming volume, consumption was relatively stable, and consumption growth was unable to keep up with the increase in production capacity. In the process of decline, breeding began to lose money, and some farmers gradually withdrew or decreased in size, which then led to changes in the supply and demand relationship, and the market gradually rose again. This process is the process of the pig cycle.”
In fact, in the previous pig cycle, sometimes they earned a little more, and sometimes they didn't make much money overall. Mr. Huang recalled, “We generally have a cycle of raising pigs. When prices are high, production capacity is increased, and production capacity is eliminated when prices are low, but in the past cycle, the time to earn money was not too short than the slump period, so overall, we made money.”
However, the current pig cycle made Mr. Huang quite distressed. It is probably the only pig cycle where he hasn't made money for so many years. “This cycle was very short to make money. At that time, the market began to pick up a bit, then reached a high point around October. I still remember that pig prices rose for 10 days in a row during the 2022 National Day. At the time, I thought an opportunity to make money had arrived, and the results immediately fell back quickly. In fact, we can clearly feel that all of our farming cycles are different from previous cycles. Until now, I haven't made any money from the general ledger during this cycle, and I switched to surrogacy last year when I couldn't bear the pressure.”
The current cycle began in April 2022. It is the sixth pig cycle in China, but after hitting a high point in October, it quickly entered a downward period in November. The upward period was clearly shorter than the previous cycle, and there was an abnormal imbalance in the cycle. Furthermore, it can also be observed from data on breeding sows that can breed sows began to rise in April 2022, but production capacity began to decline only 7 months after the expansion of production capacity.
Zhu Zekunze, a pig analyst at Zhuochuang News, told the Financial Federation reporter, “The current pig cycle is not that obvious, or the pig cycle is getting shorter. In the past, we often thought that the pig cycle was about 3-4 years, but now it may occur in a year and a half to two years for a small cycle.”