There is still a risk of a decline in pig prices in the first half of 2024

The long-term low price of live pigs is vividly presented in the third quarter reports of related listed pig companies: the volume increased and the price decreased in the first three quarters of this year, and listed pig companies generally suffered losses.

According to public data, the top three pig companies with losses are Wen's Group, New Hope, and * ST Zhengbang, with losses of 4.53 billion yuan, 3.858 billion yuan, and 2.819 billion yuan, respectively. Thanks to cost advantages, Muyuan Group turned losses in the third quarter and achieved a net profit attributable to the parent company of 937 million yuan, but still accumulated a loss of 1.842 billion yuan in the first three quarters. With the decline of the "pendulum effect" in the pig industry, multiple interviewees told reporters that the pig farming industry has moved away from the "era of huge profits" and entered an era of low or small profits. At the same time, there may be periodic small or small losses in some periods.

In response to an interview with the Economic Observer, Muyuan Group stated that the development of China's pig farming industry can be divided into three stages: the first stage is driven by capital, with a focus on quantity growth and a rapid increase in intensification; The second stage is quality improvement. After 2021, companies in the industry will shift from pursuing scale growth to improving development quality, and achieve cost reduction and efficiency improvement through equipment upgrades; In the third stage, during the low profit period, the development of the industrial chain gradually improves and the industry tends to mature.

In Zhao Guangyu's view, from the current perspective, the industry is developing from a perfectly competitive market to an oligopolistic monopoly market, which is generally accompanied by sustained losses, thereby forcing the industry to clear high cost production capacity and complete the process of leading and scaling up the aquaculture industry. From a long-term perspective, the average head profit of the future aquaculture industry will be more stable. The profit will come from refined management such as breeding cost control, as well as the development and extension of vertical integration of slaughter and food, rather than the profit fluctuations obtained from the significant fluctuations in selling prices in the past.

Guan Yilin stated that from the perspective of resuming production in the post African swine fever stage, group enterprises are the main force in resuming production. The group enterprise has strong financial strength, relatively good epidemic prevention measures, and due to the substitution of high-efficiency sows for inefficient sows, the industry's slaughter base has grown rapidly, resulting in a gradual compression of industry profits. And due to the relatively strong ability of the group enterprises to bear losses, the capacity of the pig market is relatively slow to reduce, and the low profit state has been extended compared to the previous period.

Against the backdrop of a cyclical downturn, cost reduction and efficiency improvement have been the focus of most listed pig companies in the past two years. As Muyuan Group stated in an interview with reporters, the maturity of the pig farming industry is gradually increasing. The company is shifting from high-speed development to high-quality development, from pursuing rapid increase in output to paying more attention to reducing the average cost of live pig heads and continuously improving profitability. In the future, the company will continue to strengthen research and development investment in nutrition, pig breeding, intelligence, and other areas, while also enhancing standardized management of pig production to further reduce breeding costs.

Atu also realized that the pig farming industry has undergone changes, and the time and space for market shortage of pigs are becoming smaller and smaller. Without the invasion of large-scale diseases, the era of pig farming profits has passed, and the survival situation of small and medium-sized farms is even more difficult. Due to the large amount of funds invested in the renovation and expansion of pig farms in the early stage, the capital accumulated by Atu in recent years has become fixed assets such as live pigs and pig farms. When the market improves, I plan to sell the pig farm and either stop farming or raise less, "said Atu.

At the current moment, the industry has a relatively consistent view on the future of pig prices, believing that they will still face a decline after a short-term rebound.

According to Guan Yilin's analysis, in the short term, the market is affected by the panic selling in the early stage, and the price decline is more obvious. At present, the panic has basically stabilized, and the fourth quarter will usher in the theoretical peak season for pickling and enema. It is expected that the overall pig prices will rebound in the fourth quarter. But in the first half of next year, due to the slow progress of capacity reduction in the initial stage, after a short-term rebound, it is expected that the overall trend will be mainly downward. The price of live pigs may experience a weak seasonal rebound before the Spring Festival, and then enter a trend downward again, "Zhao Guangyu analyzed. Due to the current tight cash flow of breeding enterprises, it is difficult to maintain inventory for a long time, and there is a strong willingness to sell frozen products due to high inventory levels, as well as loose supply and demand in the medium and long term, the height of pig price rebound may be limited. Subsequently, extrapolated based on the large caliber breeding sow base and piglet birth situation, the supply and demand of live pigs will still maintain a loose pattern in the first half of 2024, and spot prices may enter a trend downward again after experiencing seasonal rebound.

Zhu Zengyong also stated that pig prices will mainly rise seasonally before New Year's Day, but there is not much room for increase. In some parts of the first half of 2024, there may still be a situation of oversupply, and there is still a risk of a decline in pig prices. In the second half of the year, pig prices will gradually improve. However, under the premise of narrow adjustment of production capacity and significant improvement in the stability of pork supply, pig prices will still exhibit obvious narrow range fluctuations and will not experience a sharp rise or fall.