How can the pig industry survive the winter in 2024?

With the Spring Festival approaching, there will be pork and fennel dumplings, Braised pork belly, Dongpo elbow, stewed ribs and other delicacies on the reunion dinner table. In 2023, there will be sufficient supply of pork, but prices have remained low. While consumers have achieved "pork freedom", they have not been able to usher in a win-win situation where "ordinary people can afford it and farmers can make a profit". Pig farming enterprises have experienced a prolonged "winter".

In the fourth week of December 2023, the average price of live pigs nationwide was 14.82 yuan/kg, and the average price of pork nationwide was 24.71 yuan/kg. Both the price of live pigs and pork decreased by more than 20% year-on-year compared to 2022. In fact, except for August and September in 2023, the pig farming industry has been continuously losing money for the other 10 months.

According to monitoring, the average loss of pig farming heads from January to November last year was 73 yuan. 2023 will be the first year since 2014 to have a total loss in the annual accounting, and the industry as a whole will face significant operating pressure.

What are the reasons why the price of live pigs remained consistently low throughout last year? How is the market situation before and after this year's Spring Festival? What are the new changes in the pig industry? What should the breeding farm do during the loss period? What is the current situation of the pig epidemic?

To answer these questions, the reporter interviewed relevant officials from the Ministry of Agriculture and Rural Affairs, industry experts, association representatives, and heads of breeding enterprises.

Relative overcapacity in the early stage

The main background of the low prices is still the relative overcapacity in the early stage. The inventory of sows capable of breeding has been higher than the normal reserve of 41 million heads from 2022 to 2023. Although production capacity has been continuously reduced in 2023, the speed and magnitude of capacity reduction are slow and small, "said Wang Zuli, chief expert of pig industry monitoring and early warning of the Ministry of Agriculture and Rural Affairs.

In his view, the main reason why production capacity cannot be reduced is that the structure of the entire industry has undergone significant changes. In 2018, African swine fever was introduced to China and rapidly spread. Due to the lack of effective vaccines and drugs for prevention and control globally, the biosafety requirements for pig farming are becoming increasingly high. In addition, with the rise in breeding costs, a large number of retail investors who lack technical and financial support have withdrawn from the industry. The development speed of large and medium-sized pig farming enterprises has accelerated, and the standardization and scale level of the entire market has greatly improved. The scale level of pig farming by the end of 2023 is about 68%, an increase of 21% compared to 2017. From the pattern of past pig cycles, it can be seen that after experiencing losses, the main players who reduce production capacity are small and medium-sized retail investors, and the production and operation behavior of large-scale farms is mainly stable. At present, retail investors only have one-third of the market share, and the industry's ability to resist risks has significantly improved. The difficulty of reducing production capacity through market regulation has become much greater.

In the first half of 2023, commercial pigs have been operating at a loss, but piglets have always been profitable. At its best, a 7-kilogram piglet can earn 200 yuan, indicating that the market has good expectations for pig prices in the second half of the year. The industry's enthusiasm for replenishing inventory is relatively high, which has also led to slow capacity reduction.

Wang Zuli introduced that although the market situation continues to be sluggish, the average price of live pigs for the whole year of 2023 will be 15 yuan/kg, and the average breeding cost of the industry in November 2023 will be 15.8 yuan/kg. There has been no deep loss, and it has not caused significant pressure on the cash flow and capital chain of breeding enterprises. At this level of loss, most breeding enterprises will not choose to actively reduce the number of sows that can be bred.

Chu Hong'en, from the Strategic Department of Muyuan Company, believes that "this round of pig cycle is mainly caused by changes in production capacity leading to changes in market prices. With the industry becoming more transparent and the degree of scale increasing, overcapacity reduction is slow, pig production capacity is sufficient, supply exceeds demand, and prices continue to be low

Chu Hongen introduced that Muyuan Group believes that the production capacity of sows capable of breeding is sufficient in the early stage. The slaughter in 2023 corresponds to sows capable of breeding from March 2022 to February 2023. From March to December 2022, sows will continue to increase, and from January to February 2023, there will be a slight decrease, but still at a high level. In addition, since 2023, the overall production efficiency of the industry has significantly improved, with an estimated increase of about 5% in efficiency compared to 2022. Based on the comprehensive industry's ability to breed sows and changes in efficiency, it is estimated that the annual supply in 2023 will be higher than that in 2022.

Bai Xubo, Director of the Board of Directors and Securities Affairs Representative of New Hope Liuhe Co., Ltd., told reporters that in terms of pig prices in 2023, New Hope Liuhe believes that there are two factors that have led to the continued downturn of pig prices. On the one hand, on the supply side, the brief recovery in the second half of 2022 has improved the profitability and funding situation of various breeding entities, increasing their willingness to stabilize existing production capacity and even expand production; On the other hand, on the consumer side, the market generally expects a good rebound in consumer demand in 2023, but in reality, the rebound in demand on the consumer side has not met expectations, resulting in oversupply.

Since the outbreak of African swine fever, the scale of the industry has significantly increased, and the proportion of pig farming by large enterprises has been increasing. Even ordinary farmers have upgraded from small retail households to large-scale farmers. The financial strength of various types of breeding entities has been strengthened, and the scale of single farms has also significantly increased, "said Bai Xubo.

Meanwhile, in recent years, the overall production efficiency of various aquaculture entities has been improving, and the cost of aquaculture has been optimized and improved to varying degrees. When the pig cycle declines and remains at a low level for a long time, the large initial investment makes people "unwilling to withdraw", the strong financial strength makes people "capable of not withdrawing", and the improvement in cost efficiency makes people believe that "there is still hope and should not be withdrawn", ultimately leading to slow capacity reduction in the industry.

Although the long-term low-level operation of the pig cycle has brought significant operational pressure to enterprises, it should also be noted that the supply of pork in the market is sufficient and stable, and the efficiency and cost of various breeding entities are continuously improving, representing the overall productivity level of the industry is also increasing. "Bai Xubo said that this is to some extent another positive effect brought to society and the industry by the competition after large-scale and centralized development.

So what is the expected trend of the pig market in the coming period, especially around the Spring Festival?

Wang Zuli believes that there will be a volatile market before the Spring Festival, and pig prices may rise or fall slightly. After the festival, it will enter the off-season of consumption, and pig prices will decline as in previous years.

The current pig production capacity is at a high level, and we need to guard against continued losses after the Spring Festival, "said the person in charge of the Animal Husbandry and Veterinary Bureau of the Ministry of Agriculture and Rural Affairs. In November 2023, there were 41.58 million breeding sows in stock, which was 1.4 percentage points higher than the normal stock. The national pork market has sufficient supply, but consumption growth has fallen short of expectations, resulting in a temporary oversupply in the pig market.

Everyone believes that the fourth quarter is the peak season for consumption, which is conducive to the recovery of pig prices. However, in November 2023, the inventory of medium and large pigs in large-scale pig farms across the country increased by 3.0% month on month and 4.4% year-on-year. The supply of live pigs and pork will continue to increase in the future, and pig prices are still fluctuating at a low level recently, lacking a basis for a significant increase. From the perspective of the number of newborn piglets, the number of newborn piglets in China increased by 1.3% year-on-year from July to November 2023. These piglets will be gradually slaughtered after 6 months, and the period from July to November will be extended by 6 months, which is from January to May 2024. This indicates that the supply of pork in the market will still be loose in the first 5 months of 2024.

The head of the Animal Husbandry and Veterinary Bureau of the Ministry of Agriculture and Rural Affairs said that it is hoped that all regions will strengthen warnings, guide farmers to recognize the situation, timely and timely sell pigs, and prevent blind pressure on the market, which may lead to an increase in pork production and meat in the future, and instead lower the price of pigs at that time.

Difficulties in saving costs and increasing efficiency

In the current situation where the pig market continues to hover at a low level, what should farmers do?

Wang Zuli believes that the most important task for breeding farms (households) is to first do a good job in epidemic prevention. From historical experience, during periods of low market conditions, breeding farms (households) often overlook the importance of epidemic prevention and reduce necessary investment in biosafety to reduce production costs, thereby increasing the risk of disease occurrence. Once a disease occurs, especially a major animal disease such as African swine fever, it may cause a catastrophic disaster that affects the survival of the farm. Therefore, preventing diseases is the top priority for breeding farms, and vigilance should not be relaxed at all times.

Secondly, we need to recognize the situation. At present, the production capacity of live pigs is in a saturated state, lacking fundamental support for a significant increase in the market. There is no obvious sign of improvement in the market situation, and we cannot be too optimistic about the market for the next period of time. If the production capacity continues to be relatively saturated in the future, the industry may enter a sustained era of low profits.

At the same time, it is necessary to prepare sufficient food and supplies. Cash flow and funding chain must be prepared, as the entire industry may face even more severe challenges in the first half of 2024, with prices likely to continue to decline, and the magnitude of the decline may be slightly greater than in 2023. Breeding entities need to consider whether their cash flow and funding chain can withstand the cold winter period of this industry.

Finally, it is important to cultivate internal skills. A single breeding entity cannot change the downturn of the market. It can only manage its own pig farm well, reduce breeding costs, and grasp the pace of slaughter while preventing and controlling diseases. Small and medium-sized pig farming (households) can refer to the "Technical Guidelines for Promoting Quality, Efficiency, and Cost Reduction in Pig Farming" issued by the National Pig Industry Technology System to improve the level of breeding management, save breeding costs, and reduce losses.

Wang Aiguo, Executive Chairman of the Pig Industry Branch of the China Animal Husbandry Association and a professor at China Agricultural University, believes that during the current downturn in the market, large pig enterprises should calmly think and stabilize their capital chains as much as possible. He suggests improving the normalized communication mechanism between large pig enterprises, taking the path of high-quality development, and leading the development of small and medium-sized farmers through methods such as "company+farmers". Small retail investors should improve the biological safety level of their breeding farms, enhance their ability to prevent and control animal diseases, improve their facilities and equipment in feeding, manure treatment, and other aspects, and improve their breeding technology.

After a year of low price testing, major pig breeding enterprises are constantly adjusting production, optimizing management, and implementing measures to save costs and increase efficiency.

Our first focus is on disease purification, improving the health level of pig herds, increasing production indicators such as daily weight gain and overall survival rate, in order to reduce the cost of pig farming, "said Chu Hongen.

According to Chu Hongen, the development of Muyuan has shifted from high-speed growth to high-quality growth. Increase R&D investment, explore cost space, continue technological innovation and breakthroughs at the bottom level, improve intelligence level, and reduce production costs. At the same time, gradually connecting various technological paths, continuously promoting the replication and promotion of excellent performance breeding lines, eliminating high cost breeding lines, reducing the dispersion of breeding costs, and achieving overall cost reduction.

Through a series of cost saving and efficiency increasing measures, the cost of meat pigs in Muyuan will be reduced to 14.88 yuan/kg in November 2023, a year-on-year decrease of 0.52 yuan/kg compared to November 2022.

In recent years, New Hope Liuhe has vigorously promoted the improvement and enhancement of production management in various aspects of pig farming, and solved pain points, "said Bai Xubo.

Bai Xubo told reporters that in the production of sows and weaned piglets, New Hope Liuhe has worked together through the linkage of multiple departments such as production, health, and nutrition to enhance the production management capabilities of breeding pigs, promote balanced, efficient, and full load production, and significantly improve various production indicators.

In the process of fattening pigs, in response to the self fattening mode, New Hope Liuhe has unified the standard operating procedures for the entire fattening process to enhance the capacity of the fattening system; In response to the most important aspect of feeding management during the fattening stage, the company adjusts the feed formula and fattening feeding procedures in a timely manner based on the raw material market. In addition, efforts are being made to promote full coverage of pig farming insurance in the field of fattening and breeding, in order to reduce the cost of dead pigs.

In the field of reserve sows, New Hope Liuhe has established a reserve pig management team to strengthen the feeding and breeding management of reserve pigs, shorten the age of reserve pig conversion, improve the success rate of selection and retention, reduce the mortality rate of reserve pigs, and thereby reduce the cost of reserve pig conversion. With the company's new sow conversion, the net value of sows will continue to decline, which is beneficial for reducing seedling costs and eliminating sow losses.

The implementation of normalized epidemic prevention measures is in place

Epidemic prevention is about stable production, and reducing losses is about increasing income. Only by doing a good job in animal disease prevention and control and maintaining overall stability of animal epidemics can we ensure the safety of animal husbandry production and stable supply of livestock products, "said the person in charge of the Animal Husbandry and Veterinary Bureau of the Ministry of Agriculture and Rural Affairs.

In June 2023, the Ministry of Agriculture and Rural Affairs organized a national meeting to promote the prevention and control of zoonotic diseases among livestock, and comprehensively deployed and arranged key tasks for the normalized prevention and control of major animal diseases such as African swine fever. Throughout the year, more than 7 billion yuan of central government animal epidemic prevention subsidies and basic construction funds for animal and plant protection projects were arranged and implemented to support local efforts in animal epidemic prevention.

At present, the situation of prevention and control of major animal diseases such as African swine fever in Hubei Province remains stable. Xiang Keqiang, Director of the Hubei Provincial Agricultural Development Center and Deputy Director of the Provincial Department of Agriculture and Rural Affairs, introduced that Hubei attaches great importance to the prevention and control of major animal diseases such as African swine fever, and has issued ten measures for normalized prevention and control of African swine fever, clarifying the standards and requirements for key measures in six major links including breeding, quarantine, slaughter, and harmless treatment, effectively preventing the occurrence of major diseases such as African swine fever.

The reporter learned from the China Animal Disease Prevention and Control Center that the Ministry of Agriculture and Rural Affairs continues to implement animal disease monitoring and epidemiological investigation plans, carry out village and field inspections for African swine fever, and conduct on-site sampling and testing. Since 2023, animal disease prevention and control institutions at all levels have collected and tested over 38 million samples of various animal diseases. Implement 24-hour emergency duty for animal epidemic prevention, implement epidemic express, weekly, and monthly reporting systems, promptly report, warn, and dispose of risks and hidden dangers, and strictly prevent the spread and secondary pollution of the epidemic.

The healthy development of the pig industry cannot be separated from the perseverance of grassroots animal epidemic prevention workers. At a family farm in Ju County, Rizhao City, Shandong Province, the reporter met with Li Zhaokui, the head of Yanzhuang Livestock and Veterinary Station. He was checking the farm's breeding records, which recorded almost all the breeding content of the farm's pigs, including immunization, medication, dead cleaning, and harmless treatment.

How many? Where will they be shipped? Have there been any abnormal situations recently? "While looking at the breeding records, Li Zhaokui confirmed the information with the farmers again.

The common people want to eat meat with peace of mind, and we are the first gatekeepers, "Li Zhaokui said. He is currently conducting origin quarantine. Before animals leave their breeding and production areas, the animal health supervision agency must send official veterinarians to conduct origin quarantine.

A group of fat pigs were rushed from the pig station to the transport truck. Li Zhaokui had been focusing on checking, not only counting, but also carefully observing the health status of each pig, checking whether the ear tags were complete, whether the pigs were wilting, and whether there were any abnormalities in breathing and excretion... Time passed quickly, and it was already 1 pm when he turned his eyes. All the pigs had been loaded onto the truck. Li Zhaokui issued electronic animal quarantine certificates to 310 pigs through his mobile terminal. Paperless certification is an innovative approach in animal quarantine work in recent years. Since its pilot implementation, it has saved costs, improved the level of convenient services, and enhanced work efficiency, which has been well received by breeding farms (households) and official veterinarians.

Although the work of our official veterinarians involves repetitive inspections every day, which may seem tedious, I deeply understand the significance of this job. It not only ensures the safety of everyone's tongues, but also enables timely detection of infected animals, prevents their external transportation, and prevents the spread of animal diseases, "said Li Zhaokui.

Since 2023, our department has organized cross inspections of spring and autumn prevention, consolidated the epidemic prevention responsibilities of local governments, industry departments, and production entities, and urged the implementation of key epidemic prevention measures. We have comprehensively promoted the zoning prevention and control of major animal diseases such as African swine fever, strictly supervised key links such as quarantine, transportation, and slaughter, and severely cracked down on illegal and irregular transportation, slaughter, and sale of dead pigs, "said the person in charge of the Animal Husbandry and Veterinary Bureau of the Ministry of Agriculture and Rural Affairs.

The reporter learned from the Department of Agriculture and Rural Affairs of Guangxi that Guangxi attaches great importance to the purification and regional management of major animal diseases. By promoting the purification of major pig diseases in Guigang, Guangxi, a set of practical and effective measures for disease control and purification management have been summarized. The main pig diseases in the entire region have shifted from stable control to purification and elimination. The health level, production performance, and biosafety management level of enterprise breeding pigs have been greatly improved, effectively promoting the high-quality development of Guangxi's pig industry.

Through the construction of purification plants, epidemic free communities, and epidemic free areas, a series of technologies have been integrated and demonstrated for application and promotion in Guangxi. Guangxi has launched large-scale purification technology solutions for major pig diseases such as foot-and-mouth disease, swine fever, and pseudorabies in pig farms. Epidemiological investigations of major pig diseases such as foot-and-mouth disease, swine fever, and pseudorabies have been conducted, and an evaluation system consisting of background investigation, risk assessment, contact mechanism, purification plan, monitoring and early warning, liquidity supervision, certification and assessment has been established. A set of replicable and promotable purification and regional management models for major pig diseases have been formed.

In order to carry out the work of purifying and eliminating epidemics, the Ministry of Agriculture and Rural Affairs focuses on key diseases such as swine fever, African swine fever, and pig blue ear disease, provides policy support and publicity guidance, strengthens typical guidance and demonstration drive. Continuously promote the construction of purification fields, epidemic free communities, and epidemic free areas, and continuously expand the coverage area and disease types. As of now, a total of 262 national level animal disease purification sites, 258 epidemic free communities, and epidemic free areas have been built nationwide. The new pattern of "three in one" animal epidemic prevention is accelerating, and the level of biological safety protection and regional comprehensive epidemic prevention capabilities in each link are steadily improving.

In addition, the Ministry of Agriculture and Rural Affairs has launched the "I do practical things for the people" practical activity in 2023, supporting and helping livestock farms (households) and farmers and herdsmen to scientifically prevent and control key zoonotic diseases. Develop and issue technical materials such as the "Key Points for Prevention and Control of African Swine Fever in Rainy Season Livestock Farms (Households)", "Technical Guidelines for Prevention and Control of Animal Diseases in Flood stricken Areas", and "Technical Guidelines for Prevention and Control of Animal Diseases in Flood stricken Areas", organize online and offline special training, and continuously improve the technical level of prevention and control of African Swine Fever and other pig diseases in grassroots veterinary personnel and livestock farms (Households).

Since 2023, the Ministry of Agriculture and Rural Affairs has guided various regions to tirelessly carry out normalized prevention and control of pig diseases such as African swine fever, and has made positive progress. Throughout the year, only one outbreak of foot-and-mouth disease was reported in various regions, and no other major pig outbreaks such as African swine fever were reported. This has maintained the bottom line of no regional major animal epidemics, ensuring the safety of pig production, public health, and national biosafety.

The fluctuation of the 'pig cycle' tends to flatten out

Although the price of pork in the market remains low, the production of live pigs will remain stable and orderly throughout 2023. In the first three quarters of 2023, pork production increased by 3.6% year-on-year. The price of live pigs has fluctuated more smoothly, with the monthly price difference of live pigs nationwide narrowing to 2.7 yuan per kilogram, far lower than the monthly price differences of 13.9 yuan and 22.7 yuan per kilogram in 2022 and 2021. It is expected that the proportion of large-scale pig farming will reach about 68%, an increase of about 3 percentage points from the previous year, and the production efficiency and industrial quality of pigs will steadily improve.

The stability of pig production capacity depends on long-term stable support policies. In 2023, the Ministry of Agriculture and Rural Affairs will play a coordinating role in stabilizing pig production departments, holding a consultation meeting with relevant departments such as the National Development and Reform Commission, the Ministry of Natural Resources, the Ministry of Ecology and Environment, the Ministry of Commerce, and the former China Banking and Insurance Regulatory Commission to analyze and judge the current production situation, stabilize long-term support policies such as land use, environmental protection, and finance, and implement normalized prevention and control policies and measures for major diseases such as African swine fever to ensure production safety and stable market supply.

According to Wang Zuli, the five pig cycles that have been completed since the beginning of the new century are mostly around 4 years. However, based on current trends, the current pig cycle that began in April 2022 may end in the first half of 2024, lasting only two years, which is significantly shorter than previous cycles.

On the other hand, overall, the adjustment of production capacity in this pig cycle is relatively small. In the past few pig cycles, the adjustment of production capacity was often greater than 10%, especially in the previous pig cycle, where the adjustment of production capacity even reached 30%. However, in this round, the adjustment of production capacity is around 5%, which is significantly smaller.

Wang Zuli believes that the narrowing of production capacity adjustment is a good change, and stable production capacity is the foundation of price stability. In 2023, the fluctuation of pig prices has also narrowed a lot, and there has been little fluctuation. The main reason for this is the overall stability of production capacity, which is closely related to the implementation of the "Implementation Plan for Pig Production Capacity Regulation (Interim)". Such changes are conducive to the stability of pork supply and price stability.

In order to alleviate the significant fluctuations in production capacity and prices during the "pig cycle", the Ministry of Agriculture and Rural Affairs has taken the lead in exploring pig production capacity regulation in agricultural products since the second half of 2021.

In 2023, the Ministry of Agriculture and Rural Affairs will continue to implement the "Implementation Plan for Pig Production Capacity Regulation (Interim)", guide breeding farms (households) to reasonably reduce production capacity, decompose the quota of large-scale breeding farms to various regions, and announce the listing of 13000 national and provincial production capacity regulation bases. The total output of the bases accounts for about one-third of the national total, and the regulation bases have played a "ballast stone" role.

At the same time, continuous information warning will be carried out, and the production data of large and medium-sized pig farms across the country will be directly reported on mobile phones. Innovative methods such as "WeChat Video Pig Counting" will be used to strengthen data quality verification. Explore the use of information technology to dynamically monitor the number of breeding sows. Open Tiktok and Kwai accounts such as "Agricultural Science Know Pig Man", and strengthen the publicity and penetration of early warning guidance information among small and medium-sized farmers.

Wang Aiguo told reporters that the China Animal Husbandry Association collects data from 50 designated pig breeding core farms every month to analyze the short-term pig market situation. At the same time, we conducted in-depth research and went to Guangdong, Guangxi, Hebei, Sichuan and other places last year to conduct research, forming a report on the market situation of live pigs.

Commissioned by the Ministry of Agriculture and Rural Affairs, the association has also established WeChat direct groups with 20 large pig farming enterprises to strengthen production data exchange and facilitate capacity adjustment with the competent authorities.

Through dynamic monitoring of breeding sows, we finally have the confidence to say whether there are too many or too few sows in China, and whether the production capacity is high or low, "said the head of the Animal Husbandry and Veterinary Bureau of the Ministry of Agriculture and Rural Affairs. The predicted" severe losses in breeding after the Spring Festival "in 2022," turning losses into profits at the end of the second quarter "," sharp rise and fall in the fourth quarter ", and" sustained losses in breeding after the Spring Festival "in 2023 have all been verified by the market.

From more than two years of practice, it has become a consensus in the entire industry to grasp the production capacity "master switch" of the breeding sow inventory. The inventory has never been lower than 41 million heads, stabilizing the pig production capacity and ensuring market supply. The new round of "pig cycle" fluctuations has tended to flatten out.

During the prolonged period of low pig prices, it is even more important to prevent major financial risks and eliminate "black swans". Last year, the Ministry of Agriculture and Rural Affairs held a special consultation with major cooperative banks of pig enterprises to deeply analyze the current financial risks of large pig enterprises; Analyze and assess the monopoly risks of large pig enterprises with the State Administration for Market Regulation, and propose targeted preventive measures; Assist relevant departments in timely handling the intentional dissemination and speculation of false information related to live pigs in accordance with laws and regulations.

Next, the Ministry of Agriculture and Rural Affairs will revise and issue the "Implementation Plan for Regulating Pig Production Capacity", reasonably reduce the national target for breeding sows, guide the orderly reduction of production capacity, and promote supply-demand balance. Continue to stabilize long-term support policies such as land, environmental protection, and finance, carry out precise production warning guidance, and promote the stability of pig production capacity at a reasonable level.