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Hog prices remain low amid industry heavy losses

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Hog prices remain low amid industry heavy losses

By eupork

2022-03-25

1

Producers in China have experienced heavy losses in 2021 due to a combination of lower hog prices, higher feed costs, and productivity challenges from disease. Taking a look at the three largest producers in terms of sow numbers, published 2021 financial results show losses of 1.43 billion USD for New Hope, with a million sows reported, 2.11 billion USD loss for Wens Group, with 1.1 million sows, and 2.97 billion USD loss for Zhengbang Group, with 1 million sows.

Assuming the swine division of these large producers are indicative of the whole Chinese industry, with 42 million sows reported it would mean over 60 billion USD total loss for the year, unbearable losses in the medium and long term at current prices, indicative of further sow liquidation.

Current market hog price is at 11.78 RMB/kg, significantly below estimated cost of production, and with soaring soymeal and corn prices, the pig to grain ratio, which compares the price of live pigs with the price of corn, is at “excessive risk level”, at 4.19:1, well below the ideal ratio between 9:1 and 6:1.

National live hog prices (外三元)

Source: https://zhujia.zhuwang.cc/

Following research on the development trends of the industry, the expected performance of pig prices, and the financial operations of related companies, the industry believes that relevant companies will accelerate the reduction of production capacity.

According to a Muyuan representative, the current low price of pigs is due to both the changes in supply and the demand side, but the change in supply caused by increased liquidation due to low prices has a greater impact than the marginal change in consumption. However, local outbreaks of COVID-19 are also affecting the demand side with impact in horeca channel, influencing prices.

Although it is difficult to determine the specific turning point of the price cycle, it is estimated that the number of breeding sows has been decreasing steadily since mid-2021, and experts predict the second or third quarter as a turning point for the recovery of pig prices and imports to improve in the second half of 2022.

 

Tags: Pork prices, Live hog prices, pig herd, pork output

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  • China’s soymeal prices increase to record highs further affecting pig farmers – European Pork March 25th, 2022

    […] Soaring soymeal prices, the key protein in animal feed, is heavily affecting pig farmers across the country, together with volatile corn prices due to the conflict in Ukraine. This will further cut margins for pig farmers who are already suffering losses. […]

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