Research report on the situation of hog farming in the county

China's hog farming industry is still relatively obvious cyclical

China's hog farming industry is characterized by cyclicality, and the cyclical fluctuation of the price of hogs is obvious, generally 3-4 years for a cycle. The so-called hog cycle refers to follow "the number of sows to reduce - the supply of hogs to reduce - the price of pork rose - sow restocking increase --The so-called pig cycle refers to a cycle that follows "the decrease in the number of sows - the decrease in the supply of pigs - the increase in pork prices - the increase in sow replenishment - the increase in the supply of pigs - the decrease in the price of pork - the decrease in the production capacity of sows". The cause of the pig cycle.

In the past, when the pork price was out of balance, the state level would push the pork price to adjust back as soon as possible through policies, funds and administrative means. Since September 2021, the state has insisted on early-warning regulation and control, through the capture of the "rate of change of breeding sows" indicator of hog production capacity regulation and control, to smooth the fluctuations of the hog cycle, the future price of pigs may reduce the large fluctuations in the overall more balanced.

Pork prices are at a low level after the latest cycle adjustment

Since 2000, the national hog farming industry has experienced the following fluctuations in the cycle: 2002 to 2006, 2006 to 2010, 2010 to 2014, 2014 to 2018 each for a complete cycle. Several smaller cycles also exist within the larger cycle. The most recent hog cycle occurred in 2019-2021, and in 2019, affected by the pig cycle, the African swine fever epidemic and other factors superimposed, the pig slaughter fell, and the pig price showed the trend of low before and high after, and the average price of the whole year increased by a large amount. 2020, although the capacity is gradually recovering, but because of the large capacity removal in the previous period, the overall hogs were in a state of oversupply in 2020, and the annual price of the pigs was in a high level of fluctuation. In 2021, capacity is basically restored, the market supply is obviously rebounded, the price of hogs fell rapidly, and the current price of pork is at a low level.

It is worth noting that the industry began to carry out the breeding sows de-capacity in July 2021, the number of breeding sows declined continuously, and the current breeding sows are at a reasonable level.

Policies actively respond to the law of swine cycle fluctuations and gradually focus on long-term regulation

African swine fever broke out in 2019, and swine fever prevention and disease prevention is related to the healthy development of the hog industry, and the protection of the people's meat and food, the Chinese government attaches great importance to and has launched a series of measures to promote the transformation and upgrading of the hog industry. Short-term policies include increasing support for hog production, increasing credit support, and compacting swine fever prevention work, etc. Long-term policies include formulating a program for hog production capacity management and developing a program for swine fever epidemic prevention.

Looking ahead, the policy for the control of hog farming is more focused on the long-term mechanism, early warning, price fluctuations in the hog farming industry in the next few years is expected to be relatively smooth, and commercial breeding to achieve quality improvement will be an important direction in the future.

Short-term rise in hog prices is a normal reaction, lack of long-term upward momentum

From the change in the national hog inventory in 2019-2022, in the experience of the period of African swine fever in 2019, the stock of hogs declined significantly, resulting in a significant rise in hog prices. 2020 hog inventory still has not returned to the previous level, so the Pig prices fluctuated at a high level throughout the year.Since 2021, the stock of hogs has basically recovered to the pre-swine fever level, supply is sufficient, and pig prices declined.

Since 2022, hog inventory has been fluctuating and declining. In terms of price, hog price has shown an upward trend since April 2022, indicating that the market price has rebounded after the industry continues to push forward to remove production capacity. But overall, the current pig inventory is still at a historically high level, the pig inventory is sufficient, and it is difficult to sustain price increases in the medium and long term.

And from the point of view of the stock of breeding sows, it takes 10-11 months of breeding from breeding sows to fattening pigs, i.e., the number of breeding sows can influence the number of pigs slaughtered after 10 months.2019-2021 first half, the stock of breeding sows continues to rise, mainly due to the expansion of production capacity after the African plague epidemic; since the inflection point of July 2021, breeding sows have started to carry out depopulation , capacity kept declining for 9 consecutive months, as of May 2022, China's stock of breeding sows was 41.92 million head, equivalent to 102.2% of the normal retention, with normal capacity and in the green zone.

The rise in pig prices since April 2022 is more of a normal reaction of the market after the capacity reduction, but with the May breeding sows inventory picking up on a year-on-year basis, and breeding sows are still in a reasonable range, the future lack of further upward momentum in pig prices.

-- For more research and analysis of this industry, please refer to China Pig Farming Industry Market Outlook and Investment Strategy Planning Analysis Report