Pig Price Dropped To 15.8 Yuan / Kg, And The Loss Of Pig Breeding Industry Is Expected To Continue To Expand

"From the survey, the pig cost of large-scale breeding enterprises in Shandong, Henan and other North China regions reaches 17 yuan per kilogram at the highest point and 15 yuan at the low point." Zhongyuan futures agricultural products senior researcher Liu sikui said.

This is true. According to the reporter of 21st century economic report, before the rise of pig price in 2019, the cost of pig breeding fluctuated around 15 yuan / kg, and the "full cost" given by muyuan shares in the first quarter of this year is about 16 yuan / kg.

In addition, according to the data of the National Bureau of statistics on June 15, 2021, compared with the last ten days of May, the per kilogram of live pigs (outside three yuan) has dropped to 15.8 yuan, a decrease of 11.2% on a month on month basis.

This means that after breaking through the cost line of outsourcing piglet fattening, the spot pig has once again fallen below the cost line of self breeding enterprises with more cost advantages, and the loss area of the industry is further expanded.

In this regard, Liu sikui pointed out that since 2007, the domestic pig price has always fluctuated in the range of 10 yuan to 20 yuan / kg, and the price of 15 yuan has been at a relatively low level. "Although it is not ruled out that a few enterprises with outstanding cost control still have profits, the whole industry has suffered serious losses.".

Under the background of "big pig" being put out and pork stock not being effectively digested, the price of pig is still difficult to reach the bottom in the short term.

Muyuan's cost line broke in the first quarter

In June 2019, the pig breeding industry began to turn from deficit to profit. In June 2021, it is also at an important turning point.

Japan Daily reported on May 24 that the price of live pigs (other three yuan) in mid May given by the Statistics Bureau approached the cost line of about 16 yuan / kg of muyuan shares in the first quarter.

In just 20 days, the above cost line has been broken, and the pig price in the first ten days of June disclosed on June 15 has dropped to 15.8 yuan / kg.

It should be noted that the ten day data tracked by the statistics bureau is highly referential and basically consistent with the sales data of relevant listed companies. The sales prices of top listed pig enterprises including muyuan shares, Wenshi shares, Zhengbang technology, new hope and tianbang shares were all around 18 yuan / kg in May.

In large-scale breeding enterprises, new hope and other companies had purchased a large number of piglets, so the comprehensive breeding cost was higher than that of "self breeding and self breeding" muyuan shares. The cost advantage of the latter was very prominent, which once caused inquiries from the exchange.

However, in the cycle of pig price decline, new hope and Zhengbang technology and other enterprises can reduce the overall cost pressure by stopping outsourcing piglets. For example, new hope began to emphasize "valuable marketing" and stop outsourcing piglets.

In contrast, although the cost of "full self-supporting" mode of muyuan shares is lower than that of the same industry companies, once the pig price breaks through the cost line, its cost adjustment space is not as good as that of outsourcing piglet fattening enterprises.

To this end, muyuan shares has also taken "cost management" as the core work of this year. The specific methods include the improvement of production indicators, labor efficiency and management level to achieve cost reduction, and has established a cost target of less than 14 yuan / kg in 2021.

Although the company has not announced the cost reduction in the second quarter recently, the company has stepped into the edge of loss by combining the cost of the first quarter and the investigation of Zhongyuan futures.

This itself can also serve as a signal, that is, the most prominent cost advantage of muyuan shares are beginning to lose money, and other listed pig breeding enterprises can hardly be optimistic.

What is more dangerous is that in the short term, there is still no turning point for the bottom of pig prices.

"After the Spring Festival, affected by the epidemic situation, there were large-scale concentrated slaughtering of live pigs, which led to a rapid increase in market supply." Liu sikui said.

Some public data can provide evidence. Just take Zhengbang technology as an example. Since March this year, the average weight of commercial pigs sold by the company has increased continuously, from 126.15kg to 131.27kg, and then to 140.52kg in May.

According to Liu sikui's prediction, the "big pig" market may last until the end of June.

The centralized marketing and slaughtering of "big pigs" will significantly increase the overall pork inventory, adding that the current consumption is in the off-season, the terminal demand is weak, and the inventory is difficult to be effectively digested, or it will bring pressure on the short-term rebound of pig prices again.

The loss cycle has just begun

The futures market is probably the only one left with some hope for future prices.

On June 15, the settlement price of 2109 contract, which represents the pig price in September this year, was still as high as 19035 yuan / ton against the background of the collective decline of pig futures on June 15, which was 3.24 yuan / kg higher than the spot pig price in mid June.

The reason is that the epidemic situation around the Spring Festival in North China once caused the market to worry about reducing the enthusiasm of pig breeding. According to the piglet fattening cycle, the market is expected to have a certain gap in the supply side in September this year.

However, as the delivery date of 2109 contract is approaching, the above expectation is also weakening.

"Assuming that there is no obvious rebound in live pig spot before September, the futures price will return to the spot price under the effect of delivery mechanism." Liu sikui said.

As a matter of fact, since May this year, the price of pig futures has returned, and the margin of premium compared with the spot price has dropped from 5 yuan / kg to about 3 yuan / kg.

According to the historical trend of domestic pig, the loss of the whole industry will also maintain for a long time, rather than rebound immediately after breaking the break even line.

According to the statistics of the average price of pigs in 22 provinces and cities, it can be seen that from May 2007 to July 2019, the price of live pigs mostly runs in the range of 10 yuan to 20 yuan / kg. Among them, 15-16 yuan / kg is the average breeding cost line of the industry.

Another step back, to the Mu yuan shares hope to achieve the cost target of 14 yuan / kg as the break even line.

Since 2007, the pig breeding industry has experienced three cycles of continuous loss, namely, September 2008 to November 2010, March 2013 to may 2015, and may 2017 to March 2019. During this period, the average price of pigs in the above 22 provinces and cities was under 14 yuan / kg.

The duration of the above losses is about two years, which itself is affected by the evolution of the supply-demand relationship.

The continuous expansion of the loss range at the breeding end will lead to the shrinkage of pig breeding capacity. When the production capacity is reduced to a certain extent and effectively cleared, the market supply-demand relationship will be re balanced, and the pig price will start a new round of rise.

From the above point of view, the pig breeding industry has obviously not entered the link of spontaneous reduction of production capacity, and has just entered the loss cycle at this stage.

Of course, there are many variables that may change the above-mentioned running rhythm.

For example, can the planned production capacity of the livestock industry's leading companies increase their pig production capacity in 2019 and 2020 as scheduled after the current operating pressure has increased significantly? After this round of sharp rise and fall in pig prices, the national development and Reform Commission and other departments jointly issued the "improve the government pork reserve regulation mechanism, do a good job of pork market supply and price stability work plan" how to play a role, the market is also highly expected.

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