"Pig cycle" inflection point is doubtful, short-term pig prices are expected to repeat

Since the end of September, live pig futures have ushered in a wave of price rebound.
The main contract 2201 rebounded from the previous low of 13,365 yuan/ton to 17,470 yuan/ton
.
In the A-share market, 33 hog breeding concept stocks fluctuated and rose, and the hog concept "rised"

In this regard, many people in the industry said that the fundamentals of the industry are still weak, and the recent rebound is mainly due to low prices to stimulate demand and the gradual reduction in slaughter volume.
Short-term pig prices are still likely to be repeated
.

Low prices stimulate demand

Last week, live pig futures and spot prices rose jointly
.
On October 25, the main live pig futures contract 2201 rose quickly after the opening, and closed at 17,470 yuan/ton, setting a new closing high since August 24

Regarding the recent performance of hog futures prices, Liu Tong, a senior researcher of agricultural products at Dayou Futures, believes that the price rebound is mainly boosted by factors such as national and local frozen meat purchasing and storage policies and the phased reduction in hog production
.
However, due to the short-term increase, the price of pigs in some producing areas has seen a slight correction again

"Pork consumption season is coming, pig prices in some areas have fallen below breeding costs, and low prices have stimulated a rebound in demand.
These factors have collectively led to a rebound in the live pig market after the National Day
.
" Lu Xu, general manager of the investment consulting department of Zhongyan Futures, said in an analysis

Wei Xiu, an agricultural product analyst at Huishang Futures, said that this round of live pig price rebound has the conditions of time, location, people and three aspects
.
In terms of weather, the previous pig price continued to be low to stimulate demand; starting from October 6, the temperature in most parts of the country dropped sharply, the demand for meat rose, and the supply of pork products improved

Fundamentals are still weak

However, industry insiders interviewed by a reporter from China Securities News agreed that the pig cycle has not yet reversed, and short-term pig prices are still likely to fluctuate
.

According to statistics from the National Bureau of Statistics, as of August 31, the national stock of reproductive sows was 45,003,100
.
In September, the "Implementation Plan for Pig Production Capacity Regulation (Interim)" issued by the Ministry of Agriculture and Rural Affairs pointed out that during the "14th Five-Year Plan" period, the production data of the country’s pork production at 55 million tons in a normal year was used as a reference to set the capacity to breed sows.

Wei Xiu said that the changes in market mentality and purchasing and storage factors will not reverse the down cycle of live pigs, but are more reflected in the relief of pessimism
.
With the advent of the seasonal peak consumption season and the gradual emergence of the effect of purchasing and storage "supporting the market", it is expected that the downward space of pig prices may be limited, but the upward space is still limited, and the overall situation may be mainly turbulence

Liu Tong believes that it is too early to assert that the inflection point of live pig prices appears
.
This round of market is still a rebound, not a reversal

Lu Xu said that the threshold for live pig breeding is low.
Once prices rebound sharply, the supply of live pigs will begin to increase, and prices will often fall accordingly
.
Since 2019, the state has increased policy guidance for pig breeding and encouraged pig breeding.
Therefore, the supply of pork will increase significantly in 2020 and 2021, and the price will fall sharply
.
In the next stage, with the loss of breeding enterprises, the decline in breeding enthusiasm will lead to a decline in replenishment, and the supply of live pigs may decrease, which will support the price to a certain extent
.
However, as the current stock of live pigs and sows has returned to the pre-epidemic level, the overall supply of live pigs is still relatively large
.
There is a periodical surplus of current market supply, and pork prices may still fluctuate
.

Be wary of hedging changes to speculation

Since the beginning of this year, as the price of live pigs fluctuates, most breeding companies face greater risks in their production and operations
.
After the listing of live pig futures, many breeding companies actively participated in derivative hedging to achieve profit lock-in
.
However, in the process of active participation of listed companies in hog futures trading, there are still many issues that need attention
.

The reporter learned from the 2021 China Agriculture and Animal Husbandry Industry (Derivatives) Conference Live Pig Forum held recently that since the listing of live pig futures, breeding companies have paid close attention to and actively participated
.
Up to now, more than 10 listed companies including Muyuan shares have issued announcements, planning to use the futures market to assist their operations.
A total of more than 60 breeding companies have applied for hedging qualifications, and more than 2,000 corporate customers (excluding asset management and special law customers) ) Participate in hog futures trading
.

Wei Xiu believes that the prudent and reasonable use of derivatives can stabilize business operations and promote business development
.
"With the futures market as a new place and channel for procurement and sales, hedging will always be carried out around the company's production and operation plans.
We must adhere to the original intention of hedging, build a risk system, and always be alert to hedging to speculation
.
" Say
.

"Some listed companies lack experience in participating in live hog futures trading, and the hedging effect is not obvious
.
" Lu Xu believes that companies need to strengthen futures hedging trading research in the later stage, forming a good trading team, and matching futures hedging scientifically and reasonably Maintain value position and manage risk
.