August 5, 2024

China's pig producers could see profit in Q3, according to analyst

China's pig prices are finally on the rise as the number of fertile sows declines following a prolonged downturn in the industry, leading a market analyst to believe that the country's pig breeders could make money in the third quarter.

Pig prices gained 8% in July from the previous month, according to data from industry information agency Zhu'e. Prices have managed to rise, even though the hot summer months are an off-season for pork consumption, an agricultural analyst told Yicai. Additionally, prices may be bolstered further as consumer demand increases and the weather changes, he added.

"The reduction in the number of fertile sows is the main reason for the jump in pig prices, although an uptick in consumer demand is also an important factor," the analyst said. As of April, breeders had culled the number of sows by 12.5% from June 2021.

The price of live hogs has risen significantly since May. The average price of a live pig had surged by over 30% on July 31 from the beginning of the year to ¥19.56 (U$D2.70) per kilogramme. In some provinces, the price is now over ¥20 per kilogramme.

As pig prices recover faster than expected, investors expect listed hog firms to turn a profit in the third quarter and even for the year. As long as the price of hogs continues to rise in the second half, listed pig firms can easily make money and the amount of profit depends on the number of pigs they slaughter, the analyst said.

However, after a long time in the doldrums, hog breeders will have a lot of debt, so they will be careful about re-expansion even as the price of pork soars. This will be conducive to maintaining high profits for some time, the analyst added.

Feed prices have also been falling since the third quarter last year, reducing pig farmers' expenditure. The price of soybean meal has slumped 30% since it hit a peak in the three months ended September 30 last year, and the price of corn had tumbled around 15%.

- Yicai