December 28, 2023

Weak outlook for China's hog farmers in first quarter next year

The outlook for China's hog farmers will stay bleak in the first three months of 2024 as consumption recovers slowly in the wake of the COVID-19 pandemic, and the market continues to be flooded with swine, industry insiders told Yicai.

There will be more fertile sows in the first quarter next year than a year ago, which means that the downturn will continue, and hog breeders will rack up more losses than they did this year, an agricultural analyst said.

The large number of fertile sows and the long time it takes to reduce this number are the main reasons why the hog market is unable to get out of the doldrums. China had 42.1 million fertile sows as of the end of October, a dip of 0.7% from September but a gain of 3.9% from a year earlier and still above the normal level of 41 million, according to industry data.

Live hog prices remain low as target slaughter weights are met more easily and breeding efficiency improves, the analyst said. The number of live pigs up for sale surged 15.7% in November from a year earlier and jumped 8.6% from October to 13.8 million. In the first 11 months, the number of swine supplied by 18 listed hog breeders jumped 16.5% year-on-year to 137.3 million.

Many pig breeders expanded capacity when prices were high. Now that prices are sinking, the bigger their production, the heavier their losses. Some owners are even trying to sell out.

The gearing ratio, or debt-to-equity ratio, of 13 listed hog farms was higher than 60% at the end of September, and at some firms, it even topped 85%, according to statistics from financial data cruncher Wind Information. The average gearing ratio of all listed pig breeders was 62.2%, much higher than last year's 59.7% and 2021's 54.8%.

This year's main goal is to cut production costs, manage cash flow, optimise debt structure and reduce the gearing ratio, according to industry leaders, such as Muyuan Foods and Wens Foodstuff Group.

- Yicai