Right now, pig farmers are going through a "long season". Since the full recovery of pig production capacity in 2021, the ** low level has continued beyond people's expectations, and is known as the "coldest pig" cycle.
The so-called "coldest" pig cycle is only in terms of **, and does not fully represent the prosperity of the industry. Looking back on 2023, pig production will develop steadily, and the pork market will be sufficient. In terms of basic production capacity, the breeding sow herd is always higher than the normal number of 41 million heads. In terms of production efficiency, the number of fattening pigs per sow per year increased by 27%。Under the effect of these two factors, pork production is at a high level, with a year-on-year increase of 39%。From the perspective of the whole year, the monthly price spread of live pigs narrowed to 3 yuan per kilogram, far lower than 139 yuan, the rise and fall of the year is more flat.
However, for 2023, another expression of the flat rise and fall is continuous losses. According to the weighted average calculation, from January to November 2023, the average loss of a pig slaughtered is 73 yuan. As of the end of September 2023, 18 of the 21 listed pig companies have an average asset-liability ratio of 6841%, 3 more than 80%. In the face of losses, some dispose of idle pig farms, some actively finance, and some lower the slaughter target.
It should be noted that despite the downturn and losses, the overall industrial quality of the pig industry is steadily improving. In recent years, a number of large-scale modern breeding enterprises have emerged, the application of new varieties and technologies has been accelerated, the level of automation has been significantly improved, and the production efficiency has been continuously improved. After 2018, small and medium-sized business entities accelerated their withdrawal. In 2023, the proportion of large-scale pig breeding will reach 68%, an increase of about 3 percentage points over 2022.
The pig cycle is a mismatch between supply and demand caused by a time lag between capacity adjustment and output adjustment. Among them, ** is the appearance, and profit is the driver. The industry understands that if the production capacity does not fall, the pig price will be difficult to recover, but it seems that no company is willing to take the initiative to produce capacity. The logic behind it is that they all want to wait for others to reduce production capacity, in order to rebound and maximize their own interests. It's just that the situation is stronger than people, and under the pressure of cash flow, some entities have no choice but to go to production capacity. In essence, the conditions for the existence of the pig cycle are the different responses and mutual games of the business entities.
The pig cycle is like gravity, and pig farmers are all in it. The industry is increasingly aware that the existence of the pig cycle is inevitable for a long time in the future, and ironing the pig cycle is really extravagant, and it is not easy to pass through it safely. In 2018, the African swine fever epidemic was introduced into China for the first time, which not only changed the pattern of pig breeding, but also changed the performance of the pig cycle. In the past, when the pig cycle was down, rapid de-production was mainly achieved through the elimination of ** and small pig farms. Nowadays, with a high degree of scale, many large enterprises have strong financial capacity and strong anti-loss ability at the bottom. This has led to a slow process of de-capacity, so that it has been weak for a long time. There is no need to be pessimistic.
From the perspective of the industry, the current long loss period is also accumulating strength for normal profits in the future. The cold winter may be long but destined to end, because it will not be set in stone. Just as the 2019-2020 pig production was ultra-profitable, the current low prices will eventually come to an end. According to the data of the National Monitoring Center, according to the current cost and cost calculation, the average loss of pig breeding heads in the future is 733 yuan. Some experts said that according to the current rate of reduction, pig production capacity will return to normal levels in the first quarter of 2024.
From an individual point of view, it will naturally be cold when the cold wind blows, but the physical sensation is not the same, and the difference lies in the different means of keeping out the cold. Some have encountered a downturn after large-scale expansion, failed to respond, and even faced the risk of delisting. Some efforts to reduce costs and increase efficiency, reasonable adjustment of production capacity, breeding costs are decreasing season by season, waiting for the arrival of spring. Since 2021, relevant departments have regularly released information on the whole pig industry chain, covering data such as production, consumption, import and export, and cost and benefit. Business entities may wish to analyze and judge from it, grasp the changes in the situation, take advantage of the situation, and strengthen cost control and capital management.
The Ministry of Agriculture and Rural Affairs recently said that it will adhere to the "two-pronged approach" of production regulation and market regulation, optimize and improve the "Implementation Plan for Pig Production Capacity Regulation", accurately carry out production early warning guidance, and promote the stabilization of pig production capacity at a reasonable level. Let's wait and see how the implementation plan of capacity control will be optimized. After all, Xiaohan has passed, and the spring equinox is not far away. (This article**: Economy** Author: Qiao Jinliang).