Pig Sales Continue To Be Hot In August, Enterprises Accelerate Production Expansion, Market Turning Point Is Coming

On September 7, a number of listed pig breeding companies released their sales and production data in August. The data showed that the sales volume of each company increased by more than double digits, continuing the hot market in the first half of the year.

Among them, Zhengbang technology sold 1.0712 million pigs in August, with a month on month increase of 17.47% and a year-on-year increase of 232.93%. Correspondingly, the sales revenue was 3.870 billion yuan, with a 23.67% increase on a month on month basis and a year-on-year increase of 534.65%.

Since 2020, domestic pig prices have rebounded after stopping falling, with high profits in the market and favorable policy support from the industry, and the introduction of powerful enterprises has been accelerated. With the continuous optimization of seed sources and the continuous enrichment of gene resources, pig production capacity has been continuously improved.

Previously, in response to a question from the 21st century economic reporter about the pig market, Liu Yonghao, chairman of the new hope group, said that since last year, the number of sows that can be bred in China has decreased by 40%, and the production capacity of piglets is insufficient, which makes the price of pork rise greatly, which is more than double the average price now and in the past.

"This pig cycle may last longer." Liu Yonghao said, "however, as many enterprises join the pig breeding industry, the production capacity of pork will continue to recover, and there is the possibility of oversupply and price falling below the cost line in the next year."

According to the statistics of 20 million pig raising enterprises in China, the pig production capacity will not reach 600 million in the future. However, an industry source told reporters that such calculation is relatively ideal.

"In fact, it takes quite a long time from pig breeding project planning to construction to real pig production. During this period, with the changes of market and price, breeding enterprises can adjust at any time." "Therefore, it may still take time for the real overcapacity to emerge," said the industry source

Domestic enterprises speed up production expansion

Starting this year, domestic enterprises have accelerated the layout of pig breeding.

In April, after the first introduction of Zhengbang Yunnan pig farm, another 1040 pigs of 30-80kg were introduced from Denmark in Sichuan in September. In addition to being quarantined for 60 days in Denmark, the breeding pigs will be quarantined for 45 days after entering Sichuan. At the same time, Zhengbang group plans to introduce 10000 breeding pigs from France, Denmark and Canada in order to expand the breeding pig resources and matching blood relationship, so as to meet the company's pig breeding expansion efforts.

According to Zhuo Chuang information, as of September, the number of introduced pigs in China has broken a five-year high. The number of pure bred pigs introduced into China has reached 10637, which has reached a new high in recent five years. In the past five years, only in 2017, more than 10000 purebred pigs were introduced, which were far lower than this figure in other times.

"Due to the limitation of provenance, the defects of breeding ability and short cycle caused by the three elements are still the greater resistance to the industry's reproduction." Wang Lingyun, an analyst with Zhuo Chuang information, told reporters, "in the later stage, with the introduction of large-scale enterprises, the expansion of domestic upstream production capacity may continue to increase, and the number of breeding pigs imported in the year may exceed 15000."

Under the influence of African swine fever, after 2018, pig breeding entered into a dilemma, resulting in a growing supply gap from the second half of 2019, a sharp rise in pig prices, higher and higher profits of pig breeding, continuous improvement of breeding enthusiasm at the breeding end, and a sharp increase in demand for breeding pigs and piglets.

In terms of policy, in order to reduce the industrial heavy damage caused by the "non plague" epidemic situation and promote the speed of the industry to resume production, various provinces and cities have successively introduced policies to guarantee the production and supply of pigs, and greatly enhanced the support of pig subsidies, loans and insurance policies.

In this case, the early layout of pig breeding enterprises in the first half of this year have made a lot of profits. In the first half of this year, 20 of the 25 listed pig enterprises achieved a year-on-year increase in net profit attributable to their mothers, of which 15 achieved a year-on-year growth rate of more than 100%, and muyuan shares, Dabei agriculture, xinwufeng and aonong biology achieved a year-on-year increase of more than 10 times.

According to the data of CCB futures, as of August 31, the average profit of domestic self bred and self bred pigs was 3052.79 yuan / head, which was 94.58 yuan / head, a decrease of 3.01% compared with the end of the previous month. The pig feed ratio was 13.42, with a month on month increase of 0.16 percentage points.

"The average profit of pig head has been rising from 200 yuan / head in May last year to 3155 yuan / head by the end of October." "Since then, except that it fell to about 1300 yuan in May this year, profits have remained high and volatile," Wang said

Follow up or meet inflection point

From the follow-up market, the most important factor affecting the pig market is supply.

Judging from the trend of pork price this year, there was a sharp and rapid drop in pig price from April to may, from about 30 yuan / kg to 23 yuan / kg in the middle of May, but after that, there was a rapid recovery, rising all the way to the current 34 yuan / kg.

The seeds of this round of rising pig prices have been planted in January this year. This is the main reason for the low survival rate of piglets in other seasons.

Under the pressure of rapidly rising pig prices, the downstream demand in June, July and August is not optimistic. In addition, the hot weather and slow pork digestion speed lead to a relatively low operating rate of downstream slaughtering enterprises in July and August, which also affected the pig sales of some listed companies.

Starting from September 2019, the overall pace of production recovery at the breeding end will accelerate. By August 2020, the production capacity of large-scale enterprises has entered the release period, and with the arrival of the fourth quarter, the production capacity may continue to increase.

CCB futures forecasts that the amount of live pigs on hand in December 2020 is expected to increase by about 28% compared with that in February. The amount of live pigs before August is expected to maintain a slow growth, but the growth rate is small, and the growth rate will expand from September to November.

At the same time, the substantial increase of pig production will be after August, and it will keep increasing until March 2021, when compared with August or in the range of 10% - 15%. Therefore, it is estimated that the monthly output of pigs in the third quarter of this year will still be about 30 million, which is flat compared with the base of the second quarter; It is only in the fourth quarter and even the first quarter of 2021 that the sales volume will rise by a large margin.

"Because the current price is still relatively high, there will be some hurdles, so the decline of pork prices in September is relatively limited." Wang Lingyun said, "but in October to November, a large number of pigs will be released from the supply side, but the demand side has not entered the traditional winter peak season, so there will be a lot of room for the decline of pork prices and profits."

However, the current speed of capacity recovery is not without interference. From June to July, heavy rainfall in southern China and waterlogging affected the rise of "non plague" epidemic, resulting in different degrees of damage to production capacity. There is still some uncertainty in the number of products released at the end of this year and the beginning of next year.