The troubles of pig farmers: selling early is reluctant to sell late for fear of losing money

"Pig prices have been falling since June and have fallen near my profit and loss line. I bought piglets when they were the most expensive in March this year. There has been a rebound in the last two days, whether I should be out of the hurdle or not. " A farmer expressed his misgivings that had weighed on his mind recently.

In the first five months of this year, pig prices continued to rise, and the average price of three-yuan pigs outside the provinces reached 21 yuan / kg. After entering June, pig prices began to fall, and showed a trend of rapid decline, with the Zhihua pig price index falling as much as 10% for the whole month. In July, pig prices continued their decline in June, but the decline slowed. The Zhihua pig price index for the whole month was in the range of 18 yuan / kg-19 yuan / kg, with a monthly decline of 5%.

Pig prices have stabilized and rebounded this month, will they continue to rise or build an "M" head? This topic has caused a heated debate in the industry. Analysts believe that pig prices may remain high in the third and fourth quarters, but it is difficult to hit new highs. Demand is weak while supply is recovering, so the rebound is only temporary, and the general trend is still slowly falling.

The scenery of "Crazy Pig cycle" is no longer.

"after the beginning of summer, the domestic temperature is gradually rising, the demand for terminal meat is gradually weakening, coupled with a large number of farmers pressing down on the domestic pig market, resulting in an adequate supply of cattle and pigs in the domestic pig market, and the domestic pig market has entered a situation of phased oversupply. Slaughterhouses continue to lower pig purchase prices while strictly controlling pig purchase weight standards, farmers sell stocks of pigs, and domestic pig prices go up and down." Li Wenxu, an analyst at the Business Society, said.

Yuan Song, an analyst at Zhihua data, pointed out that there are many reasons why pig prices have risen and fallen recently. First of all, the number of fat pigs increased. Since the beginning of this year, due to the decline in production capacity, the supply of fat pigs has been tight, and pig prices have continued to rise, repeatedly setting new highs. If pig prices are to remain high, the tight supply situation must be maintained. However, after entering June, the proportion of fat pigs increased, so that the supply of live pigs increased, the tight supply pattern was alleviated, high prices were difficult to maintain, and loosened down. And the shift in pig prices, stimulating the selling mood of farmers, a substantial increase in the bar, resulting in a sharp drop in prices.

Secondly, the weather turns hot and pork consumption weakens. In June, temperatures in the north and south are gradually rising, the listing of all kinds of fruits and vegetables is increasing, prices are cheap, and meat consumption is weakening. Pork prices are rising with pig prices, and by June, the ratio of pig prices to meat prices has reached a new high of 0.66. The profits of slaughtering companies have shrunk so much that they have to cut back on prices.

Third, the cost of breeding increases. First, the feed cost, when the weight of live pigs exceeds 230 jin, the feed conversion rate will decrease. Corn, soybean meal and fish are all rising, making the cost higher and the cost of hurdling rising. Second, the cost of the epidemic, for pigs, the hot weather, the stress performance will become worse, the incidence of the disease will increase. Therefore, when the rise in pig prices is unsustainable, the motivation to get out of the bar will rise rapidly.

In July, the Yangtze River Basin was hit by torrential rains and floods. After the disaster, pig farms concentrated out of the pen to sell, and the weight of fat pigs is too large, the quality is uneven, which has a great impact on pig prices in the disaster areas. At the same time, it also led to a decline in pig prices in the surrounding areas.

In August, under the influence of the Beginning of Autumn's solar terms, prices showed a rising trend again. According to Zhuochuang data, the average price of three yuan outside the country was 18.12 yuan / kg at the beginning of August, down 0.04 yuan / kg from the end of July, a drop of 0.22%. At that time, the market showed a situation of supply exceeding demand, and the acquisition of slaughtering enterprises was smooth. However, by August 3, prices rose. As of August 5, the average price of ternary live pigs outside the country was 18.38 yuan / kg, up 0.26 yuan / kg from the 1st, or 1.43%.

The recent price rise, according to Ji Guangxin, an analyst at Zhuochuang Information, is mainly due to three points: first, the early price reduction and the concentration of pigs, resulting in a decline in the number of pigs that can be produced at the beginning of August; second, farmers cherish the sale of pressure bars, and it is more difficult for slaughtering enterprises to acquire. The phenomenon of scrambling for the source of pigs has no choice but to raise the purchase price and settlement price. Third, the Beginning of Autumn solar terms, the north "autumn fat" to pull a small increase in consumption, good for the pig market.

Or is full of blood and comes back to life.

"from a fundamental point of view, the production capacity of the industry is still low. Since last year, the stock of breeding sows has dropped to the lowest level in nearly a decade, and the overall low supply of fattened pigs this year has not fundamentally changed. " Yuan Song said.

In July, the Yangtze River basin experienced heavy rainfall and floods occurred in many areas with concentrated aquaculture. According to Zhihuaguo's understanding of farmers in the disaster area, the heavy rainfall was ferocious. Floods broke out in Hubei, Hunan, Henan, Anhui, Jiangsu and other provinces, pig farms were flooded, fish ponds were washed out, and farmers suffered serious losses.

Yuan Song pointed out that the flood directly led to a very high mortality rate of piglets, the influx of water into pig farms and a large number of piglets drowned. Therefore, it will affect the decline in the supply of fat pigs before the Spring Festival and push up pig prices before the Spring Festival. Secondly, the death and elimination of sows increased. The number of sows drowned directly is small, but due to the decline in pig prices and the disaster in pig farms, a large number of sows have been eliminated, resulting in a lack of recovery of breeding sows in July.

In addition, the current recovery of the deposit column is slow. In June, the stock of live pigs increased by 0.7% from the previous month, down 2.1% from the same period last year. The stock of fertile sows was the same as the previous month and remained stable, down 3.64% from the same period last year. In June, 14.37 million pigs were slaughtered on a fixed basis, down 3.9 per cent from the previous month and 9.6 per cent from the same period last year.

Pig prices are expected to remain high in the second half of the year. Considering that the sows have not rebounded sharply in July, it is expected that the supply of live pigs will be tight again from the end of the year to the Spring Festival, and pig prices may return to their highs. " Yuan Song pointed out that at present, the production and marketing areas are more active, and the supply is normal, but the weather is hot, the willingness to press the fence is weak, the sales volume of the slaughterhouse is light, and the willingness to buy is low, and pig prices may continue to be weak in the short term. As temperatures rise further, consumption is likely to weaken further, but after two months of growth, the supply of big pigs will decrease in August.

"the rise is only a short-term performance, the general trend is showing a slow decline, it can be said that it has entered a downward cycle. However, the decline cycle will last longer, and the speed and magnitude of the decline will be relatively slow. " Ji Guangxin analysis said.

From the perspective of industry fundamentals, Ji Guangxin said that the overall demand for pork is weak. Judging from the sales of slaughtering companies, monthly pork sales this year are 30 per cent lower than the same period last year, reaching about 50 per cent. As for the supply of live pigs, although the number of live pigs is still lower than the level of the same period, it has begun to rise from the previous month, and will recover slowly in the future.

However, Ji Guangxin believes that although pig prices will decline slowly in the future, they will remain above the cost line, and farmers should still be profitable, but they will be less profitable than they are now.

Inflation is not the focus of monetary policy

After the adjustment of the new base period of CPI in 2016, the old meat and poultry and their products have been adjusted to livestock meat, and the proportion of CPI has also been greatly reduced from 7 to 10 per cent to about 4.3 per cent. The weight of pork in CPI has also been reduced to about 2.3 per cent.

Brokerage analysts believe that as the upward inflationary pressure brought about by pig and vegetable prices gradually recedes, the inflationary pressure in the second half of the year is relatively small. And due to the high CPI of pork in the second half of last year, the pressure of pig price on CPI will be weakened obviously due to the influence of cardinality effect.

"inflation has less restraint on policy in the second half of the year. Despite early fears that flooding will put pressure on prices, judging from recent price fluctuations, grain prices are stable, pork prices have fallen, vegetable prices have rebounded less, and inflationary pressures are weakening. " Sun Fu, an analyst at Zheshang Securities, said.

In fact, the focus of monetary policy today is no longer on inflation, but on the "virtual" and "real" mismatch of funds.

Sun Fu believes that the release of capital outflows at the beginning of the year is relatively sufficient, the flexibility of RMB fluctuations is enhanced, and the large-scale capital outflows encountered in the second half of last year are difficult to reappear under the low expectation of the Fed's interest rate increase. This reduces the need to lower reserve requirements, and more innovative tools are used to regulate liquidity. Real estate prices in first-tier cities and some second-tier cities may restrict interest rate cuts. Expectations of price increases still exist, and given the current situation of low inventories in these regions, interest rate cuts may still stimulate prices to continue to rise. The Politburo meeting stressed the "suppression of asset price bubbles", with real estate prices as the focus.

Judging from the spread between the 10-year government bond yield and the wholesale market financing interest rate, Sun Fu said, as well as the benchmark one-year deposit rate and the level of inflation, even if interest rates are cut, the space is relatively limited, 50BP. To sum up, he believes that monetary policy will be more cautious in terms of continued easing, it is less necessary to lower reserve requirements, and more innovative tools will be used to adjust; even if interest rates are cut, there is little short-term space.

Pan Xiangdong, chief economist of China Galaxy Securities, pointed out that from an aggregate point of view, China's monetary policy has always maintained a sound tone. Various types of assets absorb excess liquidity and hinder the transmission of liquidity to the real economy, causing entities to feel that our monetary policy is tight. At the same time, the prices of all kinds of assets are in the process of bubble accumulation. This reflects some characteristics of China's current economic and financial market development and financing structure.

He believes that while the economy is in the doldrums, loose monetary policy and abundant liquidity have led to the pursuit of risky assets with high returns. In recent years, financial products, stock market, bond, futures market and real estate market have risen irrationally. Funds are unwilling to enter the real economy and prefer to stay in the asset market to "entertain themselves". The result is that it naturally aggravates the feeling of tight monetary policy in the real economy, while the fictitious economy shows loose monetary policy.

"at present, in the context of supply-side structural reform, monetary policy should make greater contributions to China's stable economic growth, and can no longer be limited to the continuous release of liquidity. The urgent task is to change the pattern of misallocation of financial resources. We should systematically solve the problem of capital precipitation and improve the efficiency of liquidity utilization, so as to make monetary policy under the new normal create a more suitable monetary and financial environment for economic growth." Pan Xiangdong said.