Pig price quotation confusion! After the market is up or down? Experts remind......

Although in the view of industry insiders, whether the collection and storage of pork reserves can be started immediately and the scale of collection and storage is still worth considering, it can indeed boost short-term market confidence and help stabilize the price stage. Only the negative suppression factors of pig prices are still in place, and the rebound height of pig prices cannot be too optimistic.

On the 28th, the WeChat official account of the National Development and Reform Commission announced that the price of pig and grain has entered the first-level warning range of excessive decline, and the central and local governments will start the collection and storage of pork reserves. After the news was announced, the main pig futures contract went higher. Although in the view of industry insiders, whether the collection and storage of pork reserves can be started immediately and the scale of collection and storage is still worth considering, it can indeed boost short-term market confidence and help stabilize the price stage.

Guan Xuan pig grain price ratio into excessive decline level warning range

According to the monitoring of the National Development and Reform Commission, from June 21 to 25, the national average pig-to-grain price ratio was 4.90: 1. In accordance with the National Development and Reform Commission, the Ministry of Finance, the Ministry of Agriculture and Rural Affairs, the Ministry of Commerce, the General Administration of Market Supervision and other departments jointly issued the "Improving the Government Pork Reserve Regulation Mechanism to Do a Good Job in the Pork Market to Guarantee Supply and Stabilize Prices" (hereinafter referred to as the "Work Plan") Provisions, has entered the first-level warning range of excessive decline (less than 5:1).

"This is since the African swine fever, the official release of the pig grain price ratio** fell below 5, its **point on October 30, 2019, the pig grain price ratio exceeded 20, this year the price ratio has shown a relatively smooth downward trend, which also reflects the current good situation of China's pig recovery." CITIC Construction Investment Futures Wei Xin, Gui Yuan think.

According to the "work plan", when the price ratio of pig grain is lower than 5:1, or the stock of breeding sows decreases by 10% year-on-year in a single month, or the stock of breeding sows decreases by more than 10% for three consecutive months, the first-level warning of excessive decline will be issued and temporary storage will be started.

Early warning information to guide the industry more rational

Judging from the current market situation, except for the index that the price ratio of pig to grain is lower than 5:1, the other two indicators have not been touched. The Ministry of Agriculture and Rural Affairs previously announced that from the production monitoring in May, the national stock of reproductive sows increased month-on-month for 20 consecutive months, an increase of 19.3 percent over the same period last year.

"The basis for the start of pork storage is whether the price ratio of pig grain has reached the warning point. * * Pig prices have been rising continuously in recent days, and the pig-to-food ratio may return to above 5:1 next week. Through the release of several early warning information, the main body of breeding has begun to be put on the market in time, reduce the pressure on the fence, the secondary speculative fattening has decreased significantly, the proportion of large pigs in the stock has decreased significantly, farmers have strengthened feeding management, reduced production costs, and large-scale leading enterprises have also begun to slow down the pace of production expansion, and the policy has played a significant role in guiding production." Zhu Zengyong, a researcher at the Beijing Institute of Animal Husbandry and Veterinary Medicine, Chinese Academy of Agricultural Sciences, told Xinhua Finance.

As Zhu Zengyong said, as the domestic pig futures price rebounded significantly from the low point of 16675 yuan/ton last week, the domestic in stock pig price also continued to rise. The monitoring of golden pig data shows that since June 22, the national average pig price saw a low of 13.18 yuan/kg, it has been rising for 6 consecutive days. As of June 28, the national average pig price was reported to 16.87 yuan/kg, and the price ratio of pig to grain on that day was 6.12:1.

Wei Xin and Guiyuan also mentioned in the report that the current pig-to-grain ratio early warning system lags slightly behind, breaking through the first-level early warning after a long-term downward trend, but the price ratio has been pulled back to more than 5 in three days over the weekend. Therefore, it is worth considering how to face such changeable pig prices in policy implementation.

"According to the arrangement of official documents, the central and local governments will start the collection and storage of pork reserves, but the scale of collection and storage is still worth considering." Wei Xin and Guiyuan also pointed out that, combined with the relevant statements in the "Work Plan", the scale of the central temporary reserve is determined by the relevant departments in consultation, and the provincial and municipal purchasing and storage are determined in accordance with the target requirements of "effectively supporting the market. And this "effective" or the first to be reflected in the expected management, that is, to avoid the breeding end in a pessimistic atmosphere of panic out of the column, exacerbating the downward fluctuations in prices, and thus resulting in disorderly production capacity within the industry.

Zhu Zengyong also told Xinhua Finance that the high returns for two consecutive years have prompted some breeding entities to expand their scale "irrationally". By issuing early warning information, it will help farmers enhance their risk awareness and avoid risks. "Especially for those companies that expand too quickly and misjudge the market, it is very necessary to adjust production arrangements and management priorities in a timely manner."

Pig price rebound is expected to heat up the rebound height is still suppressed

Why on one side is an excessive decline level warning, on the other hand is the pig price began to rebound? In this regard, the Agricultural Credit Internet pig industry analyst Xia Chenfeng said, the data released by the NDRC is actually lagging behind the market by about a week, and the price rise is only from the middle of last week began, and the rising process is also accompanied by more frequent adjustments.

Xia Chenfeng said that although the rebound last week was not weak, it was a bottoming rebound, so on average, some farmers may still suffer losses. At the end of last week, even if there was a price increase in some places, it only rose to the cost line or a small profit level, and it remains to be seen whether it can continue to stabilize at this level.

Xia Chenfeng believes that the previous decline has actually entered a state of oversold, and the market continues to press the bar, including the backlog of secondary fattening, which has led to a continued decline in the market. In this case, a pure buyer's market has been formed, at which point the price will move away from the fundamentals and enter an oversold situation.

As a result, there may be a concentrated sell-off at the farming end. Xia Chenfeng said that since last week, not only pigs raised by individual farmers have begun to be put on the market in large quantities, but also large-scale enterprises such as Muyuan shares have been put on the market in large quantities. "Not only are there more large-weight pigs out of the market, but the proportion of standard-weight pigs out of the market has also increased. This concentrated sell-off will lead to further price declines in a short period of time."

"But once the sell-off is over, prices will start to rebound very quickly." Xia Chenfeng explained that after the end of the sell-off, the supply of pork in the market will be significantly reduced in a short period of time.

After the announcement of the first-level early warning news, the industry's confidence that pig prices are expected to bottom out and rebound has also increased. "Pig prices have bottomed out successfully, because the seasonal recovery is the main trend behind. But on the premise that supply continues to recover, the main breeding body should pay attention to the production warning information issued by the Ministry of Agriculture and Rural Affairs in a timely manner, and treat the seasonal recovery in the later period rationally". Zhu Zengyong said that from the perspective of demand, when the price of pork reaches about 10 yuan per catty in some places, it has a significant effect on consumption.

According to media reports, with the continued decline in pork prices, **near Sichuan Ziyang many citizens out of season to fill the sausage.

Wei Xin and others also said that the increase in short-term market purchasing and storage expectations has given the entire market a shot in the arm, which may help improve the pessimism in the industry in the past two months, but from a practical point of view, the intensity of government purchasing and storage may not necessarily meet expectations, and the scale of purchasing and storage may have a relatively small impact on the volume of pork in the market; on the other hand, judging from the chaotic quotation in some areas over the weekend, there is a need to be wary of speculation by some market players.

"In the second half of the year, the overall pig price should remain above the cost line, but the rebound height cannot be too optimistic. Now many suppressing factors exist." Wang Zuli, an associate researcher at the Institute of Agricultural Economics and Development of the Chinese Academy of Agricultural Sciences and an expert in pig production monitoring and early warning of the Ministry of Agriculture and Rural Affairs, told Xinhua Finance that the magnitude of imported frozen meat in stock is not small, and it is estimated that shipments will be concentrated in the third quarter. Therefore, he believes that it is difficult to say that the low point of the pig price cycle has been seen, but the low point of the pig contract in September may be "almost.

"Fat pigs continue to be out of the market after the price rebound, then the future seasonal adjustment range can be expected; on the contrary, if you see the price rebound momentum and continue to bet on the rising pressure bar and secondary fattening, then the pull of seasonal demand in the future will also be limited." Wei Xin, Guiyuan also said.

Talking about the future market, Xia Chenfeng said that in fact, the current supply of live pigs has not yet fully entered the state of surplus. In addition, because the price of pigs is relatively low now, the substitution effect of other meats such as chicken will slowly weaken, and pork consumption will gradually increase in the third quarter. It is expected that this loss state will not continue.

"However, the current inventory of frozen meat on the market is still relatively high. The frozen meat imported in the first half of the year, including the first half of the year, because the price is relatively low, slaughtering companies have also made a lot of inventory. This part of frozen meat has yet to be released, so in the third quarter If the price comes up, this part of frozen meat will also restrain the price increase in the third quarter." Xia Chenfeng said.