Market analysis

During the past week, China's live hog market was characterised by the following:

In mid-June, hog prices started rising at a gradual pace in a few northern and southern regions, before making more significant gains since July.

Earlier, hog farmers had taken up fewer supplies of piglets, which have yet to reach the required weight to be released into the market during the week under review. This, coupled with farmers' continued price-cutting actions to move hog sales, has led to a gradual fall in hog inventories.

Hog prices in Guangzhou, Guangdong province, and Shanghai, reached the highest levels nationwide of late. Deals were concluded for foreign cross-breed lean hogs in Guangzhou and Shanghai in the range of RMB9.00-9.20/kg and RMB8.60-9.00/kg respectively. Consequently, most hogs from major hog production regions in the north were delivered to regions with relatively high hog prices rather than to southern provinces. This eased the intensity of market competition in the southern regions.

The rise in China's hog prices to their current levels has enabled integrated and commercial hog farmers to recoup their losses incurred during the first half, with some even earning profits of RMB80-100 a head of hog. Due to currently high feed raw material costs, domestic farmers have exercised less restraint in releasing their hogs into the market.

Market forecast

Despite currently high temperatures, domestic pork demand should improve in the run up to the Mid-Autumn Festival (which falls on October 6 this year). Fewer live hogs are expected to be released into the market in the near term, while a typhoon is forecast to hit the southern provinces of Guangdong, Guangxi and Hainan. Thus, further gains in China's live hog prices are seen in the week ahead.