According to a report from Caixin News on December 31 (reporters Liu Jian and Wang Ping'an), December, which should have been the peak season for cured products, has experienced a continued downturn in pork prices, with the monthly average farming profit per head sharply reduced by over 100 yuan.

Interviews conducted by Caixin News reporters revealed that although cured products have boosted end demand slightly, the ample supply on the supply side has still caused pork prices to trend downward. Looking ahead, the industry expects that pork prices in the first quarter of 2025 may continue with a weak oscillation pattern, while the annual prices will mainly show a year-on-year decline. The profitability of listed pig companies may diverge, with those excelling in cost control likely to maintain profitability, while companies with still high costs may face certain risks of losses.

The 'peak season' for pork prices cannot hide the downward trend.

As we enter the end of December, the peak season for cured products is nearing its end.

Looking back on the entire month of December, the hog market, which was supposed to be in peak season, did not drive prices up but instead continued to weaken. Choice data shows that as of December 30, the national average price of hogs was 15.65 yuan/KG, a decrease of 1.07 yuan/KG during the month. Based on an average hog weighing 120KG, the average monthly profit per head fell by 128 yuan.

(December live pig spot price trend chart source: Choice)

Zhu Zekun, an Analyst from Zhuochuang Information, explained to Caixin News reporters, 'In December, as temperatures dropped and the peak season for cured products began in the southern regions, end demand gradually increased, but due to the ample supply of live pigs, the prices still fell month-on-month.'

According to monitoring data from Zhuochuang News, the national plan for hog sales by 242 large-scale Hog Farming enterprises increased by 5.06% in December compared to the previous month, reaching the highest growth rate since October. As the year-end approaches, group farming enterprises are accelerating their hog sales pace to fulfill their annual sales goals, showing a notable increase in the December group hog sales plan.

In fact, it is common for related pig enterprises to show signs of increased sales pace by year-end. From the data released by listed hog companies, 18 listed hog enterprises sold a total of 14.38 million pork in November, a year-on-year increase of 4.2%. The top three are Muyuan Foods (002814.SZ) with 6.38 million, Wens Foodstuff Group (300498.SZ) with 2.91 million, and New Hope Liuhe (000876.SZ) with 1.26 million.

Additionally, "Due to some small and medium-sized farms being supported by expectations for cured meat, there were numerous instances of proactive weight gain through hog holding from October to November. As December arrives and the southern cured meat season peaks, the previously held hogs are being gradually released, and the sales of middle and small-scale hog producers also increase, leading to ample actual hog supply in December," pointed out Zhu Zekun.

Chief Analyst Zhu Zengyong from the Ministry of Agriculture and Rural Affairs' Pork Industry Chain Monitoring and Early Warning believes, "This year's hog sales at year-end are basically on par with the same period last year. From a supply perspective, there's not enough support for pork prices to rise significantly; in fact, pork prices this year are better than last year's."

Will the profitability of listed hog companies face a 'test' in 2025?

Looking ahead to the first quarter of 2025, will the sluggish trend of pork prices continue?

The Ministry of Agriculture and Rural Affairs previously stated that although the number of piglets born from August to October this year decreased by 1.6% compared to the same period last year, it remains at a relatively high level in recent years. Calculating with a six-month fattening cycle, after the Spring Festival in 2025, the potential for oversupply in the off-season consumer market of pork increases, and Hog Farming is likely to experience thin profits or even losses.

Zhu Zengyong analyzes that: "In the first quarter, it is highly likely to face weak downward trends. Post-holiday supply levels are relatively high, while consumption typically declines after the Spring Festival, so overall pork prices may present a fluctuating weak decline."

Zhu Zekun stated, "In the first quarter of 2025, the theoretical supply of hogs will gradually increase. Considering the impact of the Spring Festival holiday, hog prices may fluctuate and decline in early to mid-January, while the latter part of the month coincides with the small New Year where stocking up occurs, which allows for a rebound in prices. February will see a demand off-season after the Spring Festival holiday, and hog prices may continue to decline. In March, as demand gradually recovers and the support from secondary fattening and replenishment increases, it is expected that hog prices will rise slightly in March."

From a longer-term perspective, Zhu Zengyong analyzed, "Next year's prices will definitely be lower overall than this year. It should not be a big issue to profit throughout the year, but the profit level is expected to be low. The overall supply is primarily observed this year, and secondly, the phased supply is considered. Overall supply for the year will be roughly equal to this year; for phased supply, due to better epidemic prevention this winter, there will not be a phase supply tightness as seen in the third quarter this year, meaning there won't be too high prices in the third quarter of next year."

Zhu Zekun also pointed out that hog production capacity will recover in 2024, and the supply of hogs will gradually increase in 2025. It is expected that hog prices will decrease year-on-year in 2025, resulting in reduced farming profits.

In fact, the data can also support this; as of November 2024, the number of breeding sows was 1.8 million more than the normal holding amount of 39 million, which is 104.6% of the normal holding amount and falls within the green zone, indicating normal fluctuation in production capacity, but it is already close to the critical value, and considerations for improving hog production levels and efficiency are still needed.

It is noteworthy that from February to November 2024, it will be a period of farming profits. The "net income per hog" for large-scale farming nationwide fluctuated from -14 yuan to 289 yuan. If hog prices continue to weaken and fall later on, farming profits may continue to shrink, potentially putting the profitability of farming companies to the "test" next year.

Zhu Zengyong believes, "If companies face costs higher than 15 yuan/KG in the first quarter next year, they may face certain risks. Looking at the entire year, companies that maintain good cost control are likely to continue being profitable."

Among A-share listed pig companies, Muyuan Foods, Shennong Group (605296.SH), Wens Foodstuff Group, and Tecon Biology Co.Ltd (002100.SZ) have significantly reduced costs this year, falling below 14 yuan/KG. Even if hog prices drop next year, their stable profitability remains supported by cost advantages.

However, some companies that still face high costs carry a certain risk of loss. In this regard, Zhu Zengyong believes, "To avoid risks, companies must prioritize stabilizing production next year to avoid blindly expanding; secondly, they should continue to reduce costs and increase efficiency."

Zhu Zekun pointed out that to avoid risks, enterprises must maintain their core competitiveness. "On one hand, the core competitiveness of an enterprise is to reduce its overall farming costs, while on the other hand, it is to lock in profits in a timely manner through various sales channels such as piglets and secondary fattening."