pennslammer33500| [Special topic on pigs] The high point of the market is likely to be approaching, and breeding companies can participate in selling hedging on high prices

sourcepennslammer33500: SDIC Anxin Futures Research Institute

1. The short-term spot trend deviates

After May Day, spot prices of live pigs continued to rise as secondary fattening groups continued to enter the market to make up the stalls and breeding companies pressed against the stalls and were reluctant to sell. Recently, the spot price of live pigs has accelerated upward. From May 17 last Friday to May 24 this Friday, the average price of live pigs has increased from 15.pennslammer33500.43 yuan/kg rose to 16.71 yuan/kg, up 1.28 yuan/kg, or 8.3%. From the perspective of Northeast China, the price of Heiji Liao pigs rose by 0.65 yuan/kg yesterday, and rose by 0.3 to 0.55 yuan/kg today. The signs of being driven by emotion are more obvious. On the other hand, the performance of futures is relatively calm. Recently, the pig futures price has continued to fluctuate at a high level and has not followed the spot out of the rapid upward market.

2. Under the background of de-production capacity, secondary fattening affects the pace of supply

Due to the continuous reduction in Nengfa sow production capacity last year and the impact of pig disease in the fourth quarter, the market expects a reduction in pig supply this year and there is optimism and bullish sentiment about pig prices. Since the Spring Festival this year, secondary fattening, filling and slaughtering have continued to affect the pace of market supply, thus affecting the spot price of live pigs. Judging from Yongyi's statistics, the magnitude of secondary fattening and filling hurdles has increased again after May Day, accelerating the recent upward trend in pig prices.

Considering that secondary fattening and reluctance to sell have a rapid pull on pig prices, the sentiment on the supply side has a greater impact, the consumer side is still in the off-season, and the real demand has not improved. We believe that once the sentiment on the breeding side is reluctant to sell and second breeding slows down, pig prices are likely to be closed, and futures prices are currently close to highs.

3. Market valuation estimates that breeding profits are good, and breeding companies can participate in selling hedging on rallies.

Since September in the second half of 2023, spot prices of soybean meal, corn and other varieties have dropped significantly, and have pushed down the cost of pig breeding. According to the announcement of the listed company, the current cost of complete pig breeding for breeding companies may be around 15 yuan/kg, of which the cost of complete pig breeding for industry leader Muyuan Co., Ltd. in April, the cost of complete pig breeding for Wenshi Co., Ltd. in April was 14.4 yuan/kg.

According to Yongyi Consulting statistics, the latest estimated cost of breeding weaned piglets to standard pigs this week is 13.6 - 13.7 yuan/kg, and the cost of fattening outsourced piglets to standard pigs is 16 yuan/kg. The corresponding time point is around the end of October and early November. Corresponding to the standard pigs slaughtered at the end of August and the beginning of September, the complete cost of self-breeding and self-breeding is 13.7 - 13.8 yuan/kg, and the complete cost of outsourced piglets is 15.48 yuan/kg. Based on this cost calculation, the current valuation of the September and November contracts on the market is around 18.2 and 18.6 yuan/kg. The profits of hedging pig breeding are relatively high, and breeding companies can participate in selling hedging on rallies. Historically, before the epidemic, the average profit of the pig breeding industry from 2010 to 2018 was 217 yuan/pig, and the current hedging profit is higher than this level.