Guo Zhiqiang, a reporter from China Economic Weekly, | Beijing reports
Recently, A-share listed pig companies announced the first three quarters of the performance data, affected by the sharp decline in domestic pig prices, the pig breeding industry fell into a collective loss, in order to reduce losses, some pig companies even sold piglets to roast suckling pig traders.
On October 14, according to the data released by the National Bureau of Statistics: in September 2021, the national consumer price increased by 0.7% year-on-year, of which food prices fell by 5.2%; while in food, pork prices fell by 46.9% year-on-year.
On October 17, Wang Quan, a veteran of the pig breeding industry, told China Economic Weekly: "After the explosive growth of the previous two years, the leading enterprises in the pig industry have fallen into deep losses, and large-scale losses have led to the industry entering a 'cold winter', and some pig leaders have appeared in pig farms across the country. ”
At present, the pig industry is collectively losing money, while some pork stocks are rising gratifyingly, what is the reason behind this contradiction? Pig farming has entered the "cold winter", when will the pork market bottom out? With these questions in mind, a reporter from China Economic Weekly did an investigation.
Piggy-raising dragon heads suffered huge losses, and piglets were sold cheaply to roast suckling pig shops
Since the beginning of this year, the domestic pig production capacity has recovered, and the current situation of oversupply of pigs in the market can be glimpsed from the changes in the piglet market.
On October 17, Lin Lin, the head of a pig breeding enterprise in the central region, told China Economic Weekly that at present, there is a dilemma in some parts of the country where the price of piglets is frequently falling and no one cares, and the breeding business owners are powerless to do anything about it, and can only choose to sell to the vendors of roast suckling pig shops at a price of 20-30 yuan per piglet, which has triggered the roast suckling pig business in some places.
"Selling piglets as roast suckling pigs is unprecedented in the pig industry. In the past, this situation was unimaginable to everyone, but now it has become a reality. Lin Lin said that behind the piglets' lack of attention is the recovery of pig production capacity. With the decline in pig prices, many farmers have accelerated the elimination of inferior sows, reduced the supplementary fence, and are unwilling to continue to buy piglets to avoid falling into the dilemma of pig losses, reflecting the reality of overcapacity in the current pig market.
Lin Lin calculated an account for the reporter, at present, the market price of the piglets just born is more than 300 yuan / head, and the market price of the piglets after weaning is 500-600 yuan / head, and now the pig farmers are selling to the roast suckling pig shop traders at a price of 20-30 yuan / head, and a piglet leaving the hand means a loss of more than 300 yuan.
According to CCTV financial reports, the data shows that the number of fertile sows in China is rapidly rising, from 19.13 million at the end of September 2019 to 45.64 million at the end of June this year, an increase of 2.3 times. The large increase in the number of fertile sows means that the supply of pigs is also increasing, which has caused a sharp decline in pig prices.
In early October, listed pig companies successively announced the first three quarterly report performance forecasts, affected by the sharp decline in pig prices, in addition to the use of "self-breeding and self-raising", the most cost-competitive pig breeding model of Makihara shares to maintain profitability, the pig industry has a large area of huge losses.
Taking Wen's shares as an example, the company expects a loss of 9.25 billion yuan to 9.75 billion yuan in the first three quarters, down 212% to 218% year-on-year. For the reasons for the decline in performance, Wen's shares explained that due to the sharp and continuous decline in domestic pig prices, the pig industry fell into a comprehensive loss in the third quarter, coupled with the continuous rise in the price of feed raw materials, the company's pigs out of the barn including purchased seedlings to fatten pigs, the disposal of low-efficiency breeding pigs and other factors pushed up pig costs, the company's pig breeding business in the first three quarters of the deep loss.
According to the "China Economic Weekly" combing found that Tianbang shares, Makihara shares, New Hope and other leading enterprises in the pig industry attributed the loss to: the recovery of domestic pig production capacity, the oversupply of pork in the market; the sharp decline in pig prices; the rise in feed breeding costs and other reasons jointly led to "blood losses" in the pig industry.
"The cost control ability of each pig breeding enterprise is different, like Makihara shares with strong control ability, there are single-quarter losses, and the cost pressure borne by other pig companies can be imagined." If the company cannot match the scale of pig breeding in terms of control mode, team building, technical capabilities, and process reengineering, then the aggressive capacity expansion means that the cost control ability is weakened, and the loss gap is also larger. On October 17, Zhang Yun, general manager of a state-owned pig breeding enterprise, said in an interview with China Economic Weekly.
Pig dividends ebbed out, and some pig farm projects have defaulted on "rotten tails"
Behind the decline in pork prices, there is the reality of the expansion of production capacity of a large number of pig breeding enterprises. Since 2020, along with the pig dividend, a large number of industries have poured into breeding enterprises, and major pig breeding enterprises have begun to "race horses" across the country.
In late August 2020, Tao Yishan, chairman of Tang Renshen, told China Economic Weekly: "According to incomplete statistics, the scale of pig projects under construction or to be built by Major Pig Raising Enterprises in China will reach 2 billion heads, while China's pork consumption is only 650 million heads, and the pig industry will have overcapacity in the future, or will face a disaster." ”
A year has passed, looking back, Tao Yishan's words have indeed been "a word", and the problems caused by the expansion of pig production capacity have emerged one after another.
In September this year, a "Notice on Economic Scheduling of the "Rotten Tail" situation of large-scale enterprise projects in 2021 " ( hereinafter referred to as the "Notice") attracted attention on the Internet, and the notice was named "Hunan Provincial Animal Husbandry and Aquatic Affairs Center". The "Notice" pointed out that "in the past two years, stimulated by the dual benefits of the market and policies, the rapid expansion of leading enterprises and the operation of high debt, the continuous decline in pig prices after February has fallen into huge losses".
After many verifications by the reporter of China Economic Weekly, the "rotten tail" project mentioned in the above-mentioned notification document and the damage to farmers do exist.
According to the Notice, some projects that have been put into production have defaulted on investment withdrawal, projects under construction have stopped production and stopped work, and arrears in the construction fees and maintenance fees of cooperative farms have occurred from time to time, which has become a major hidden danger in the current agricultural economic operation.
"The 'rotten tail' of the pig farm project has attracted the attention of the relevant parties in Hunan, and farmers, pig farm contractors, investors, etc. are involved, and it is conservatively estimated that these projects have basically lost 5 billion to 6 billion yuan." On October 17, Bai Yan, a company head who has been engaged in pig breeding enterprises for more than 20 years, told China Economic Weekly. Entering 2021, with the ebb and flow of pig dividends, pig breeding leaders have successively lost money, and "rotten tail" pig farm projects have also begun to appear.
Wang Quan told the "China Economic Weekly" reporter that affected by the continuous decline in pig prices, some leading pig breeding enterprises have suffered serious losses, and many projects invested in Hunan in the early stage have stopped, which has also caused many pig farm projects to have a "rotten tail", "There are hundreds of 'rotten tail' pig farm projects in Hunan province alone." Compared with the crazy capacity expansion in the early stage, the pace of pig production capacity expansion of such leading enterprises has slowed down a lot, and some companies originally planned to build farms in Hunan to breed 800,000 sows, and now there may be 80,000 sows."
Lin Lin told reporters: "In the early stage, the blind expansion of production capacity by leading pig enterprises led to a tight capital chain, coupled with serious losses, many pig factory projects have appeared 'rotten tail'. The pig farm built by the third party is now no longer taken over; the leasing project that was originally agreed upon is no longer rented by the leasing party. ”
In addition, pig breeding is a strong cyclical industry, in this way pig dividend ebbing tide, some breeding enterprises themselves control and technical capabilities are weak, lack of financing and anti-risk ability is also highlighted.
Wang Quan said frankly: "Now small-scale pig breeding entrepreneurs can only compress the scale, and if they do not compress the scale, they will go out of business. These unlisted aquaculture enterprises have neither financing capabilities nor technical management capabilities, and it is difficult to become bigger. Their financing ability cannot be compared with that of listed pig companies, and naturally they cannot improve their ability to control risks. ”
The pig market has entered a "cold winter", but the stock price of pork has risen
Many people in the market predict that the past few months have been the most difficult period of pig breeding, and the entire industry has entered a "cold winter".
According to the official website of the Ministry of Agriculture and Rural Affairs, the average domestic wholesale pork wholesale price showed a cliff-like downward trend from January to mid-October this year, from 46.71 yuan / kg in January to 19.36 yuan / kg on October 15.
On October 7, Caixin Securities released a research report saying that pork prices continued to decline, the average wholesale price fell to 19.02 yuan / kg, this week (September 27 - September 30) pig food price comparison continued to fall back to 4.20, pig supply continued to increase, pork demand with the weather cooler has improved but is still relatively weak, there is no significant rise, supply and demand mismatch pattern still exists.
Lin Lin told China Economic Weekly: "Considering that the supply of pork is still relatively loose, with the impact of festive factors such as the Spring Festival in the fourth quarter, pork prices may rebound slightly, but the probability of pork prices reversing is not large, and pork prices will remain volatile for a period of time." ”
Tianfeng Securities analysts pointed out that from the current pig price point of view, the price continues to explore downwards, and if the price continues to remain at a low level, it is possible that some farms (households) will begin to accelerate the elimination of fertile sows, thus laying a certain theoretical foundation for the price reversal in the middle of next year.
On October 11, as soon as the news about pork storage came out, pig futures rose and stopped, and many contracts such as pig futures 2111, 2201, 2203 were sealed on the limit board, which was the first time since the listing, pork stocks also rose rapidly, and there was a large-scale rise.
Although the pig industry has fallen into a "cold winter", the stocks of the pig breeding sector have soared, what signal does this contradictory phenomenon reveal?
Choice data shows that in just 6 trading days in October, 8 of the 9 stocks in the Shenwan pig sector recorded positive growth. In September, New Hope rose 34.9% in a single month, leading the sector; Makihara shares rose more than 22%, and individual stock prices such as Zhengbang Technology and Tianbang shares performed well.
Wang Quan said: "The pork market has basically bottomed out, and now the 'cabbage price' of pork has not yet bottomed, when will it bottom out?!!" Market institutions have a much more sensitive sense of opportunity than the average investor, who has seen this turning point in the pig market, and the bottom of the pork stock market has been determined. ”
(Lin Lin, Zhang Yun, Wang Quan, Bai Yan as pseudonyms)
Editor-in-charge: Guo Jiyao
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