Dabeinong, one of the smaller publicly listed hog companies, announced that in July it had 270k hogs generating a revenue of 631m yuan. The sales volume was down 5.4% month on month and down 41% year on year. Average hog weights were 120.69kg (266lbs)
The company’s monthly disclosures over the past two years provide insights into how hog farmers try to time the market, adjust their hog weights, how they can get market timing wrong, and how this impacts prices.
Hog prices last peaked in January 2021 before falling continuously until October 2021. The company’s average selling price that January was 33.27 yuan/kg ($4.93/kg). As prices fell, sales volumes were relatively stable, but hog weights rose. During this time, most farmers expected prices to rebound and fed their hogs to heavy weights to profit once the rally happened.
However, prices continued to fall through the first half of the year. Dabeinong’s average selling weight rose from 124.82kg in January to 136.82kg (302lbs) in June. As the market remain low, the company’s monthly hog sales rose dramatically. In H1 2021 monthly sales averaged 277k head per month, but in H2 2021 this rose to 440k.
This situation wasn’t unique to Dabeinong. Many farmers had held onto herds hoping for a price rebound, but eventually capitulated and this selling in H2 2021 kept prices extremely low and caused the government to intervene to prop up prices.
Hog prices reached a recent low in March. Farmers started to hold onto hogs longer as the market turned bullish this year. Average selling weights for the company reached a low of just 113.15kg in April of this year with the company selling 346k hogs.
Now in July, the company’s average selling weight reach 120.69kg and sales have fallen to just 270k hogs. Many hog farmers have continued to hold back sales and raise hogs to higher weights.