Live hog futures have continued their downward trend recently, driven by oversupply in the market and weak seasonal demand during the off-peak consumption period. On April 9, the LH2605 hog futures contract opened at 9,220 yuan per ton, dipped to an intraday low of 9,115 yuan, and closed at 9,195 yuan, marking a decline of 0.97% for the day, reflecting persistent weakness in the market.
Analysts note that the ongoing slump in spot hog prices has dragged down futures prices, with nearby-month contracts hitting record lows since their launch. Particularly, overvalued distant-month contracts have also seen significant declines as market expectations for hog prices worsen. Meanwhile, piglet prices remain subdued amid deepening losses in the hog farming sector.
Supply-demand imbalances continue to intensify. According to monitoring data from the Ministry of Agriculture and Rural Areas, the national average hog price fell to 10.68 yuan per kilogram in the fourth week of March, with prices in some regions dropping below 10 yuan—the lowest level in eight years. Industry experts attribute the persistent decline to oversupply, exacerbated by seasonal demand weakness after the Spring Festival. Despite efforts by farmers to accelerate hog sales to reduce inventory, the pace of destocking remains slow, keeping spot prices under pressure.
On April 3, China's reserve management agency announced a purchase and storage plan for 10,000 tons of pork, equivalent to approximately 80,000 hogs. However, analysts suggest this move is unlikely to significantly impact market trends, though it may help stabilize farmer sentiment amid the price slump. So far, there has been no substantial reduction in production capacity, and policy measures aimed at cutting capacity and supporting prices have yet to yield clear short-term results.
As of late March, hog inventories monitored by sample surveys stood at 39.4021 million heads, up 1.3% month-on-month. Despite deep losses across the industry, there are few signs of active capacity reduction, such as lower slaughter weights or large-scale culling of breeding sows. Instead, high inventory levels and elevated slaughter weights continue to weigh on the market.
Looking ahead, analysts highlight several key factors that will determine when the market may bottom out: a sustained decline in breeding sow inventories, a meaningful reduction in slaughter weights, and mounting financial pressure from rising feed costs. Only when losses deepen and extend over a critical period is a trend reversal likely.
For hog futures, the nearby-month contracts are expected to remain under pressure due to high spot inventory and futures premiums. Distant-month contracts, however, may find some support after significant declines. If destocking progresses well in the second half of the year, a rebound in hog futures is possible. Otherwise, the market may continue to pressure producers to cut capacity.
Experts advise hog farming companies to consider hedging above full cost levels to lock in profits and navigate the current downturn. While temporary rebounds are possible if capacity is reduced, a sustained recovery will depend on concrete actions to lower breeding sow numbers and alleviate supply pressure.
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