China’s most active hog futures closed down 5.69% on Monday at a record low, after farmers ramped up selling of pigs following months of weak prices, hitting market confidence.
The January contract fell to 14,660 yuan ($2,032.98) per metric ton in the biggest daily decline since June, and despite the state planner announcing on Friday it would stockpile more pork to support prices.
China’s cash hog prices have been falling since August on large oversupply and weak demand, and dropped another 4% in the past week to 14.41 yuan per kilogramme on Monday.
Farmers have begun to accelerate the destocking of herds in recent weeks, say analysts.
“Large companies are reducing herds due to financial pressure after a year of deep losses while smaller farmers are also selling due to increasing outbreaks of African swine fever,” said Darin Friedrichs, co-founder of Shanghai-based Sitonia Consulting.
Farmers often send pigs to slaughter before the herd becomes infected by spreading disease, depressing prices.
The contract for January delivery has plunged more than 9% in November.
China’s sow herd at the end of October was still larger than needed at 42.1 million pigs, state media reported last week.
“The market is becoming less confident. But the market expects that the sell-off now will help speed up the process of overcapacity reduction. Far months are better than near months,” said Yuan Song, chief analyst at Juxing Agriculture Group.
($1 = 7.2111 yuan)
(Reporting by Dominique Patton and Mei Mei Chu; Editing by Kim Coghill and Mrigank Dhaniwala)
