Hog production cost is RMB14.04/kg currently, but hog procurement price is only RMB14.56/kg., suggesting a profit of RMB56.5/head on average, a collapse of RMB600/head from the outset of this year.
If hog and piglet prices keep going south at a rate of 2% and 5% respectively, the returns from hog production may be about RMB60/heads during Aug. ~ Oct. If hog price drops to RMB13.5/kg in Oct. because of seasonal concentrated slaughter, the returns from hog production may drop to zero.
Piglet price is predicted to drop in the second half of this year because of more supply. Only when piglet price drops below RMB18/kg, can farmers attain a profit of RMB100/head from hog production.
Taking into account of labor cost of RMB200/head in hog production, farmers already suffered losses in July. In fact, farmers have stopped adding piglets to pigsties in some regions. If hog price keeps declining, most of the hog farms may suffer losses in the second half of this year.
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