The live hog futures market experienced a significant decline yesterday, with the live hog 2611 contract closing at 10,295 yuan per ton, a drop of 4.01%.

Following the holiday period, the breeding sector remains in a phase of inventory release, resulting in abundant market supply that continues to pressure spot prices. The decline in spot prices after the holidays has exceeded expectations, with the weak spot market driving the futures market to open lower and continue falling throughout the day.

The overall valuation center continued to shift downward. Except for the far-month 2707 contract, which closed with a loss of less than 400 points, all other contracts recorded declines exceeding 400 points, marking the largest single-day drop since the bottoming-out trend in mid-April.

After the dual-holiday expectations were disproven, market sentiment shifted rapidly. With consumption declining due to post-holiday inertia, the market worries about a second bottoming-out risk for spot prices. The premium on near-month contracts narrowed quickly and gradually began pricing in post-holiday risk factors.

Far-month contracts were also dragged down by the current spot market weakness. This year's dual-holiday stockpiling fell noticeably short of early September expectations, not only reflecting a decline in actual fresh pork sales growth during the holiday but also revealing the disappearance of speculative hoarding activity by slaughterhouses.

Following the overall valuation decline, the trading focus of near-month and far-month contracts is expected to gradually diverge. Near-month contracts will mainly follow the pace of the spot market and remain under significant pressure. Far-month contracts, supported by year-end peak consumption season expectations and anticipated capacity reductions, still present phased recovery opportunities.

In the short term, post-National Day consumption is declining due to seasonal inertia, and the overall October fresh sales growth is likely to narrow compared to September. Prices are expected to fluctuate near the bottom after finding a floor. The psychological price level for secondary fattening bottom-fishing is currently concentrated around the 10.0 integer mark. After the holidays, it is advisable to observe the support effect at this level. If the breeding sector continues to accelerate inventory release, a break below this level cannot be ruled out.

In the medium term, the marginal improvement in Q4 supply is limited. Demand growth this year is flat, and stockpiling behavior by slaughterhouses has changed, with the substitution effect of frozen product inventory expected to rise year-on-year. The rigid consumption increase starting in late November could provide a slight bottom-lifting effect on prices. Without phased production cuts by breeders or increased stockpiling by slaughterhouses, prices are unlikely to replicate last year's year-end rally.

Overall, a cautious outlook on Q4 prices is maintained, and it cannot be ruled out that the industry may still struggle to return to profitability throughout the quarter.

Risk factors: concentrated slaughter, frozen product inventory release.