Gf Securities released a research report stating that hog and piglet sales have fallen into losses. Given the relatively clear trend of sustained growth in hog supply pressure across the industry in the first half of 2026, hog prices are expected to remain low with continued losses in breeding. Meanwhile, policy-driven capacity adjustments are likely to intensify.
Considering the current industry-wide losses and the backdrop of "anti-involution" efforts, the reduction of hog production capacity has begun. Key factors to monitor include industry policies and potential winter disease outbreaks. With sector valuations at relatively low levels, cost-advantaged leading enterprises are preferred.
Gf Securities' key views are as follows:
**Hog Prices Fall Below Cost Line, Both Hogs and Piglets in Loss** Expectations of a seasonal price rebound were dashed as hog prices accelerated their decline since late September, briefly dropping below RMB 11/kg after the National Day holiday, hitting a yearly low. Current hog prices have fallen below most firms' cash cost lines, pushing the industry into widespread losses.
The recent unexpected price drop stems from earlier production expansion and efficiency gains, leading to significant supply pressure in H2 2025. Additionally, piglet prices plummeted in September, with losses exceeding RMB 100 per head, reflecting breeder pessimism about future prices.
**Cycle Bottoming, Supply Pressure to Persist in H1 2026** Feed data indicates high base levels in Q3 2024, yet piglet and hog feed sales in Q3 2025 still showed notable YoY and QoQ growth, signaling rising hog inventories and continued supply pressure in Q4 2025.
Mid-term price outlook: Data from the Ministry of Agriculture shows piglet numbers at large farms have grown MoM since February 2025, pointing to higher hog slaughter volumes in Q1 2026. Prices are expected to remain low, sustaining industry-wide losses.
As of Q2 2025, breeding sow inventories stood at 40.43 million, up 40,000 QoQ and 50,000 YoY. Factoring in efficiency gains, hog supply in H1 2026 is projected to rise YoY, with post-Lunar New Year seasonal weakness likely driving prices lower and deepening losses.
**Losses and Policy Tightening Highlight Left-Side Opportunities** With both hog and piglet sales in the red, the industry meets preconditions for capacity reduction, which may accelerate. Investors should watch for left-side cycle opportunities. Beyond losses, policy shifts and winter diseases could further catalyze sow capacity adjustments.
Considering sow inventories and efficiency, Gf Securities expects hog prices to remain low in H1 2026 before gradual improvement in H2, potentially lifting prices. For 2026, hog slaughter volumes may see moderate YoY growth, with average annual prices slightly lower, though top breeders could remain profitable.
**Risks:** Agricultural price volatility, disease outbreaks, policy shifts, and food safety issues.