The persistently low price of live hogs has led to a temporary loss for leading hog farmer Muyuan in the first half of the year.
On July 11th, Muyuan released its performance forecast for the first half of 2026. The company expects a net profit attributable to shareholders of the listed company in the range of a 5.7 to 6.7 billion yuan loss, compared to a profit of 10.53 billion yuan in the same period last year.
From an operational perspective, hog prices remain the core variable affecting Muyuan's performance. This year, the average selling price of Muyuan's commercial hogs has remained low, hovering around 10 yuan per kilogram for most of the period from March to June.
However, against the backdrop of industry-wide pressure, Muyuan's cost improvements continue.
The company disclosed that as of May this year, the full cost of hog farming has been reduced to 11.6 yuan per kilogram, moving closer to the annual target of below 11.5 yuan per kilogram. Costs at the company's top-performing farms have been stably controlled below 11 yuan per kilogram, with the best-performing farms achieving costs below 10.5 yuan per kilogram.
Muyuan's President, Gao Tong, stated that the company's 2022 target to reduce costs by 600 yuan per head has achieved 323 yuan as of the end of May this year, leaving 277 yuan of potential cost improvement remaining.
Moving forward, the company plans to further standardize and replicate the experiences of its top-performing farms in health management, feed efficiency, and production performance to more farming operations through technological innovation and management optimization.
Muyuan's current operational focus has shifted to improving the operational quality of its existing capacity. For large-scale farming enterprises, even minor improvements in metrics like feed conversion ratio, survival rate, daily weight gain, and disease prevention, when amplified across tens of millions of hogs sold, can translate into significant cost changes.
In addition to its core farming business, the slaughter and meat processing segment has become an important supplement for Muyuan during the cyclical low.
Muyuan began laying out its slaughter and meat business in 2019 and achieved annual profitability for the first time in 2025. According to company disclosures, the slaughter and meat segment remained profitable in both the first and second quarters of 2026.
Muyuan's Meat CEO, Qin Muyuan, revealed that the proportion of hogs self-slaughtered by the company in 2025 was 36.75%, indicating significant room for growth, which also represents future profit potential for the slaughter and meat business.
Next, Muyuan will continue to optimize sales channels and product structure, increase the proportion of segmented products, and drive further improvements in slaughter scale and profitability.
At this stage, the significance of the slaughter and meat business for Muyuan lies more in extending the industrial chain and buffering against the volatility of the farming cycle.
Since the farming business still dominates the company's overall profits, the slaughter segment is not yet sufficient to fully offset the pressure from low hog prices. However, its sustained profitability indicates that the slaughter capacity previously built by the company is gradually entering a stage of output.
Improvements in the financial structure also provide a certain safety cushion for Muyuan to navigate the industry trough.
As of the end of the first quarter of 2026, Muyuan's asset-liability ratio was 50.73%, a decrease of 3.42 percentage points from the beginning of the year. Total liabilities decreased by over 3.1 billion yuan from the start of the year, and the balance of monetary funds reached 14.27 billion yuan.
The company stated that it has largely completed large-scale hog farming capacity construction. Future capital expenditure for domestic farming operations will gradually decline, and new capital expenditure requirements for the slaughter and meat business are also relatively limited.
From an industry perspective, the live hog market remains at the bottom of the cycle, but marginal changes have emerged. As the industry continues to incur losses and the inventory of breeding sows is gradually adjusted, the earlier capacity reduction is gradually being transmitted to the supply side of commercial hogs.
However, whether the rebound in hog prices can be sustained still depends on the subsequent extent of capacity reduction, the pace of commercial hog sales, and the recovery of terminal consumption.
Over a longer cycle, progress in cost reductions, profitability of the slaughter business, and optimization of the financial structure will determine Muyuan's profit elasticity in the next industry upturn.
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