China Galaxy Securities has released a research report emphasizing the balanced offensive and defensive investment opportunities in the hog farming industry. Considering breeding sow inventories and farming efficiency, hog prices in 2026 are expected to decline year-on-year, though intermittent rebounds may occur. The report suggests focusing on high-quality hog farming enterprises with significant marginal cost improvements and strong financial positions, taking into account both policy-driven and loss-induced capacity reductions. Recommended companies include Muyuan Foods Co., Ltd. (002714.SZ), Wens Foodstuff Group Co., Ltd. (300498.SZ), Shennong Group Co., Ltd. (605296.SH), and Tiankang Animal Husbandry Co., Ltd. (002100.SZ). Investors are also advised to monitor Dekon Agriculture and Husbandry Group (02419). Additionally, leading feed producer Guangdong Haid Group Co., Ltd. (002311.SZ) presents a potential opportunity. Key views from China Galaxy Securities are as follows:
December CPI showed a month-on-month improvement, with pork exerting a drag. China's CPI in December increased by 0.8% year-on-year (previous value +0.7%), with the food category rising 1.1% year-on-year (contributing approximately 0.21 percentage points to the CPI increase). Within the food category, pork prices fell by 14.6% year-on-year. On a month-on-month basis, December CPI increased by 0.2% (previous value -0.1%), with the food category up 0.3% (previous value +0.5%), compared to a five-year average of 0.6%. Pork prices within the food category declined by 1.7% month-on-month. Seasonal price increases for fresh fruit were the primary driver of the food CPI increase for the month, while the growth rate for fresh vegetable prices moderated, with pork remaining a drag.
Fruits and vegetables: Prices showed strength in January, with Q1 average prices expected to continue their year-on-year upward trend. The average vegetable price in January was 5.59 yuan/kg, up 6.37% year-on-year. It is projected that the overall Q1 average price will trend higher year-on-year, partly due to the later timing of the 2026 Spring Festival extending the holiday consumption period, and the lingering effects of La Niña delaying the harvest season for some vegetables. The average fruit price in January was approximately 7.88 yuan/kg, up 8.87% year-on-year, reaching the highest level for the same period since 2020. Considering the timing of the Spring Festival and typical annual fruit price patterns, it is believed that the average fruit price in Q1 2026 may reach a peak compared to the average levels from 2020 to 2025. The average grass carp price in January was approximately 16.43 yuan/kg, up 6.81% year-on-year, exceeding the six-year average of 7.04%. Based on aquaculture cycles and existing price trends, grass carp prices in Q1 2026 are expected to show a year-on-year upward trend.
Feed raw materials: Corn and soybean meal price changes are not expected to significantly pressure farming costs. The average spot price for corn in China in January was 2,364.6 yuan/ton, up 0.69% month-on-month and 10.55% year-on-year. Based on price trend patterns and potential supply-demand dynamics, corn prices in 2026 are expected to fluctuate within a range, with the average price slightly higher than in 2025. The average spot price for soybean meal in China in January was 3,198.97 yuan/ton, up 1.94% month-on-month and 3.82% year-on-year. Considering price trends and potential supply-demand factors, including weather impacts, trade relations, and harvest conditions in the US and Brazil, soybean meal prices in 2026 are anticipated to show a slight upward trend with fluctuations. Overall, considering the price trends for corn and soybean meal and their proportions in feed formulations, feed raw material prices in 2026 are expected to remain relatively stable, with limited impact on feed prices, indicating no significant upward pressure on feed costs for farmers.
Hog farming: Pork prices rebounded before the holiday, but the annual average hog price may decline year-on-year. Since late December 2025 (22.48 yuan/kg), China's pork prices have shown a fluctuating upward trend, reaching 23.87 yuan/kg by early February, primarily driven by pre-Spring Festival peak consumption demand. However, typically, the post-holiday period experiences a seasonal consumption slowdown, often leading to price declines. On an annual basis, based on the capacity and efficiency framework, the average annual hog price is projected to trend lower year-on-year. Potential rebounds during the year may be influenced by the severity of winter disease outbreaks.
Risk warnings include potential underperformance of livestock and poultry prices, animal disease risks, volatility in raw material prices, policy risks, and natural disaster risks.
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