On April 7, the main hog futures contract 2605 hit a new intraday low of 9,125 yuan per ton, setting a fresh record low since its launch.
In contrast, the spot and stock markets for hogs have shown signs of stabilizing since early April. For instance, the latest price for domestic hogs (outer三元) held steady at 10.12 yuan per kilogram, matching the level seen at the end of March. Related stocks such as Muyuan Foods and Wens Foodstuff Group did not continue to decline, with some even posting modest gains during the same period.
The divergence in short-term performance among futures, spot, and stock markets may be attributed to intensified battles between long and short positions in the futures market.
In fact, since hog prices began their current decline in mid-March, hog futures have consistently broken records for open interest, with total open interest rising from around 350,000 lots to approximately 500,000 lots.
According to Wind data, as of the close on April 7, the total open interest value of hog futures reached 83.36 billion yuan, with margin deposits amounting to 13.34 billion yuan.
Despite hog prices falling to their lowest levels in nearly two decades, the contest between long and short positions in the futures market remains unresolved. The top 20 futures firms by open interest have continued to increase their positions in recent trading sessions.
Amid this fierce battle, the 2605 contract has maintained its downward trend, repeatedly hitting new lows.
New Lows in Hog Prices, Record Highs in Open Interest Since April, the decline in spot hog prices has been smaller than that in futures prices.
Data from China Pig Web shows that since April, the lowest price for domestic hogs (outer三元) was 10.03 yuan per kilogram, compared to a low of 10.06 yuan per kilogram at the end of March. During the same period, the lowest price for domestic hogs (inner三元) was 9.95 yuan per kilogram, down from 10.03 yuan per kilogram at the end of March.
In contrast, the futures market has experienced steeper declines and lower prices, particularly in the 2605 contract, which has become the main battlefield for long-short battles and exhibits the highest trading activity.
After falling below 10 yuan per kilogram at the end of March, the 2605 contract hit a historic low of around 9.13 yuan per kilogram during the morning session on April 7, marking the lowest level since the contract's launch in 2021.
Hog prices at their lowest point in nearly two decades have attracted substantial capital seeking to buy at the bottom, driving open interest in hog futures steadily higher.
Data from Wenhua财经 shows that in early March, total open interest in hog futures fluctuated around 350,000 lots. As the main contract successively broke below the key levels of 11 yuan per kilogram and 10 yuan per kilogram, both open interest and its value gradually increased. By the afternoon of April 7, total open interest had reached 501,000 lots, an increase of over 40% compared to early March. This record open interest corresponds to margin deposits exceeding 10 billion yuan.
According to Wind statistics, as of the close on April 7, the total open interest value of hog futures reached 83.36 billion yuan, with margin deposits amounting to 13.34 billion yuan. The implied margin rate for this data is 16%. While the open interest value, calculated using settlement prices and contract size (16 tons per lot), is relatively accurate, the margin deposit figure can vary due to differing margin requirements set by futures firms and should be considered as a reference.
Even using a lower margin rate, such as the 13% applied by a leading futures firm on April 7, the positions held by longs and shorts still represent a battle involving over 10 billion yuan.
More importantly, despite the continuous decline in hog futures and the main contract falling to as low as 9.1 yuan per kilogram, long positions have not capitulated.
For example, looking at the top 20 futures firms by open interest, long positions increased more aggressively than short positions in recent trading sessions. On April 1, long positions held by these top firms increased by 4,734 lots, while short positions increased by only 2,030 lots. Similarly, on March 2 and March 3, the increase in long positions slightly exceeded that of short positions. It was not until April 7 that the increase in short positions surpassed that of long positions.
As the saying goes, "As long as longs refuse to surrender, the downtrend may persist." Until long positions are significantly reduced through stop-losses or liquidation, the current downward trend in hog futures is unlikely to reverse. The foreseeable change is that the main battlefield for long-short contention will gradually shift from the nearing-expiry 2605 contract to the next main contract, 2607, as the delivery month approaches.
As of the close on April 7, the hog futures 2607 contract was priced at 10.23 yuan per kilogram, significantly higher than the 2605 contract's price of 9.21 yuan per kilogram. This price difference of over 1 yuan per kilogram provides short sellers with greater potential profit margins in subsequent trading.
Portraits from a Downturn Cycle Hog breeding enterprises are natural short sellers in the futures market. However, with current hog futures prices at extremely low levels, selling futures for hedging purposes offers limited effectiveness in offsetting losses from their core hog breeding operations. For instance, the settlement price for the 2611 contract, which reflects expectations for November hog prices, was only 11.98 yuan per kilogram on April 7—below the cost line for most hog breeding enterprises.
Based on recent earnings briefings and institutional research, even the leading breeders with the best cost control, such as Muyuan Foods and Wens Foodstuff Group, reported hog breeding costs of around 12 yuan per kilogram for January-February this year. New Hope Liuhe reported a full cost for fattened hogs of approximately 12.3 yuan per kilogram in February.
Muyuan Foods' cost target for the year is only 11.5 yuan per kilogram, indicating little room for significant cost reduction to avoid losses in the short to medium term.
Furthermore, even if breeders opt to hedge using far-month contracts to reduce losses, they must contend with the lower liquidity and smaller market capacity of these non-main contracts.
With futures prices too low and limited scope for cost reduction, some hog breeding companies are preparing for a prolonged downturn and exploring new ways to hedge losses from their breeding operations.
Muyuan Foods is expanding into overseas markets and extending its reach downstream into slaughtering and meat processing. In March 2025, the company established a wholly-owned subsidiary, Vietnam Muyuan Co., Ltd., through its subsidiary, focusing on providing technical services for hog breeding and intelligent farming equipment.
During a recent annual report communication meeting, Muyuan Foods updated its strategy, stating that by 2026, the goal for its overseas business is to establish breeding capacity in Vietnam and solidify the technical pathway for local development. The company also noted increased capital expenditure planning for its slaughtering segment compared to 2025, aiming to boost investment in slaughtering and meat processing and increase the proportion of self-slaughtering.
Wens Foodstuff Group, which theoretically faces less operational pressure due to its poultry business providing some hedging, has also identified international expansion as a key strategic direction for the year. Its initial goal is to capture about 10% of Vietnam's yellow-feather broiler market, with plans to potentially expand into hog and duck farming overseas later, depending on developments.
Historical data shows that Wens sold 40.4769 million hogs in 2025, including 5.0302 million piglets, making it the second-largest hog breeding enterprise in China after Muyuan Foods.
Against the backdrop of efforts to reduce production capacity in China's hog industry, Wens announced it would annually supply 5 million fresh suckling pigs and roasted suckling pig products to the market as a key method for selling piglets. The company believes this approach can reduce the final slaughter weight of hogs, avoid holding animals for excessive weight gain, and thus help alleviate overcapacity issues.
Kingkey Smart Agriculture, which entered the industry during the last pig cycle and has businesses spanning real estate and breeding, is pursuing diversification through external acquisitions for hedging purposes. According to a recent announcement, the company plans to gain control of Jiangsu Huibo Robot Technology Co., Ltd. through capital increase and signing a concerted action agreement, subsequently consolidating it into its financial statements. Kingkey stated that this move "helps balance the cyclical fluctuations of its main hog breeding business and promotes the company's external growth."
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