The pork cycle has once again become a focal point in capital markets. Two leading breeding giants, Muyuan and Wens Foodstuff Group, both reported a shift from profit to loss in the first quarter, with combined losses exceeding 22 billion yuan. The phenomenon of "vegetables being more expensive than meat" is often seen as a hallmark signal of a cycle turning point, but this time, conventional wisdom appears to be failing. Throughout April, hog prices experienced severe fluctuations in a pattern of "bottoming out—rebounding—falling again." The average price for ternary hogs hit a yearly low of 8.66 yuan per kilogram on April 14, with the hog-to-grain ratio dropping to 3.44:1. Subsequently, reduced supply from breeders aiming to support prices, combined with pre-holiday stocking and supportive policy signals, briefly pushed prices back to around 10 yuan per kilogram. However, insufficient demand led to another price decline by the end of the month, leaving the entire industry mired in deep losses.
Despite prices hovering near historical lows and policymakers signaling a push for "reasonable price recovery," the anticipated cyclical rebound has yet to materialize. Price signals alone may no longer suffice to explain the current situation. The behavioral logic of leading enterprises during loss cycles is becoming a more critical window for observing this round of the pork cycle.
If viewed from the cyclical rhythm, the current hog price level is indeed close to the peak of supply pressure in this cycle. According to pig farming patterns, it takes approximately 10 months from breeding a sow to the slaughter of market hogs—about 4 months for gestation and 6 months for fattening. The piglet inventory reached a阶段性 high from October to November 2025, corresponding to the concentrated slaughter period from March to April 2026. As subsequent replenishments marginally decline, supply pressure is expected to gradually ease.
However, with increasing industry concentration, the traditional pork cycle's operational mechanisms are changing. In 2025, national hog slaughter volume was approximately 720 million heads, with Muyuan alone accounting for nearly 10%. Listed companies and large breeding groups collectively control over 40% of the sow inventory, while small-scale farmers' share has fallen to below 20%. Past cycles exhibited strong elasticity primarily because small-scale farmers, who constituted a high proportion, would exit quickly upon entering a loss phase, leading to supply contraction and rapid price rebounds. In contrast, large-scale enterprises do not exit swiftly during loss periods; instead, leveraging financing capabilities and cost advantages, they maintain or even expand capacity. In an oligopolistic competitive landscape, major players tend towards观望 and博弈 rather than主动 reducing production, significantly slowing the clearance pace.
Changes on the cost side are also rewriting the cycle's logic. Unlike the past reliance on experience and single cost items, leading enterprises now focus on systematic cost reduction. The普及 of代养 models allows companies to control costs in a more "asset-light" manner, while the introduction of hog futures provides some hedging against price volatility uncertainty. Furthermore, systematic cost reduction is not merely about expense compression but also entails continuous improvements in production efficiency, which objectively increases effective supply. Since 2021, the industry's PSY has risen from 18.6 to over 24, with leading enterprises even reaching around 30. The actual supply per sow continues to expand, with "hidden capacity" persistently offsetting "explicit reduction."
Taking Muyuan as an example, its full cost had decreased to 11.6 yuan per kilogram by March and is expected to have further room for decline. Approximately one-third of this reduction came from lower feed prices, while the remainder stemmed from internal efficiency gains, including optimized breeding systems, improved capacity utilization, and refined expense management. Against this backdrop, extending downstream into the industry chain has gradually become a consensus to smooth cyclical fluctuations. Tianbang Food plans to achieve a slaughter capacity of 4 to 5 million heads by 2026; Shennong Group has reached a slaughter capacity of 2.5 million heads, with related business accounting for 26.38% of revenue; Xinwufeng and Tecon Biology have also completed layouts for 2 to 3 million heads. The most aggressive, Muyuan, slaughtered 28.663 million hogs in 2025, doubling year-on-year, with a capacity utilization rate of 98.8%, and achieved annual profitability for the first time. In 2026, Muyuan intends to continue allocating resources towards slaughtering, specifically reserving 10 to 15 billion yuan in capital expenditures for new slaughter capacity, aiming for at least double-digit growth on the existing base.
For breeding enterprises, the slaughter business provides a relatively stable gross profit source during cyclical lows, reducing risks associated with被迫 holding back hogs and二次育肥. It also offers a buffer for misjudged expansion timing, absorbing upstream capacity pressure. As the entire industry actively smooths fluctuations through efficiency improvements, financial tools, and产业链延伸, supply no longer contracts rapidly, leading hog prices into a prolonged bottoming phase.
Superficially, scale, efficiency gains, and产业链延伸 do grant leading enterprises stronger resilience to volatility. However, practical outcomes suggest this "anti-cyclical capability" manifests more in delaying clearance rather than avoiding it. Firstly, there is a significant mismatch in the transmission节奏 between price declines and cost reductions. Hog price drops occur almost instantaneously, whereas cost reductions rely on productivity improvements, organizational optimization, and cyclical factor declines, which have a longer transmission cycle. At current price levels, the industry's full cost is around 12 yuan per kilogram, and cash cost about 10 yuan per kilogram. With first-quarter hog prices普遍 falling below these levels, not only are profit margins compressed, but enterprises have begun entering a cash flow loss zone.
Secondly,规模化 expansion implies a more rigid cost structure. In the era dominated by small-scale farmers, losses often led to exits, clearing out costs. Under the current model, expenses like pen depreciation, labor, environmental compliance, and interest have solidified into fixed costs that do not contract同步 with falling hog prices. The lower prices go, the heavier these burdens become, continuously raising the break-even point and causing enterprises to consume profits and cash while maintaining production.
Against this backdrop, the real constraint for leading enterprises has shifted from the income statement to cash flow and the balance sheet. Taking Muyuan as an example, the large-scale fixed assets and debt accumulated during the previous expansion cycle make it more sensitive to cash flow during low-price phases, prioritizing "debt reduction" as a core objective. By the end of 2025, the company's asset-liability ratio had decreased to 54.15%, with total liabilities down 17.1 billion yuan from the start of the year. By the end of the first quarter of 2026, aided by factors such as funds raised from its H-share listing, the ratio further dropped to 50.73%, the lowest since the interim report of 2021.
However, the operational "blood-making ability" is simultaneously under pressure. The net cash flow from operating activities turned from an inflow of 7.5 billion yuan to an outflow of 900 million yuan in the first quarter, significantly contracting with the decline in hog prices. To sustain operations and debt repayment, the company had to rely on financing activities, with cash inflows from financing reaching 33.491 billion yuan, while cash used for debt repayment was as high as 23.886 billion yuan. This indicates that even with some financial structure repair, cash flow pressures continue to be released.
Under such a structure, enterprises' sensitivity to hog price fluctuations has not decreased but may have increased. Furthermore, in an environment with faster information transmission and higher industry concentration, leading enterprises might even initiate replenishment before the cycle completes its clearance, "jumping the gun" on the next expansion. While this behavior smooths short-term volatility, it also raises the supply floor, delaying price recovery.
Consequently, the clearance mechanism of this pork cycle is undergoing change. The过去 rapid clearance driven solely by price is evolving into a slower clearance triggered by cash flow and balance sheet constraints. Enterprises do not exit immediately due to short-term losses but are被动 cleared out through continuous resource depletion, significantly prolonging the cycle. Current disagreements in assessing the pork cycle are集中于此. For both market participants and traders, the risks of simply betting on a cycle reversal are rising.
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