Huafu Securities released a research report stating that the hog farming industry has recently fallen into a loss-making state, coupled with the advancement of capacity adjustment policies, expectations for hog industry capacity reduction have strengthened. This is expected to drive a long-term upward shift in hog price trends, with low-cost, high-quality hog enterprises poised to achieve excess returns. According to data from the Ministry of Agriculture and Rural Affairs, the national breeding sow inventory dropped below 40 million by the end of October, a reduction of over 350,000 compared to September, indicating gradual progress in capacity reduction.
In the livestock sector, beef cattle prices saw a slight short-term decline. The Ministry of Commerce's safeguard investigation on imported beef, originally scheduled to conclude in August 2025, was extended to November 26, 2025, due to case complexity. Market participants are advised to monitor the upcoming import safeguard measures.
Key views from Huafu Securities are as follows:
**Hog Farming: Capacity Reduction Gradually Materializes** (1) Hog prices initially declined before rebounding slightly this week, with an overall minor dip. Early in the week, large-scale farms maintained increased slaughter volumes, keeping prices under pressure. By mid-to-late week, as temperatures continued to drop, basic terminal consumption showed signs of recovery. Additionally, sporadic demand for cured meat and sausage production in southern regions provided support, leading to a slight uptick in hog prices. As of November 21, hog prices stood at RMB 11.62/kg, down RMB 0.04/kg week-on-week. (2) Average hog slaughter weight continued to rise. Lower temperatures improved daily weight gain, while large farms maintained higher slaughter volumes, contributing to increased average weights. Meanwhile, small-scale farmers and secondary fattening operations became more active in selling, leading to a rise in heavier hogs in the market. As of November 20, the average slaughter weight was 128.81kg, up 0.33kg week-on-week.
Looking ahead, recent losses in the farming sector, combined with capacity adjustment policies, are expected to accelerate industry-wide capacity reduction, potentially driving long-term hog price increases. Low-cost, high-quality hog producers are likely to benefit. Companies to watch include **Tiankang Biotech (002100.SZ)**, **Muyuan Foods (002714.SZ)**, **Wens Foodstuff Group (300498.SZ)**, and **Dekon Agri (02419)**.
**Livestock Sector** (1) **Beef Cattle**: Short-term prices dipped slightly, with attention on upcoming import safeguard measures. As of November 21, calf prices were RMB 32/kg, up 0.63% week-on-week and 32.73% year-to-date, while fattened bull prices were RMB 25.58/kg, down 0.16% week-on-week but up 8.25% year-to-date. The Ministry of Commerce's safeguard investigation on imported beef, extended to November 26, 2025, will be closely monitored. In the medium to long term, prolonged losses have led to significant capacity reduction, with breeding cow destocking effects gradually filtering through. Tight beef supply is expected in 2026–2027, ushering in an upward price cycle. (2) **Raw Milk**: Prices remain low, with capacity reduction likely to persist. Current raw milk prices are at cyclical lows, with industry prices at RMB 3.03/kg as of November 14, up 0.33% week-on-week but down 31% from peak levels. Continued losses are expected to drive further capacity reduction, potentially stabilizing and lifting prices later. Companies to watch include **Youran Dairy (09858)** and **China Shengmu (01432)**.
**Poultry Sector** (1) **Broilers**: Recent price pressure on live chickens, coupled with weaker restocking enthusiasm ahead of the New Year, has led to lower chick prices. As of November 21, white-feathered broiler prices were RMB 7.15/kg, up RMB 0.03/kg week-on-week, while chick prices were RMB 3.48/bird, down RMB 0.01/bird week-on-week. Ongoing overseas avian flu outbreaks have restricted imports, potentially tightening upstream broiler capacity. Companies to monitor include **Yisheng Livestock (002458.SZ)**, **Sunner Development (002299.SZ)**, and **Wellhope Foods (603609.SH)**. (2) **Layers**: This week, average egg prices were RMB 6.25/kg, down RMB 0.24/kg week-on-week, while layer chick prices were RMB 2.80/bird, down RMB 0.10/bird. Import restrictions due to avian flu have constrained breeding stock supply, supporting future price recovery. **Xiaoming Poultry (300967.SZ)** is worth attention.
**Agricultural Products** The November USDA report, though moderately bullish, failed to surprise markets, leading to a pullback in soybean meal prices. As of November 21, spot soybean meal was RMB 3,070/ton, down RMB 28/ton week-on-week, while futures (Jan 2026 contract) closed at RMB 3,012/ton, down RMB 80/ton. Short-term volatility is expected, with focus on U.S. soybean purchases and South American planting weather. Investors may consider soybean meal ETFs.
**Risk Factors**: Animal disease outbreaks, commodity price volatility, and natural disasters.
