CITIC Securities: Losses in pig farming combined with intensified regulatory measures, leading to an expected acceleration in capacity reduction

China Securities Journal Report states that pig prices have fallen to a 10-year low. With ample supply, pig prices in the first half of 2026 are expected to fluctuate at low levels. Continuous deep losses combined with gradually deepening capacity regulation policies suggest that capacity reduction may accelerate, and the pig industry outlook for Q4 2026 and 2027 is promising. Currently, the sector’s valuation is low. We continue to recommend: 1) leading companies with cost advantages and dividend potential; 2) undervalued companies.

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Pig Farming | Losses and Deepening Regulations May Accelerate Capacity Reduction

Pig prices have fallen to a 10-year low. With ample supply, pig prices in the first half of 2026 are expected to fluctuate at low levels. Ongoing deep losses combined with gradually deepening capacity regulation policies suggest that capacity reduction may accelerate, and the pig industry outlook for Q4 2026 and 2027 is promising. Currently, the sector’s valuation is low. We continue to recommend: 1) leading companies with cost advantages and dividend potential; 2) undervalued companies.

▍ Rapid Decline in Pig Prices, Low-Level Fluctuations Expected in H1 2026

Affected by abundant supply and post-holiday demand decline, pig prices recently dropped rapidly to around 10 yuan/kg, approaching a 10-year low. According to Yongyi Consulting data, the industry’s average loss this week (March 6–12) is 250–300 yuan per head, with losses further widening. Currently, the entire industry has been losing for nearly six months. Looking ahead, the number of breeding sows, piglets, weight, and utilization rate of second-stage pens remain relatively high. We estimate that pig prices in March–April will still be in a deep loss zone, with low-level fluctuations expected in H1 2026.

▍ Losses and Deepening Capacity Regulation Policies May Accelerate Breeding Sow Culling

Since the beginning of this year, with the stabilization and rebound of bulk raw material prices, feed costs for pigs have risen under pressure. Coupled with continuous decline in pig prices, the industry is rapidly losing ground. Recently, prices for piglets and culled sows have fallen sharply, and market-driven capacity reduction may accelerate. Since March, capacity regulation meetings for pigs have continued, and the breeding sow inventory may be further reduced. Future capacity regulation remains a key focus, likely continuing to restrict industry capacity expansion. Under the dual influence of market-driven and policy-driven capacity reduction, the pig industry outlook for Q4 2026 and 2027 is optimistic.

▍ Risk Factors:

Policy implementation not meeting expectations; natural disasters; pig price fluctuations exceeding expectations; large-scale outbreaks of animal diseases; food safety issues.

▍ Investment Strategy:

Pig prices have fallen to a 10-year low. With ample supply, pig prices in H1 2026 are expected to fluctuate at low levels. Continuous deep losses combined with gradually deepening capacity regulation policies suggest that capacity reduction may accelerate, and the pig industry outlook for Q4 2026 and 2027 is promising. Currently, the sector’s valuation is low. We continue to recommend: 1) leading companies with cost advantages and dividend potential; 2) undervalued companies.

(Source: Yicai)