Farms will incur losses of RMB -179 per head from fattening hogs, according to a November 11 report from China's National Development and Reform Commission. The report said farms are reluctant to stock up on pigs or engage in "second fattening." Similarly, a weekly report from Shandong Province estimated an average loss of RMB -80 from farrow-to-finish and RMB -170 from fattening purchased piglets to market weight. The Shandong report attributed losses to low prices under pressure from strong supplies and weak demand.
A year ago hog prices were high and feed prices were dropping. In October 2024, the NDRC estimated profits of RMB 322 from fattening hogs. Since then, hog prices have dropped dramatically, and profits have turned to losses.
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| Data from China Ministry of Agriculture and Rural Affairs. |
Big companies sold large volumes of hogs during October, adding downward pressure on prices. Sales by the top 3 companies during October were their largest of the year. Muyuan sold 7.076 million head during October, up 13.17% from a year ago, Wens Foodstuff sold 456,900, up 45.7% yoy, and New Hope sold 344,400, up 34.4% yoy. A second tier of companies increased their October sales by 60% from a year ago. Hog prices reported by Muyuan and Wens were down by about 33% from a year earlier.
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| Compiled from monthly reports. |
Chinese hog farming companies are in a game of "chicken" to see who can last out the down cycle. Several elite companies claim to have cut their production costs to RMB 11.5 per kg and are close to breakeven at the recent low level of prices. Other companies and small farms with production costs of RMB 13.5 or higher are incurring heavy losses.
An analysis posted on Chinese livestock industry news sites last week suggested that Chinese companies have canceled dozens of giant pig farming projects over the past year. Most announcements cite financial losses for the cancellations and said they plan to shift funds to shore up working capital. The news appears to signal a reversal of last year's breakneck expansion plans, but it could be meant to demonstrate fealty to government officials who have been nagging them to cut back production capacity over the last 6 months.
A year ago, Muyuan Foods announced plans to invest RMB 576.8 million in 7 huge swine farming projects with combined capacity of over 1.3 million head. The company has now proposed terminating fund-raising for the projects and instead says it will devote funds to working capital and daily operations.
Wens Foodstuff halted construction of two giant pig breeding projects in Hubei Province that had been funded as part of RMB 9.3 billion bond issuance in 2021. Fourteen other projects are also being suspended. Wens will use funds for biosecurity upgrades and other projects.
This month, pig company Luoniushan told investors the company will terminate its collaboration with a pig farm in Guizhou Province to stem losses incurred by the farm and protect the company's stockholders from the industry's deteriorating outlook. On the same day, Bunge Technology announced it was canceling acquisition of 6 pig farming companies in several Chinese provinces, according to the analysis. The acquisitions had been part of a plan to create a vertically integrated industry chain extending operations from pig feed to livestock farming.
In September, Tianbang announced it had cut the number of its sow farms in Shandong Province and carried out renovations in order to improve performance in swine breeding and bring down operation costs.
In July, Shennong Group canceled a plan to issue RMB 290 million in in stock to fund a giant 240,000-head piglet production base. The decision was prompted by changes in the swine market and capital market situation.
In March, Tiankang Biological terminated plans for a farming project in Gansu Province that would have produced 300,000 piglets and 200,000 finished hogs annually. Funds meant for the project are being used to supplement working capital and fund core business operations. Tiankang is focused on improving efficiency through upgrading existing facilities, optimizing breeding pig quality, and adopting a light asset expansion strategy.
Last December Dongrui Co. announced termination of a 200,000-head multi-story pig farming project in Huizhou, Guangdong Province. Funds will be shifted to working capital.
A year ago, Tangrenshen announced termination of a pig farming poverty alleviation project in Guangxi Province it had announced after its IPO several years earlier. A farming project in Hainan was canceled because the land was designated as "permanent basic farmland" which banned use for livestock farming, and another project was canceled because it was not likely to achieve the expected economic and social returns.
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