Unclear Prospects for Pork Capacity Reduction and Price Rebound

Hog prices have been below break-even for most of this year, and China's hog industry needs to shed production capacity to match supply with shrinking demand. Hog prices slid from over RMB20 per kg in August 2024 to RMB10 from April-June 2026. Production capacity appears to have started shrinking this year, but the path to a smaller hog industry in China is still unclear. There was a modest rebound in hog prices during the summer months, but it appears to be a seasonal blip. Market commentaries are not optimistic about a sustained recovery in prices.

A counter in a Suzhou supermarket selling cheap pork from national reserves

For the last 2 years Chinese government officials have been calling on giant hog producing companies to cut back on production. Investor reports for H1 2026 released in recent weeks appear to show that 8 big farming companies reducing their sow inventories by a combined 723,800 head. That amounts to 28% of the year-over-year reduction in national sow numbers of 2.63 million sows reported by the National Bureau of Statistics for the end of June. The reductions were led by Muyuan Foods which claims to have reduced its sow inventory by 318,000 head and suspended construction of 124 pig farms. Wens Foods cut its sow herd by 200,000, Twins cut 100,000 sows, and New Hope cut 20,000.

China National Bureau of Statistics.

Big hog producers say their cutback on sows and cancellation of new projects is an embrace of government plans to cut production capacity to the agriculture ministry's new target of 37.5 million sows. Financial news outlet Cailianshe cited Tiankang Bio's cancellation of a 300,000-piglet breeding base project as an example of companies shifting their focus from expansion to profitability.

An article this week suggests that farms are still liquidating sows. This assessment is based on a decline in price for culled sows to 6.4-to-7.2 yuan per kg during August--well below the price of fattened hogs. A declining ratio of prices for culled sows to prices of fattened hogs was cited as evidence that culled sows are being dumped on the market in large numbers. The analyst noted that declining prices for spent sows also reflect more cautious buying by slaughterhouses in a glutted market.

Mounting financial pressure is the most likely factor driving companies to offload their sows. This blog previously reported on H1 2026 losses reported by hog companies. An article released this week called rising debts among hog companies "a huge test of survival" in Q3 2026, as growth in debt outpaced growth in assets for 25 listed hog companies in China according to the article's compilation of financial reports. The debt-asset ratio climbed from 61.87% to 64.57%, and 5 companies had debt-asset ratios exceeding 80%. The article pointed to 15 companies that had net outflows of cash during H1 206 and pointed out several that appeared to have cash reserves insufficient to cover short-term debts. The commentary pointed out that income from poultry, feed, or animal health businesses cushioned losses on hogs for diversified companies. 

Some commentators are skeptical that the sow cutbacks will constrain pork supplies. The July commentary on pork by Beijing's Xinfadi wholesale market said there is still an ample supply of hogs and warned that a rebound in prices could trigger a new expansion that would perpetuate low hog prices. Commentators note that rising productivity of sows blunts the impact of shrinking sow inventories on production capacity. Producers tend to remove their least-productive sows and facilities during downturns and add more productive ones during a recovery. 

Other commentaries say companies may continue to release hogs to the market this year because they are under pressure to hit production targets.

Variation of finished hog weights also influences the pork supply. So-called "second-fattening" of hogs near market weights became a common practice during the recovery from the African swine fever epidemic in 2021-22, especially among medium- and small-scale farmers. Raising pigs to heavy weights of 150 kg or more became another factor influencing the pork supply. One of Muyuan's pledges to government officials last year was that it would stop selling hogs to farmers for second fattening. 

One commentary warns that market supplies in Fall months could be impacted by a cohort of hogs purchased in June for second fattening and held off the market waiting for better prices. One article in late August reported a shortage of heavy hogs in southwestern provinces like Chongqing and Yunnan that resulted in a premium of more than RMB1/kg for heavy hogs in those regions. The shortage of large hogs developed due to an earlier outbreak of ASF and high temperatures during the Summer that constrained weight gain. 

The Summer rebound in hog prices also coincided with extensive flooding in China which destroyed an unknown number of pig farms and increased disease risk. Flooding is not cited in any market commentaries, but impacts of natural disasters are never discussed in Chinese news media. 

Reopening of schools and a seasonal rebound in consumption with cooling temperatures in September is seen as bullish for pork prices, but consumer demand is still described as lackluster. Supply will also improve as relief from hot weather is expected to add to the number of large hogs. Moreover, slaughterhouses have been holding back carcasses and building frozen inventory to preserve their margins, and improved prices could prompt them to release those inventories to the market. The Xinfadi market's wholesale price history shows prices declined during the peak-consumption Fall months during 2024 and 2025. 

Data compiled from www.xinfadi.com.cn

Some commentators have speculated that Chinese meat consumption is diversifying away from pork to poultry, beef, and seafood. With population declining, income stagnant, and overall consumption sluggish, this suggests a downsizing of the pork industry. It remains unclear how the sector may shed capacity to accommodate lower consumption and thus restore equilibrium. It is more common to cite plans by companies like Muyuan, Wens, and New Hope to produce premium-priced products and to expand overseas investments.

A few hog companies appear to be in danger of bankruptcy, but bankruptcy does not necessarily lead to a reduction in capacity. Bankrupt firms are sometimes acquired by competitors (often at the behest of provincial bureaucrats). The weak financial position of publicly listed hog companies could prevent such acquisitions during the current downturn, but officials could persuade a high-flying company in an unrelated industry--such as electric vehicles or solar panels--to take over a failing hog company, thus perpetuating excess hog production capacity. 

Millions of small and medium hog farms have disappeared from the industry since the ASF epidemic, and this segment seems to be the most likely to cut back on production capacity. However, these farms have also been surprisingly resilient, with many switching to second fattening or other niches. A surge in hog prices would attract a resurgence of small and medium hog producers, but officials are counting on tightened regulatory requirements to forestall a revival of small- and medium-scale pig farms.