Hog prices still face supply pressure despite recent rally

After domestic hog prices ended a prolonged downtrend and staged a phased rebound by mid-April. The national average ex-farm price of DLY hogs rose from Yuan 8.66/kg on April 14 to Yuan 9.82/kg on April 28, an increase of Yuan 1.16/kg, or 13.39%. This rebound resulted from a combination of recovery from deep losses, slightly improving supply-demand dynamics, and policy guidance. However, against the backdrop of persistently high production capacity and limited demand support, the sustainability and upside potential of the rebound remain constrained in May.

During March and early April 2026, several large-scale pig farms accelerated destocking and lowered slaughter weights to rake in funds, resulting in concentrated supply and sustained price declines. By mid-April, prices dropped to multi-year lows, deviating significantly from production costs.

With losses reaching Yuan 300-400 per standard-sized hog, the breeding sector shifted from panic selling to price support and reluctance to sell. Small and medium-sized farmers opted to delay slaughter and adopt a wait-and-see approach, while some enterprises reduced sales volumes. As slaughtering pace normalized, the hog prices found a window for recovery, providing the fundamental impetus for the rebound.

While the prices continued to drop, the pork's price advantage improved significantly, fueling the demand growth. Household purchase frequency and per-purchase volume increased, while schools, canteens, and catering establishments expanded pork usage due to cost advantages, driving overall demand improvement year-on-year.

According to sampled slaughtering enterprises, average daily slaughter volume in April increased by 15.42% month-on-month and 20.22% year-on-year.

Equally important, the prolonged industry weakness attracted high-level policy attention. On April 17, the Ministry of Agriculture and Rural Affairs held a special symposium on the hog industry, explicitly reinforcing production capacity regulation and promoting a return to reasonable price ranges, sending positive signals to stabilize the market. Breeding-side bullish expectations intensified, while traders and end buyers moved away from wait-and-see attitudes. A positive short-term cycle formed, supporting the price rebound.

Looking ahead, however, the market is yet to fully resume healthy operations. The biggest constraint on the rebound is persistently high production capacity. As of March 2026, the national breeding sow inventory stood at 39.04 million head, down only 1.4% from the end of 2025, indicating slow capacity reduction.

Based on the 10-month production cycle for hogs, commercial hog slaughter volumes will remain elevated over the next six months, leaving the core issue of supply-demand imbalance unresolved. Additionally, industry breeding efficiency continues to improve, with PSY rising to over 24, meaning higher slaughter volumes from the same inventory level, further amplifying supply pressure.

Besides, the current market holds ample reserves of large-weight hogs. Hogs from earlier secondary fattening operations are being gradually slaughtered, with commonly higher carcass weights. As summer heat approaches, pork consumption preferences shift toward standard-weight hogs, while demand for large-weight hogs weakens, narrowing the price spread between standard and large hogs. Once hog prices rebound to a certain level, large-weight hogs will be released in concentrated volumes, causing a short-term supply surge that directly pressures upside prices or even triggers a pullback.

During this rebound, competition among scale enterprises, scattered farmers, breeders, and slaughterhouses has intensified, causing the rebound to appear "short, fast, and sharp," which may overstretch the future market. This price increase is based not on a fundamental improvement in supply and demand but on sentiment and pace adjustments. At higher prices, market supply quickly increases, rendering the rebound short-lived.

In summary, the phased rebound in hog prices is driven by three factors, including price support after deep losses, short-term demand recovery, and improving policy sentiment. Essentially, it is a technical recovery from oversold conditions driven by a temporary supply-demand mismatch, rather than a reversal of the underlying supply-demand pattern.

That is, high production capacity, an abundance of large-weight hogs, and intensifying industry competition all point to a rebound with limited upside and weak sustainability, making a sustained uptrend unlikely.

In the short term, the hog prices may maintain a high-level range with limited upside supported by farmers holding price firm and demand staying moderate. In the medium term, prices will likely face downward pressure following a demand decline after Labor Day holiday and concentrated large-weight hog slaughtering.

In the long term, only sustained and effective reduction of breeding sow inventory to a reasonable range, coupled with a tangible recovery in consumption, can bring about a true reversal in the hog market.