China hog market to stall in bottom-finding phase until capacity clears

Entering June, China's domestic hog market remains stuck in a low-level consolidation phase with sustained losses. As of June 15, the average price of DLY hogs dropped to RMB 9.46/kg, keeping the industry deep in the red. While pre-Dragon Boat Festival stocking offered brief support, the overall weakness has not fundamentally reversed. The recent stabilization appears to reflect improved sentiment and short-term-supply-demand adjustments, rather than a lasting cyclical recovery.

Looking at the full-year trajectory, hog prices in 2026 have exhibited a persistent downward trend with low-level fluctuations since the beginning of the year. Prices started the year at around Yuan 12.5/kg, then fluctuated lower throughout the period, reaching a new low for the corresponding period in recent years by mid-April.

Compared with the same period in 2021-2025, the hog price performance has been significantly weaker in 2026, with notable year-on-year declines, ranking among the most sluggish first-half performances in recent years. After entering May, prices stabilized and rebounded, with the average DLY hog price rising from its mid-April low to Yuan 9.55/kg by mid-May, after which it fluctuated within a relatively narrow range with overall weak rebound momentum.

This price recovery was primarily driven by improved market sentiment and short-term support from piglet circulation and secondary fattening activities, rather than by genuine strengthening in demand, casting doubt on the sustainability of the upside movement.

The current market remains challenged by triple pressure of high inventories, high carcass weights, and high frozen product stocks. Operational losses persist across the farming sector, cash flow pressures continue to mount, and the supply-demand fundamentals show no significant improvement. Against this backdrop, the recent modest price recovery can only be viewed as short-term market volatility, insufficient to support a cyclical trend reversal.

Accelerating the elimination of inefficient capacity remains the core theme for industry development in the period ahead.

In terms of capacity reduction, structural differentiation has become increasingly pronounced. According to data from Mysteel's 208 sampled enterprises, China's breeding sow inventory entered a sustained contraction channel in May 2026, but the pace of reduction exhibits notable asymmetric characteristics.

As of May, among 123 large-scale farms, breeding sow inventories stood at 4.8933 million head as of June 5, 2026, down 1.33% month-on-month and 3.74% year-on-year; among 85 small and medium-sized sample farms, breeding sow inventories stood at 162,200 head, down 1.13% month-on-month, with a year-on-year decline of 6.77%, a reduction rate nearly twice that of large-scale farms. 

These figures accurately reflect the current industry pattern of "rapid capacity exit at the tail end, slow capacity reduction at the leading end". At the regional level, apart from the Northwest region where breeding sow inventories remained stable, all other major regions showed modest reductions.

The widening decline in breeding sow inventories in May is driven by three factors. First, despite a slight uptick in hog prices from earlier lows, the whole industry remains in loss-making territory, with worsening cash flow pressures forcing some players to proactively reduce capacity. Second, capacity reduction policies are being progressively implemented, prompting some large-scale farms to accelerate the culling of low-efficiency sows. Third, mid-sized farms have increased their focus on cost reduction and efficiency improvement, accelerating the pace of herd replacement and capacity optimization.

However, the structural contradiction in capacity reduction remains prominent. The small and medium-sized farmers, with weaker risk tolerance and limited cash flow buffers, are actively culling low-yield sows and compressing inventory, with some players already exiting the market entirely due to broken capital chains. Leading large-scale enterprises, by contrast, are leveraging their advantages in capital, cost control, and management to stabilize core capacity, with some even engaging in counter-cyclical deployment, which objectively slows the overall industry reduction pace and makes it difficult to rapidly reverse the ample supply pattern.

The piglet market provides another dimension confirming the industry's cautious expectations for the longer-term outlook. As of June 15, national 7kg piglet prices continued their downward trend, with most major production areas seeing weekly declines of Yuan 20-60 per head. Nationwide mainstream quotes were concentrated in the Yuan 150-190/head range, with actual transaction prices among small-size farmers generally below mainstream quotes.

The persistent weakness of piglet prices and the absence of clear rebound signals reflect the generally subdued replenishment enthusiasm among small and medium-sized farmers. On one hand, sustained losses have intensified cash flow pressures on small-size farmers, leaving insufficient surplus funds for forward replenishment; on the other hand, the market remains uncertain about the magnitude and pace of forward hog price rebounds, discouraging farmers from venturing into capacity expansion. Meanwhile, replacement gilt transactions also remain sluggish, with no notable changes in market demand, indicating that the localized contraction in capacity has yet to translate into confidence restoration on the replenishment side.

Overall, the hog market remains in a bottom-finding phase and the low-level consolidation of hog prices likely to persist.