Hog rally faces sustainability concerns, late August seen as likely inflection point

As of August 8, 2026, the national average ex-farm price for DLY hogs stabilized around Yuan 10.51/kg, with price premiums for larger hogs becoming more pronounced in some regions, hat is, the standard-to-heavy hog spread has remained above Yuan 1.5/kg).

However, beneath the apparent strength, market participants remain generally cautious about both the quality and sustainability of this rebound. Given the current hog supply-demand dynamics, market sentiment, and medium-term production capacity trends, this price increase is still best characterized as a phased rebound within a broader bottoming process. A sustained uptrend will take time to materialize.

The current bullish factors closely resemble those seen in early July, including secondary fattening operators stepping in to intercept standard-sized hogs, some large-scale producers actively reducing volumes to support prices, and a temporary tightness in heavy hogs (over 140 kg) in the Southwest and South China regions, all of which have encouraged farmers to hold back supplies and delay sales.

However, despite the superficial similarities, the underlying support is considerably weaker than before.

Hog production cuts by large-scale enterprises are short-term strategic adjustments. Unlike the notable volume reductions seen in late June and early July from some leading producers, August's planned slaughter volumes have actually increased month-on-month. Daily supply pressure on these enterprises has not eased; current hog marketing volume reductions are largely tactical adjustments to align with secondary fattening sentiment. Once prices reach target levels, selling pressure is likely to be released quickly.

Secondary fattening enthusiasm has waned significantly. After several rounds of rapid in-and-out operations, secondary fattening capital has become more cautious. Barn vacancy rates are lower than before, and the willingness to re-enter the market on a large scale has diminished. This means the core driver of the previous price rally has materially weakened, and the price-boosting momentum will be difficult to replicate from early July.

While supply-side contraction and secondary fattening support provide near-term positive factors, persistently weak demand continues to weigh on hog prices. In detail, the current hot weather, combined with the summer school holiday period that has sharply reduced demand from institutional canteens, has kept slaughtering plants' operating rates low, with fresh pork sales sluggish. Slaughterhouses are resistant to accepting higher procurement prices, and weak demand-side support will clearly constrain any further price gains. As for sustainability, waning secondary fattening interest and narrowing production cuts suggest this rebound will not last as long as the one seen from late June to early July.

Based on the national average ex-farm price of Yuan 10.36/kg, the upside for this rebound is expected to be limited to just Yuan 0.4-0.5/kg. After that, prices are likely to fall back into a volatile and directionless pattern or even face the risk of reversing lower after an initial spike.

Despite limited near-term upside, positive signals for the market are emerging. An improvement is expected to become more apparent from late August to early September.

First, as temperatures cool, the meat consumption is expected to pick up seasonally. Second, the resumption of schools will drive centralized demand from campus canteens and group catering, providing tangible support for hog prices. Third, September's market hog supply will correspond to piglet production from March 2026, which saw a phased reduction in new piglet numbers, implying that commercial hog supply is expected to decline month-on-month on a theoretical basis. The combination of shrinking supply-side increments and expanding demand-side releases could create a temporary supply-demand imbalance, potentially triggering a more pronounced price recovery.

Yet, the outlook can best be summarized as "cautiously optimistic". Hog prices are unlikely to move in a straight upward line. Instead, they are more likely to trade in a range-bound pattern with gradually rising support levels. Prices are expected to inch their way toward the Yuan 12/kg level (the industry cost line) through repeated ups and downs. The year's price peak is most likely to occur during the traditional peak consumption season from the Winter Solstice to the pre-Chinese New Year period. At that time, supported by demand for cured meat and sausage preparation, combined with the gradual effects of capacity reductions, hog prices could temporarily approach Yuan 14/kg.

However, the realization of this peak will depend on several factors, including the extent of production capacity removal, the pace of demand recovery, the potential impact of disease outbreaks on phased supply, and the influence of secondary fattening operations on phased demand patterns.