CITIC Securities: Losses in pig farming combined with intensified regulatory measures, leading to an expected acceleration in capacity reduction

CITIC Securities Research Report indicates that pig prices have fallen to a 10-year low. With ample supply, pig prices in the first half of 2026 are expected to fluctuate at low levels. Continued deep losses combined with gradually intensifying capacity regulation policies suggest that capacity reduction may accelerate, and the pig industry outlook for Q4 2026 and 2027 is promising. Currently, the sector’s valuation is low, and we continue to recommend: 1) leading companies with cost advantages and dividend potential; 2) undervalued companies.

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Pig Farming | Losses Deepening and Capacity Regulation Intensifying, Capacity Reduction Expected to Accelerate

Pig prices have fallen to a 10-year low. With ample supply, pig prices in the first half of 2026 are expected to remain low. Continued deep losses coupled with gradually intensifying capacity regulation policies suggest that capacity reduction may accelerate, and the pig industry outlook for Q4 2026 and 2027 is promising. The sector’s valuation is currently low, and we continue to recommend: 1) leading companies with cost advantages and dividend potential; 2) undervalued companies.

▍ Pig Prices Rapidly Declining, Maintaining Low-Level Fluctuations in H1 2026

Affected by abundant supply and post-holiday demand decline, pig prices recently dropped rapidly to around 10 yuan/kg, approaching a 10-year low. According to Yongyi Consulting data, the industry experienced an average loss of 250-300 yuan per head from March 6 to March 12, with losses further widening. Currently, the entire industry has been losing for nearly six months. Looking ahead, the number of breeding sows, piglets, weights, and utilization rates of second-stage pens remain relatively high. We estimate that pig prices will still be in a deep loss phase in March-April, with low-level fluctuations expected in H1 2026.

▍ Losses and Deepening Capacity Regulation Policies May Accelerate Capacity Reduction

Since the beginning of the year, with the stabilization and rebound of bulk raw material prices, feed costs for pigs have risen under pressure. Coupled with continuous decline in pig prices, the industry is rapidly losing ground. Recently, prices for piglets and cull sows have fallen sharply, and market-driven capacity reduction may accelerate. Since March, capacity regulation meetings for pigs have continued, with further reductions in the breeding sow inventory likely. Future capacity regulation remains a key focus, potentially further constraining industry capacity expansion. Under the dual influence of market-driven and policy-driven capacity reduction, the pig industry outlook for Q4 2026 and 2027 remains optimistic.

▍ Risk Factors:

Policy implementation not meeting expectations; natural disasters; pig price fluctuations exceeding expectations; large-scale outbreaks of animal diseases; food safety issues.

▍ Investment Strategy:

Pig prices have fallen to a 10-year low. With ample supply, pig prices in H1 2026 are expected to fluctuate at low levels. Continued deep losses combined with gradually intensifying capacity regulation policies suggest that capacity reduction may accelerate, and the pig industry outlook for Q4 2026 and 2027 is promising. Currently, the sector’s valuation is low, and we continue to recommend: 1) leading companies with cost advantages and dividend potential; 2) undervalued companies.

(Source: Yicai)