SDIC Securities: Sow degeneration exceeds expectations, pig cycle reversal may be expected

The Zhitong Finance App learned that SDIC Securities released a research report saying that at the end of 26Q2, 37.8 million sows were kept in the country, down 1.24 million from the previous month (-3.2%). The extent of elimination increased markedly, mainly due to market-based loss of production capacity driven by deep losses in pig farming in the second quarter. Listed pig companies' semi-annual performance forecasts generally showed a month-on-month increase in losses, and financial pressure on the industry became apparent. Pig prices are not strong during the peak season, but production capacity is expected to accelerate nonlinearly under continuous loss pressure. The bank expects 26Q3 or gradually entering the sow super hunt stage, and a reversal of the pig cycle (profit scale) can be expected.

SDIC Securities's main views are as follows:

26Q2 can breed sows to accelerate degeneration, dominated by market-based forces

According to data from the National Bureau of Statistics, at the end of the second quarter of 2026, 37.8 million sows were kept, down 1.24 million heads or 3.2% from 26Q1. The decline was significantly worse than 26Q1 (down 570,000 heads, 1.4% month-on-month). Looking back at the Ministry of Agriculture and Rural Affairs's policy guidance process on the pig breeding industry since this year, the bank indicated that the government only proposed a plan to reduce normal holdings from 39 million to 37.5 million heads in mid-May, and the schedule was only brought forward to the end of the 3rd quarter in mid-June. Currently, the bank believes that this is mainly the result of market-based capacity removal driven by continuous deep losses in the pig breeding industry in the second quarter. According to statistics from Boya Hexun, the average loss of self-growing pig heads in 26Q2 was about 357 yuan, and the average loss of fattening piglets purchased from outside was about 258 yuan.

The financial pressure on listed pig companies became apparent, and the industry as a whole was under pressure

Up to now, 17 listed companies operating pig breeding businesses have disclosed semi-annual performance forecasts, all showing a trend of increasing losses month-on-month in the 26Q2 quarter. According to the 26Q1 quarterly report data, the balance ratio of 6 listed pig companies is already above 70%, which is at a high level. The bank expects the balance ratio of some listed pig companies to have risen to a high level in 26Q2 or so. Considering that listed companies are usually entities with obvious financing advantages and low operating costs within the industry, their high balance ratio level may indicate that the overall financial pressure on the pig breeding industry is already high.

Pig prices are not strong during the peak season, and production capacity can be expected to continue to decline

June to August is the traditional peak season for pig prices, and historical pig prices have mostly risen. However, in June of this year, the average price of pigs in the country continued to fall below 10 yuan/kg. Although there was a rebound at the end of June, it only rose to 11.4 yuan/kg and fell again. The pig breeding side continued to lose cash flow. According to the bank's judgment, mass breeding pigs introduced in 2020 and 2021 continue to influence production efficiency indicators such as PSY for breeding sows in China; however, the breeding center for breeding sows in 2025 did not show a significant decline, or as a result, the pressure on pigs to be released in 2026 is high, making it difficult for pig prices to rise sharply now. The bank expects the reduction of pig production capacity to accelerate nonlinearly under continued loss pressure.

A reversal in the pig cycle can be expected. It is recommended to actively pay attention to breeding stocks

Referring to the normal number of breeding sows (37.5 million heads) set by the Ministry of Agriculture and Rural Affairs, combined with the bank's judgment that market-based forces and policy guidance or a two-pronged approach will drive nonlinear accelerated removal of pig production capacity, the bank expects the 26Q3 pig breeding industry to gradually enter the sow super hunt stage, driving a corresponding reversal of the pig cycle (profit caliber).

Risk Alerts

Agricultural product price performance fell short of expectations; major epidemics or natural disasters; business data fell short of expectations.