Zhi Tong Cai Jing·2025-10-13 06:24Core Viewpoint - The current pig prices are weak both in reality and expectations, combined with policy drivers, indicating that the pig farming industry is likely to initiate capacity reduction [1][2]. Group 1: Industry Overview - The pig farming industry is experiencing a rapid shift towards losses, with average profits for large-scale farms dropping to -57 CNY per pig in August, down from 21 CNY in July, and for smallholders, the average profit fell to -109 CNY per pig from 6 CNY in July [2]. - The price of fat pigs is nearing 11 CNY per kilogram, while the price for 7 kg weaned piglets has dropped below 200 CNY per head, leading to a comprehensive loss across the industry [1][2]. - The number of breeding sows has slightly decreased, with a total of 40.38 million sows reported at the end of August, a reduction of 40,000 from the previous month, indicating a stabilization year-on-year [2]. Group 2: Price and Profit Trends - In August, the average price for market pigs fell to 14.23 CNY per kilogram, a decrease of 4.1% month-on-month and 31% year-on-year, while the average price for piglets was 33.63 CNY per kilogram, down 5.9% month-on-month and 24% year-on-year [2]. - The industry is expected to see further price declines, with fat pig and piglet prices having reached their lowest points of the year, suggesting a potential for continued market-driven capacity reduction [1]. Group 3: Investment Recommendations - The pig farming sector is viewed positively, with expectations that quality companies will continue to generate profits and increase dividend rates, driving long-term performance and valuation improvements [3]. - The policy and market dynamics are expected to facilitate capacity reduction in the pig farming industry, which will support long-term performance improvements in the sector [3]. - Relevant investment targets include Muyuan Foods (002714), Wens Foodstuff Group (300498), Shennong Group (605296), and Juxing Agriculture (603477) [3].