Report Title - 20250829 Zhonghui Futures Monthly Report on Live Pigs: Gradual Reduction of Reproductive Sows Benefits Far - Month Contracts, Focus on Peak Season Performance [1] Core View - In the short - term, there is supply pressure, but demand is expected to improve marginally in the next 1 - 2 months. The spot and near - month contracts face high weight reduction and production capacity realization pressure, but the price may strengthen during the peak season. The far - month contracts may rise as production capacity is gradually reduced, and investors can consider buying at low prices or using reverse spread strategies. The reference range for the main contract is [13700, 14500] [4][5] Summary by Directory 1. Spot Performance - In August, the national average live pig price decreased by 0.44 yuan to 13.82 yuan/kg. Prices in Henan, Jiangsu, Hunan, Chongqing, and Sichuan all declined [3][15] - The average spot price of culled sows in sample breeding enterprises decreased by 0.01 yuan to 9.86 yuan/kg, and the average price of 50kg binary sows decreased by 10.96 yuan to 1627.14 yuan/head. The market for culled sows continued to see a slight increase in volume [3][17] - The average出栏 price of 7kg piglets decreased by 80.47 yuan to 364.29 yuan/head, and the average出栏 price of 15kg piglets decreased by 123.96 yuan to 403.75 yuan/head [3][20] 2. Logic and Outlook - **Logic**: In August, the planned出栏 volume of Steel Union sample enterprises was 13.2257 million heads, a 5.26% increase. The proportion of large pigs出栏 remained high. From January to July 2025, the number of newborn piglets increased, indicating potential growth in出栏 volume in the second half of the year. High supply pressure is expected to continue until May 2026. The profit of self - breeding and self - raising continued to weaken, which is beneficial for the reduction of far - month production capacity. Demand is expected to improve marginally in the next 1 - 2 months [4] - **Outlook**: The spot and near - month contracts face high weight reduction and production capacity realization pressure, but the price may strengthen during the peak season. The far - month contracts may rise as production capacity is gradually reduced, and investors can consider buying at low prices or using reverse spread strategies [5] 3. Key Data - **Spot Price**: Various prices such as live pigs, sows, and piglets showed a downward trend in August [3][6] - **Short - term Supply**: The official inventory at the end of the second quarter was 424.47 million heads, an increase of 7.16 million heads. The planned出栏 volume of Steel Union sample enterprises in August increased. The average出栏 weight of live pigs increased, while the average weight after slaughter of white - striped pigs decreased. The standard - fat price difference expanded, and the proportion of different weight - range inventories changed [6][23][25] - **Medium - term Supply**: In July, the national piglet survival rate decreased slightly, the number of piglet births increased, and piglet feed sales decreased slightly. The market supply of live pigs is expected to increase in Q4 2025 [6][29] - **Long - term Supply**: In July, the increase in reproductive sows in large - scale breeding enterprises was basically zero, the number of culled reproductive sows increased, and the official number of reproductive sows decreased [6][31] - **Demand**: In August, terminal consumption showed obvious off - season characteristics at first and then recovered. The slaughtering rate, daily slaughter volume, and frozen product storage rate changed slightly, while the fresh - sales rate decreased slightly [6][33] - **Cost**: In August, the corn price decreased, and the soybean meal price increased. The cost of purchasing piglets and self - breeding and self - raising decreased [39][41] - **Profit**: In August, due to increased supply and limited demand recovery, the breeding profit decreased. The self - breeding and self - raising profit turned negative, and the loss of the mode of purchasing piglets increased [43] - **Price Ratio**: In late August, the national average pig - grain price ratio fell below 6:1, entering the third - level warning range. The state plans to conduct central frozen pork reserve purchases, which is beneficial for short - term market sentiment [45]

Report Industry Investment Rating - Not provided Core View - The overall supply of live pigs is abundant, with a 2.04% month-on-month increase in the feed sales volume of sample enterprises in July, which has been increasing for four consecutive months, and an over 5% month-on-month increase in the slaughter plan of large-scale farms in August. Meanwhile, the demand side is difficult to boost. Although the purchase of 10,000 tons of pork can temporarily stabilize market confidence, the real turning point still awaits the substantial progress of capacity reduction [2] Summary by Relevant Catalogs Supply and Demand Analysis - Supply: The feed sales volume of sample enterprises in July increased by 2.04% month-on-month and has been increasing for four consecutive months. The slaughter plan of large-scale farms in August increased by over 5% month-on-month, indicating abundant overall supply [2] - Demand: The demand side is difficult to boost, and the real turning point depends on the substantial progress of capacity reduction [2]

Summary of Conference Call on Swine Industry Industry Overview - The swine industry is currently facing challenges in supply-side regulation despite policies aimed at reducing production capacity. The effectiveness of existing policies is limited, as indicated by the insufficient reduction in breeding sow numbers, which has not met expectations for significant capacity reduction [1][2]. Core Insights and Arguments - Future swine prices are expected to remain stable, with reduced likelihood of significant fluctuations. The increase in the proportion of "smart capacity" is a key factor in the decline of industry volatility. Even during traditional peak seasons, price increases will be constrained [1][3]. - Investment should focus on leading swine farming companies with stable profitability and strong risk resistance, rather than small-scale operators reliant on price volatility [1][4][5]. - Companies with low-cost advantages, regardless of size, will be more valuable in the current market environment. Value stocks, particularly leading companies, are expected to show stronger investment potential due to enhanced internal and external value attributes [1][6][7]. Important but Overlooked Content - Leading swine companies have shown significant improvements in dividend capacity and balance sheet conditions, which enhance their attractiveness to investors. The increase in dividend ratios and amounts is a notable factor [1][7][8]. - The stability of swine prices has improved, allowing leading companies to be recognized as value stocks, with their disadvantages compared to other sectors, such as coal and banking, diminishing [1][7][8]. - The focus should be on companies with cost advantages and strong value attributes within the swine sector for future investment opportunities [1][9].

Core Insights - The swine market is undergoing significant changes, with government regulations aimed at controlling production capacity and market supply [2][4] - Despite a recovery in pig prices last year, underlying issues such as increased production capacity and supply pressures remain [2][4] - The expectation of a strong demand season for pork may not materialize due to oversupply and limited consumption growth [8][10] Supply and Demand Dynamics - As of the end of Q2, the national pig inventory reached 42.447 million heads, a year-on-year increase of 2.2%, indicating a potential rise in market supply in the second half of the year [4] - The increase in piglet numbers, up over 9% year-on-year, suggests that the volume of pigs available for market will also rise [4] - Despite recovery in sectors like tourism and dining, pork consumption remains weak, unable to absorb the increased supply [4] Price Trends and Market Sentiment - The pig price peaked at 21.15 yuan/kg in Q3 due to supply constraints and bullish market sentiment, but a correction was expected as the market could not sustain such high prices [7][8] - The market's previous optimism was driven by a significant drop in production capacity, but this has not translated into sustained price increases [5][8] - The expectation of a strong demand season in Q4 may be undermined by an anticipated surge in supply, leading to a "旺季不旺" (strong season not strong) scenario [8][10] Future Outlook - The process of reducing production capacity is gradual, and without the influence of secondary fattening, pig output is likely to increase [10] - While this year may not see a robust demand season, it is expected to set the stage for a more normalized market in the following year [10] - Cost support is anticipated to keep prices above breakeven levels, indicating a shift towards a micro-profit era for pig farming [10]

1. Report Industry Investment Rating - Not provided in the content 2. Core Viewpoints of the Report - **Fundamental Viewpoints**: Since mid - February 2025, the national live pig market has been in a stalemate between supply and demand, with prices adjusting narrowly within a range. After the Dragon Boat Festival, due to high - temperature weather, pork consumption entered a slack season, and pig enterprises faced great pressure, leading to a temporary decline in pig prices. The spot price briefly fell below 14 yuan/kg and then rebounded, indicating strong willingness for second - round fattening at low prices. In May 2025, the inventory of reproductive sows increased by 40,000 to 40.42 million, a month - on - month increase of 0.10% and a year - on - year increase of 1.15%, still 3.9% higher than the normal level. The piglet supply curve may intensify the expected supply pressure in the far - month. If pork consumption does not increase significantly, the upside of pig prices will be limited even in the peak season [7]. - **Strategy and Outlook**: There are still profit expectations for the live pig breeding industry in the second half of the year. However, the epidemic prevention pressure in the breeding end will increase in the third and fourth quarters. The inventory of reproductive sows may decline slightly but the overall reduction will be limited. In July, the supply of the live pig market may continue to increase, and the spot price may continue to run weakly within the range. In the long term, prices are expected to improve. The short - term market sentiment supports the strengthening of the futures market, and the resistance level of the main contract is 14,000. For options, out - of - the - money call options can be sold [9]. 3. Summary According to the Directory 3.1 Semi - annual Views and Strategies - **Fundamental Views**: The live pig market is in a supply - demand stalemate, with prices in a narrow - range adjustment. The inventory of reproductive sows is increasing, and the supply pressure in the future is expected to intensify. Most enterprises are in a state of small profits or cost - covering [7]. - **Strategy Views and Outlook**: The profit expectation for the second half of the year exists, but the epidemic prevention pressure increases. The inventory of reproductive sows may decline slightly. The supply in July may increase, and the spot price may run weakly. The futures market depends on market sentiment. The short - term resistance level of the main contract is 14,000, and out - of - the - money call options can be sold [9] 3.2 Futures and Spot Markets - **Futures and Spot Prices**: Since mid - February 2025, the live pig market has been in a stalemate, and prices are expected to continue to fluctuate within a range [15]. - **Futures Spreads**: Not elaborated in detail in the summary requirements. - **Standard and Fat Pig Prices**: Recently, the prices of standard and fat pigs have risen simultaneously. The supply of both has decreased, and the demand for second - round fattening has increased, with the price of standard pigs rising more than that of fat pigs, and the spread narrowing [31]. - **Piglet and Binary Sow Prices**: Since mid - May, piglet prices have been falling due to weak commodity pig market, past peak of piglet replenishment, and cautious attitude of retail farmers. In the second half of the year, the enthusiasm for piglet replenishment will weaken, and prices are expected to adjust weakly [35]. - **Culled Sow Prices**: The industry's willingness to actively eliminate production capacity is low. Culled sow prices were driven up by the increase in live pig prices this week and are expected to fluctuate and adjust [38] 3.3 Production Capacity - **Inventory of Reproductive Sows**: In May 2025, the inventory of reproductive sows increased to 40.42 million, a month - on - month increase of 0.10% and a year - on - year increase of 1.15%, still 3.9% higher than the normal level. Enterprises' willingness to actively reduce production capacity is weak, and the supply pressure in the future is expected to increase [42]. - **Elimination Volume of Reproductive Sows**: In May, the elimination volume of reproductive sows in large - scale farms decreased slightly month - on - month and year - on - year, while that in small and medium - sized farms decreased month - on - month but increased year - on - year. In June, due to high - temperature and high - humidity weather, the elimination volume may be stable but difficult to decrease [49] 3.4 Supply Side - **Inventory of Commercial Pigs**: In May, the inventory of commercial pigs in large - scale farms and small and medium - sized farms increased. In June, due to high - temperature weather and price decline, the inventory is expected to decrease [54]. - **Slaughter Volume of Commercial Pigs**: In May, the slaughter volume of commercial pigs in large - scale farms and small and medium - sized farms decreased month - on - month. In June, it is expected to increase due to factors such as farmers' willingness to sell [57]. - **Inventory Structure of Commercial Pigs**: In May 2025, the inventory proportion of 7 - 49 kg piglets decreased, mainly due to the suspension of piglet replenishment; the inventory of pigs over 140 kg decreased due to farmers' willingness to sell; the inventory of 90 - 140 kg pigs increased slightly due to the entry of second - round fattening pigs [60]. - **Average Slaughter Weight of Commercial Pigs**: This week, the average slaughter weight of live pigs decreased slightly due to farmers' pressure - barring and weight - increasing intentions [63] 3.5 Demand Side - **Live Pig Slaughter Volume**: Not elaborated in detail in the summary requirements. - **Cold Storage Rate of Slaughtering Enterprises**: Terminal consumption is weak. Slaughtering enterprises have a high fresh - sales rate and a low cold - storage rate, indicating cautious attitude towards inventory building. Domestic frozen products are in the de - stocking stage, and the impact on pig prices is limited [72]. - **Operating Rate and Fresh - sales Rate of Slaughtering Enterprises**: The operating rate decreased due to weak downstream demand. The demand for frozen products is weak, and there is still passive storage of fresh products, leading to a slight increase in the cold - storage rate [75] - **Substitute Prices**: Not elaborated in detail in the summary requirements. 3.6 Cost and Profit - **Profit of Live Pig Breeding and Slaughter**: The average weekly profit of self - breeding and self - raising mode is 75.35 yuan per head, a month - on - month increase of 14.24 yuan. The average weekly loss of the mode of purchasing piglets has expanded to 58.39 yuan per head, a month - on - month increase of 4.97 yuan [88]. - **Slaughter Gross Profit and Feed - to - Meat Ratio**: Not elaborated in detail in the summary requirements. - **Pig - to - Grain Ratio**: This week, the pig - to - grain ratio was 5.90, a month - on - month increase of 0.73%. Next week, it is expected to increase slightly and stabilize [95]

Core Insights - The core viewpoint of the articles indicates that the pig farming industry in China is experiencing a significant increase in supply, leading to a decline in pig prices, which have fallen below the breakeven point for many companies [1][3][7]. Supply and Price Dynamics - In May, the total output of listed pig companies increased by 30% year-on-year, resulting in a surplus supply amid weak consumer demand, which caused pig prices to remain low [1][3]. - As of June 17, the national pig price was reported at 14.24 yuan/kg, down 24.13% year-on-year and 2.8% month-on-month, indicating a continued struggle below the breakeven price of 14 yuan/kg [1][3]. - The increase in supply is attributed to the seasonal decline in pork consumption during the second quarter, compounded by a lack of holiday demand [3][6]. Company Performance - Major companies like Muyuan Foods and Wens Foodstuffs reported significant sales figures despite the price drop. Muyuan sold 777,000 pigs in May, a 9% increase from the previous year, while Wens sold 315,540 pigs, a 32.64% increase [4][5]. - Smaller companies have also seen rapid growth in output, with companies like Zhengbang Technology and Dongrui achieving year-on-year growth rates of 158% and 122%, respectively [5]. Future Supply Expectations - The stock of breeding sows, which is crucial for future pig supply, stood at 40.38 million heads as of the end of April, with expectations for a reduction of about 1 million heads to alleviate oversupply [2][7]. - Analysts suggest that reducing the breeding sow stock will impact pig supply in the next 10 months, potentially stabilizing prices if demand does not improve [7]. Cost Management and Profitability - Companies are focusing on cost management as a key to profitability in a low-price environment. Muyuan's breeding cost has decreased to approximately 12.2 yuan/kg, allowing for a profit margin of about 3.3 yuan/kg at current sales prices [8]. - Wens also reported a decrease in breeding costs, which is crucial for maintaining profitability amid falling prices [8]. Market Outlook - The overall market sentiment remains cautious, with expectations of limited price recovery due to persistent oversupply and weak demand. The focus is shifting towards cost control and operational efficiency as key competitive factors in the industry [7][8].

Investment Rating - The industry rating is "Overweight" [4] Core Insights - In January 2025, the total number of pigs slaughtered by listed companies was 9.2002 million, showing a year-on-year decrease of 0.76% and a month-on-month decrease of 7.89%. The decline in slaughter volume is attributed to the earlier timing of the Spring Festival, which led to a general decrease in operational rates in the pig industry [10][19] - The revenue for listed pig companies in January 2025 was 14.430 billion yuan, an increase of 23.72% year-on-year but a decrease of 14.10% month-on-month. The significant year-on-year revenue growth is due to higher slaughter prices compared to the previous year, while the month-on-month decline is due to a drop in slaughter prices [2][10] - The average selling price of pigs in January 2025 decreased by 1.93% month-on-month but increased by 14.72% year-on-year. The average selling prices for leading companies were 15.77 yuan/kg for Wens Foodstuffs and 15.41 yuan/kg for New Hope, with both showing year-on-year increases [2][19] Summary by Sections Section 1: Slaughter Volume - The slaughter volume for listed pig companies in January 2025 was 9.2002 million pigs, with a year-on-year decrease of 0.76% and a month-on-month decrease of 7.89%. Leading companies like Wens Foodstuffs and New Hope reported slaughter volumes of 2.8997 million and 1.4987 million respectively, with year-on-year changes of +9.95% and -13.11% [10][12] Section 2: Revenue and Pricing - The revenue for listed pig companies in January 2025 was 14.430 billion yuan, reflecting a year-on-year increase of 23.72% and a month-on-month decrease of 14.10%. The average selling price of pigs was 15.69 yuan/kg, with a year-on-year increase of 14.72% but a month-on-month decrease of 1.93% [2][10][19] Section 3: Average Weight - The average weight of pigs slaughtered in January 2025 was 102.61 kg, showing a month-on-month decrease of 3.27% but a year-on-year increase of 1.58%. Leading companies reported average weights of 116.97 kg for Wens Foodstuffs and 89.07 kg for New Hope, with both showing month-on-month declines [3][19] Section 4: Investment Recommendations - The report suggests seizing opportunities in the pig farming sector, focusing on companies with strong growth in slaughter volume and stable operations. Recommended companies include Muyuan Foods, Wens Foodstuffs, Tangrenshen, Huazhong Agricultural, and Juxing Agriculture [3][10]