2025-12-08 00:41Summary of the Conference Call on the Hog Industry Industry Overview - The conference call focused on the hog industry in China, discussing market developments and price outlooks for hogs [2][3]. Key Points Capacity Trends - Sow Herd Capacity Cuts: The reproductive sow herd began to decline in July 2025, with a significant acceleration in cuts noted in October 2025 due to mounting losses. The sow inventory fell over 1% month-over-month to 39.9 million heads [3][4]. - Small-Scale Producers: Responsible for approximately 28% of hog output in 2025, small-scale producers are the main contributors to capacity reductions. Large-scale producers also began to cut capacity as losses increased [3]. Cost Trends - Production Costs: Costs have decreased in recent years, attributed to lower feed costs and improved efficiency. Top-tier companies operate at an average cost of Rmb 12–13/kg, while smaller producers operate at Rmb 13–14/kg. With hog prices dropping to Rmb 11.6/kg in October and November, the industry has entered a loss-making phase [4]. Price Outlook - Hog Prices: Experts predict that hog prices will remain under pressure until mid-2026 due to persistent oversupply. The Ministry of Agriculture's target of 39 million heads by year-end 2025 is deemed achievable. An inflection point for prices is expected in the second half of 2026, reflecting a typical 10-month lag between sow herd cuts and market supply contraction [5]. Industry Consolidation - Continued consolidation in the industry is anticipated, with small-scale producers exiting the market. Companies with cost advantages are expected to outperform during this period [5]. Key Beneficiaries - Muyuan Foods and Wens Foodstuff Group: Both companies are well-positioned to benefit from the upcoming hog price upcycle, with Muyuan being highlighted as the top pick due to its cost advantage [6]. Risks Muyuan Foods - Risks include limited production cost savings due to rising feed costs, slower-than-expected hog destocking, lower-than-expected sales volume growth, and delays in the development of its downstream slaughtering business [8]. Wens Foodstuff Group - Risks involve limited cost savings from swine diseases and rising feed costs, sluggish hog prices due to slow de-capacity, lower demand from restaurants, and lower-than-expected average selling price growth of yellow feather broilers [9]. Conclusion - The hog industry in China is facing significant challenges with capacity cuts and price pressures expected to continue until mid-2026. However, companies like Muyuan and Wens are positioned to capitalize on future price recoveries, albeit with notable risks that could impact their profitability.