CMSC: Overselling evident in March pig farming industry, pig prices may still have bottom support

CMSC released a research report stating that in March, the price difference between hogs and standard pigs narrowed seasonally, with significant overselling by sample companies. However, factors such as the rebound in frozen product inventory and secondary fattening provide strong support for hog prices, which are seasonally weakening but overall stronger than market expectations. At the same time, there has been a rebound in feed raw material prices, leading to a further narrowing of industry breeding profits. Looking ahead, the overselling of hogs in the industry in March will release some supply pressure, and there is still room for improvement in frozen product inventory and secondary fattening, indicating that there is still support for hog prices. Additionally, the slow growth in sow production capacity in 2024 and limited increase in hog supply in 2025, along with large cost variances in the industry, suggest that high-quality pig companies may be able to achieve substantial profits with low-cost advantages and continue to repair balance sheets. In terms of valuation, with reference to the number of hogs slaughtered in 2025, the average market value of major listed pig companies has fallen to historical lows, highlighting the value of high-quality pig company allocation. CMSC's main points are as follows: In March, the seasonal narrowing of the price difference between hogs and standard pigs was significant overselling in the industry. Hog prices are seasonally weakening but stronger overall than market expectations, and there is still room for improvement in frozen product inventory and secondary fattening, suggesting that there is still support for hog prices. The production capacity of listed pig companies is still in a period of release, with a record high monthly slaughter volume. Considering the limited increase in hog supply in 2025 and the large cost variances in the industry, high-quality pig companies may still achieve substantial profits and continue to repair balance sheets. Muyuan Foods and Wens Foodstuff Group are recommended as key stocks, and attention is advised to be given to Yunnan Shennong Agricultural Industry Group and Dongrui Food Group. Narrowing breeding profits, decrease in sow production capacity On the front of hog prices, the seasonal narrowing of the price difference between hogs and standard pigs has stimulated the industry to increase slaughtering activities, resulting in significant overselling in the industry. However, factors such as the rebound in frozen product inventory and secondary fattening provide strong support for hog prices, which are seasonally weakening but stronger overall than market expectations. In addition, the significant increase in feed raw material prices such as soybean meal and corn has led to a rebound in feed prices, resulting in a marginal narrowing of profits in hog farming and a marginally turning to loss in the profitability of purchasing piglets externally. In terms of production capacity, the industry is still marginally profitable, with group pig companies continuing to improve their capacity utilization rates to reduce breeding costs. The industry's expectations for future hog prices are cautious, and there is weak enthusiasm for replenishing piglets. According to data from the Ministry of Agriculture and Rural Affairs and the National Bureau of Statistics, China's sow production capacity decreased by 1.0% in the first quarter of March, and it is expected that the sow production capacity will continue to show a weak trend in the medium term. Significant year-on-year growth in slaughter volumes, continued increase in piglet sales In terms of slaughter volumes, in March 2025, a total of 17.69 million pigs were slaughtered by 15 listed pig companies, an increase of 40% year-on-year, reaching a record high single-month slaughter volume and still in a period of production capacity release. Eleven listed pig companies saw year-on-year growth in slaughter volumes, with Muyuan Foods, Jiangxi Zhengbang Technology, COFCO JOYCOME, Yunnan Shennong Agricultural Industry Group, and Dongrui Food Group all seeing increases of more than 50%, reaching 63%, 130%, 87%, 106%, and 91% respectively. In terms of the structure of slaughter volumes, in March 2025, a total of 2.62 million piglets were slaughtered by 7 listed pig companies, an increase of 196% year-on-year, mainly due to the peak season for piglet replenishment boosting demand, with piglet prices overall strong, prompting pig companies to increase piglet sales to lock in profits early. In terms of slaughter weights, in March 2025, affected by the narrowing of the price difference between hogs and standard pigs, the average slaughter weight of major listed pig companies increased slightly, with 9 listed pig companies having an average slaughter weight of 124kg, an increase of 2.2% year-on-year and 1.0% month-on-month. Among them, Wens Foodstuff Group had an average slaughter weight of 121kg for commercial pigs, down 1.9% month-on-month; Jiangxi Zhengbang Technology had an average slaughter weight of 132kg for commercial pigs, down 1.0% month-on-month. Risk warning: Unexpected price fluctuations in pig companies, outbreaks of large-scale uncontrolled diseases, major food safety incidents, and listed company sales/costs falling below expectations.