Policy and Market Together Drive Sow Capacity to Accelerate Destocking in Q2 and Q3

Hot Topics

Selected Stocks Data Center Market Center Capital Flows Simulated Trading

Client

Senior Analyst Li Jing of Zhuochuang Information on the Pig Industry

【Introduction】In 2026, government policies will continue to strengthen, likely promoting the reduction of high-cost capacities. Coupled with 2026 being a year of continued capacity release, the livestock sector may face long-term pig price lows and rising feed costs in the first half of the year. Excess capacity in 2026 may significantly shrink profits, and both policies and market oversupply could accelerate sow capacity reduction. Based on cost and profit forecasts, it is expected that capacity reduction will accelerate from March to June and slow down from July to September.

Increased policy efforts may keep large enterprises reducing production at a steady pace

On March 3, 2026, the Ministry of Agriculture and Rural Affairs held a special meeting with leading pig companies, announcing plans to further reduce the national breeding sow inventory to around 36.5 million, down 7.8% from 39.61 million in December 2025. The meeting proposed establishing an annual production filing system and implementing detailed supervision of major breeding enterprises. Going forward, large pig companies will need to report annual slaughter plans and sow inventory adjustment schemes, transitioning from “soft guidance” to “hard constraints” on capacity control. This move aims to manage “key minority” players, stabilize national pork supply expectations, and prevent large fluctuations in capacity. The implementation of the filing system also indicates that industry regulation will become normalized and institutionalized, making enterprise expansion more transparent and controllable. Previously, the “Pig Capacity Regulation Implementation Plan (2024 Revision)” set the normal breeding sow inventory at around 39 million. The recent downward adjustment signals a pressing need to rebalance supply and demand in the pig industry.

Combining Zhuochuang’s data on the average annual breeding sow inventory, pig slaughter volume, and sow productivity from 2023 to 2026, the breeding sow stock base continues to decline, but with increased scale, sow productivity growth accelerates. The pigs slaughtered in 2026 correspond to breeding sows from March 2025 to February 2026. As of the latest data at the end of December, the average sow inventory during this period was 40.26 million, down 6.52% from 2023. However, with increased scale, sow productivity is expected to improve by 7.17% compared to 2023, with slaughter volume projected to reach 728 million, a 1.15% increase over 2025.

Overcapacity is causing upstream losses, with only piglet exports remaining marginally profitable

As pig capacity continues to be released, the breeding sector may gradually enter losses. Since late January, self-breeding and piglet fattening have turned unprofitable again, shifting from shallow to deep losses. By March, with pig prices falling below 10.5 yuan/kg, both breeding modes are losing over 200 yuan per head. In the coming months, slaughter volumes may gradually increase, but average slaughter weight remains above 125 kg, making it difficult to reverse the oversupply situation in the short term. Pig prices may stay in the 10.0-11.0 yuan/kg range, with ongoing losses driving the industry to accelerate capacity reduction from March to June.

According to Zhuochuang’s industry-wide cost estimates, the cost of weaned piglets in 2025 was about 276 yuan per head, driven by rising feed costs. In 2026, the cost is expected to be around 282.98 yuan per head. Most piglet capacity is concentrated among the top 30 breeding companies, which have some resilience compared to commercial pigs. However, due to persistently low pig prices and insufficient capacity reduction earlier, the cost threshold for piglet fattening in 2026 may be compressed from the end of 2025’s 300-450 yuan to 300-380 yuan per head. Export profits for piglets are expected to range from 10.04 to 85.59 yuan per head, but with sales declining compared to 2025, it may be difficult to offset earlier losses from self-breeding and piglet fattening, further accelerating sow herd reduction from March to June.

Feed costs enter a rising cycle, possibly accelerating capacity bottoming out

Affected by rising raw material prices, feed prices in 2026 are expected to fluctuate and trend upward, peaking at 2,607.32 yuan/ton in June and dropping to 2,376.32 yuan/ton in November. In the first half of the year, driven by higher prices for corn and soybean meal, feed costs may continue to rise, limiting the enthusiasm for secondary fattening and replenishment. The narrowing of the fat-to-meat price spread reduces the advantage of fat pigs, leading to cautious re-fattening. The lack of secondary fattening capacity to absorb slaughter demand, combined with no significant increase in slaughter demand, may keep pig prices low for an extended period, resulting in long-term losses for the industry. Currently, about 66.68% of breeding capacity operates below a cost line of 6.5 yuan/jin, with roughly 30% at higher costs. Continued rising feed costs may accelerate sow herd reduction in the first half of the year.

In summary, continued policy tightening may promote faster capacity reduction in the pig industry. High capacity levels maintained earlier could lead to prolonged pig price lows and losses, with only piglet prices remaining above 300 yuan per head due to pricing power. While piglet exports may remain marginally profitable, they are unlikely to offset losses from self-breeding and piglet fattening. Meanwhile, feed costs are expected to fluctuate upward in the first half, and these factors could accelerate capacity clearance. Zhuochuang forecasts that capacity reduction will accelerate from March to June and slow from July to September.