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

Reprinted from: Xinhua Finance

In 2026, government policies will continue to intensify, likely promoting the process of reducing high-cost capacity. Coupled with 2026 being a year of ongoing capacity release, the livestock sector may face losses from long-term pig price lows and rising feed costs in the first half of the year. Policy measures and market oversupply may jointly accelerate the culling of sow capacity. Based on cost and profit forecasts, it is expected that from March to June, there will be an accelerated reduction in domestic sow capacity, followed by a slower decline from July to September.

Increased policy support may keep large enterprises on a steady reduction path

On March 3, 2026, the Ministry of Agriculture and Rural Affairs held a special meeting with leading pig breeding companies. Reports indicate that the meeting called for further reduction of the national breeding sow inventory to around 36.5 million, down from 39.61 million in December 2025—a decrease of 3.1 million or 7.8%. The meeting proposed establishing an annual production filing system and implementing refined supervision of top 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 approach aims to manage “key minority” enterprises, stabilize national pork supply expectations, and prevent large fluctuations in capacity. The implementation of the filing system also indicates that industry regulation is entering a normalized and institutionalized phase, making enterprise expansion more transparent and controllable. Previously, the “Implementation Plan for Swine Capacity Regulation (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 data from Zhuochuang Information on the average annual breeding sow inventory, pig slaughter volume, and sow productivity from 2023 to 2026, the baseline sow inventory has been declining steadily. However, as scale increases, sow productivity growth accelerates. The pigs slaughtered in 2026 correspond to breeding sow inventories from March 2025 to February 2026. As of the latest data at the end of December, the average sow inventory during this period was 40.22 million, down 6.52% from 2023. Based on scale data, sow productivity is expected to increase by 7.17% compared to 2023, with slaughter volume projected to reach 728 million, a 1.15% increase over 2025.

Overcapacity has led to widespread upstream losses, with only piglet exports remaining marginally profitable

Since late January, self-breeding and piglet fattening have returned to losses, gradually deepening from shallow to significant deficits. 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 carcass weights remain above 125 kg, making it difficult to reverse the oversupply situation in the short term. Pig prices are likely to remain at 10.0-11.0 yuan/kg, continuing to test bottom levels, with ongoing losses prompting producers to accelerate capacity reduction from March to June.

Additionally, Zhuochuang’s industry-wide cost estimates for weaned piglets show that in 2025, costs were around 276 yuan per head, driven by rising feed prices. In 2026, costs are expected to reach approximately 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, long-term low pig prices and insufficient capacity reduction earlier have led to a projected cost line for piglet fattening in 2026 of 300-380 yuan per head, down from 2025’s 300-450 yuan. Export profits for piglets are estimated between 10.04 and 85.59 yuan per head, but with sales volume declining compared to 2025, it may be difficult to offset earlier losses from self-breeding and piglet fattening, further accelerating capacity reduction from March to June.

Rising feed costs may accelerate capacity bottoming and implementation

Due to rising raw material prices, feed costs in 2026 are expected to fluctuate and trend upward initially, peaking in June at 2,607.32 yuan/ton and bottoming in November at 2,376.32 yuan/ton. In the first half of the year, feed costs are likely to continue rising, which could dampen enthusiasm for secondary fattening and restocking. The narrowing of the fattening price spread also weakens the advantage of pig prices, leading to cautious re-fattening. The lack of secondary fattening and restocking digestion in the breeding sector, combined with no significant increase in slaughter demand, may keep pig prices at low levels for an extended period, resulting in long-term losses. Currently, about 66.68% of breeding capacity operates below a cost line of 6.5 yuan per jin, with roughly 30% at relatively higher costs. Continued increases in feed costs may further accelerate sow culling in the first half of the year.

In summary, continued policy tightening is likely to promote accelerated capacity reduction in the pig industry. High capacity levels earlier may lead to prolonged losses at low pig prices, with only piglet prices remaining above 300 yuan per head due to relatively concentrated pricing power. While piglet exports may remain marginally profitable, they are unlikely to offset earlier losses from self-breeding and piglet fattening. Meanwhile, feed costs are expected to fluctuate upward in the first half of the year. These factors may collectively speed up capacity clearance. Zhuochuang forecasts that the industry will accelerate capacity reduction from March to June, with a slower pace from July to September.

(Author: Li Jing, Zhuochuang Industry Analyst)

Editor: Wu Zhengsi