Policy accumulation and capacity regulation work hand in hand; a reversal in valuation and profitability for the pig farming sector is anticipated.

How can capacity regulation promote supply and demand matching amid industry-wide losses in the AI sector?

According to Caixin, recently the National Development and Reform Commission and the Ministry of Agriculture and Rural Affairs organized a symposium with pig farming enterprises to assess the price situation and deploy regulation measures. The meeting pointed out that pig prices have entered a warning zone of excessive decline, and the central government has initiated the storage and reserve of frozen pork and guided local authorities to follow suit. Enterprises are required to orderly reduce breeding sow inventories and reasonably control slaughter volumes to promote supply and demand matching and ensure stable pig market operation.

Currently, the pig market is deeply out of balance with supply and demand and suffering industry-wide losses. As of March 21, the average price of external three-way crossbred pigs fell to 9.83 yuan/kg, a 20-year low; the average loss per pig in self-breeding and raising exceeds 280 yuan, and losses on purchased piglets exceed 300 yuan. The cost line (about 12 yuan/kg) has been fully breached.

On the supply side, the current breeding sow inventory is 39.61 million, higher than the normal level of 39 million; combined with the increase in PSY (pigs weaned per sow per year) to 26.34, slaughter volume has hit a record high. On the demand side, post-holiday consumption enters a seasonal lull, coupled with a decline in slaughtering activity, intensifying supply and demand conflicts.

Therefore, the pig industry urgently needs regulatory intervention. From the symposium’s deployment, policy measures directly target core issues:

1. Storage and reserves to stabilize the market. Recently, the central and local governments have collectively stored over 35,000 tons of frozen pork to ease short-term supply pressure and stabilize market expectations.
2. Capacity constraints. Clear directives to reduce breeding sows and control slaughter volumes to cut supply at the source.
3. Counter-cyclical regulation. Building a system of “early warning + storage + capacity control” to prevent sharp cyclical fluctuations.

However, short-term storage mainly serves as policy guidance, and it is difficult to change the oversupply situation, so pig prices will continue to bottom out. Nonetheless, policies will accelerate capacity reduction, ultimately restoring supply and demand balance.

Looking ahead, pig prices in the first half of this year may hover between 9.5-11 yuan/kg, with accelerated capacity reduction. After the third quarter, supply and demand are expected to further improve, with an estimated 6% reduction in supply in the second half of 2026. Pig prices may rebound to 12.8-13.3 yuan/kg, turning the industry from loss to profit. In the long term (Q4 2026 to 2027), once capacity reduction is complete, the industry may enter an upward cycle.

Regarding the A-share market, the policy bottom has already appeared, and sector valuations are low. Investors can focus on two main themes: first, leading companies with cost advantages and ample capital; second, breeding stocks with high dividends and low valuations. (Everbright Securities Micro News)