Pig cycle bottoms out: Industry shifts behind Muyuan and Wens’ 2.2 billion yuan losses

```

The pig cycle has once again become a focal topic in the capital market.

The two major breeding giants, Muyuan Foods and Wen's Co., both turned from profit to loss in the first quarter, with a combined loss exceeding 2.2 billion yuan.

"Vegetables are more expensive than meat" is often regarded as a signature signal of a cycle turning point, but this time, the usual experience is failing.

Throughout April, pig prices experienced violent fluctuations in the cycle of "bottoming—rebounding—falling again". The average price of 'foreign three-way' hogs hit a yearly low of 8.66 yuan/kg on April 14, and the pig-to-grain ratio dropped to 3.44:1.

Subsequently, supply-side volume reduction to support prices, pre-holiday stocking, and policy signals combined to drive a brief price rebound to near 10 yuan/kg; but due to insufficient demand support, prices fell again at the end of the month, and the entire industry remained deeply unprofitable.

Prices are hovering at historical lows, and policies have signaled "promoting reasonable price recovery", but the cycle’s “expected rebound” has yet to appear.

Price signals alone may no longer be enough to explain the present situation. The behavioral logic of leading enterprises during the loss phase is becoming a more crucial window for observing this round of the pig cycle.

Supply’s brakes fail

Looking from a cycle perspective, the current position of pig prices is indeed close to the peak of supply pressure in this round.

According to breeding rules, it takes about 10 months from breeding sows to market pigs, with about 4 months gestation and 6 months fattening.

October to November 2025, piglet inventory reaches a phased high, corresponding to the concentrated market period in March-April 2026. With subsequent supplemental stocking margins decreasing, supply pressure is expected to gradually ease.

However, as the degree of intensification increases, the traditional pig cycle operating mechanism is changing.

In 2025, the national pig slaughter volume is about 720 million head, with Muyuan Foods alone accounting for nearly 10%; listed companies and large breeding groups collectively control over 40% of breeding sows inventory, while small farmers’ share has dropped to less than 20%.

The previous cycle had significant elasticity, mainly because of the high proportion of small and medium breeders, who quickly exited once entering the loss zone, thus shrinking supply and causing rapid price rebound.

In contrast, large-scale enterprises do not exit quickly during periods of loss; instead, relying on financing ability and cost advantages, they maintain or even expand capacity.

In an oligopolistic competitive landscape, parties tend to wait and strategize rather than actively cut production, which significantly slows down the clearing process.

Changes in cost structures are also rewriting the cycle logic. Unlike the past reliance on experience and single cost items, the current leading companies’ cost reduction has become systematic.

Popularization of contract farming enables companies to control costs in a more "asset-light" way, and the introduction of hog futures hedges, to some extent, against uncertainties caused by price volatility.

On the other hand, systematic cost reduction is not just about expense cuts, but also continuous improvement of production efficiency, which objectively lifts effective supply.

Since 2021, industry PSY (pigs per sow per year) has increased from 18.6 to over 24, with leading enterprises reaching around 30. Actual supply per sow keeps expanding, and "invisible capacity" continuously offsets "visible capacity reduction".

Take Muyuan Foods as an example: in March, full costs dropped to 11.6 yuan/kg with further room for reduction anticipated. About one-third comes from falling feed prices, and the rest from internal efficiency gains, including breeding system optimization, improved capacity utilization, and refined expense controls.

On this basis, extending downstream in the industrial chain to smooth cycle volatility is gradually becoming an industry consensus.

Tianbang Foods plans to achieve slaughter capacity of 4 to 5 million head by 2026; Shennong Group’s slaughter capacity reached 2.5 million head, with related business revenue accounting for 26.38%; Xinwufeng and Tiankang Biotech also completed layouts of 2 to 3 million head.

Muyuan Foods is the most aggressive, slaughtering 28.663 million pigs in 2025, doubling year-on-year, with a capacity utilization rate of 98.8%, and for the first time achieving annual profitability.

In 2026, Muyuan plans to continue allocating resources to the slaughter business, with capital expenditure specially reserving 1 to 1.5 billion yuan to build new slaughter capacity, aiming for at least double-digit growth on the current basis.

For breeding enterprises, the slaughter business provides relatively stable gross profit sources at cycle lows, reduces risks from passive stock retention and secondary fattening; it also buffers against capacity expansion errors, absorbing upstream capacity pressure.

When the industry as a whole is actively smoothing cycle fluctuations through efficiency improvement, financial instruments and industrial chain extension, supply no longer shrinks rapidly, and hog prices enter a protracted bottom-grinding period.

The leading players can’t escape the test

On the surface, scale, efficiency improvement, and industrial chain extension do give leading enterprises stronger anti-volatility capability; but in actual operation, this "cycle resistance" is more about delaying clearing, rather than avoiding clearing altogether.

First, there is a marked mismatch in the transmission pace between price and cost.

Pig price drops occur almost instantly, while cost reduction depends on production efficiency improvements, organizational optimization, and cyclical factors, which have longer transmission cycles.

At current prices, industry full cost is around 12 yuan/kg, cash cost [is] about 10 yuan/kg, yet first quarter pig prices have generally fallen below these levels. This means not only is profit squeezed, but companies are entering negative cash flow territory.

Second, scale expansion means cost structure is more rigid.

During farmer-dominated stages, losses usually prompted withdrawal, and costs were cleared; but under the current model, barn depreciation, labor, environmental protection, and interest expenses have become fixed costs that do not shrink when pig prices fall.

The lower the price, the heavier these expenses feel, raising the break-even point, meaning companies continually consume profit and cash while maintaining production.

In this context, the true constraint on leading companies has shifted from the profit-and-loss statement to cash flow and balance sheet.

Taking Muyuan Foods as an example: the scale of fixed assets and debt accumulated during the last expansion cycle makes it more sensitive to cash flow at low-price stages, focusing on "deleveraging" as a core direction.

By the end of 2025, the company's asset-liability ratio dropped to 54.15%, total liabilities fell 17.1 billion yuan compared to the beginning of the year; by the end of Q1 2026, benefitting from H-share fundraising and other factors, asset-liability ratio further dropped to 50.73%, the lowest since mid-2021.

However, the “blood-making” ability of operations is also under pressure: net cash flow from operations turned from an inflow of 7.5 billion yuan to an outflow of 900 million yuan in Q1, showing significant contraction with falling pig prices.

To maintain operations and repay debt, the company had to rely on financing, with cash inflow from financing activities reaching 33.491 billion yuan, and debt repayments totaling 23.886 billion yuan.

This also means that even with some financial repair, cash flow pressure continues to be released. In such a structure, sensitivity to pig price fluctuations has not decreased, but actually increased.

Furthermore, in a scenario of faster information transmission and higher industry concentration, leading companies might even replenish stock ahead of the cycle clearing, "jump-starting" the next round of expansion. While this smooths short-term volatility, it also raises the supply floor and delays price reversal.

Thus, the clearing mechanism of this pig cycle is changing. The rapid clearing driven by price in the past is evolving into slow clearing triggered by cash flow and balance sheet constraints. Enterprises no longer exit due to short-term losses, but are forced to clear out in continual consumption, significantly lengthening the cycle.

Current divergences on the pig cycle judgment focus precisely on this.

For both market participants and traders, simply betting on cycle reversal is becoming riskier.

Risk warnings and disclaimerThe market is risky and investment should be prudent. This article does not constitute personal investment advice, nor does it consider any individual user’s specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their particular situation. Investment made based on this is at one’s own risk. ```