Hong Kong Stock Concept Tracking | The Major Turning Point of the Pig Cycle is Approaching Institutions are positioning themselves in the breeding sector (with concept stocks attached)

Research shows that this round of pig farming cycle has three unexpected factors: the capacity reduction of non-listed entities exceeded expectations, cash flow pressures for small and medium-sized farmers were more severe than anticipated, and the potential rise in future pork prices is likely to exceed expectations. Using the pig slaughter data from Henan as an observation sample, the local sow slaughter volume has significantly increased. Excluding the major listed companies, the scale of sow culling by non-listed entities continues to grow rapidly, with the sow slaughter volume in August alone showing a year-on-year increase of 80%, confirming that the industry capacity reduction in the third quarter is accelerating further. Through industry research across nine provinces, it is evident that small and medium-sized farms are facing real pressure from tightening financing channels, with banks raising credit thresholds and secondary market financing options shrinking. A large number of non-listed pig farming enterprises, even during a slight rebound in pig prices, are still continuously culling sows to replenish cash flow, with production reductions this year generally reaching 10-20%. The ongoing decline in piglet prices further intensifies the pressure for industry clearance, with the market predicting that the average price of live pigs for next year is likely to exceed 15 yuan per kilogram. Currently, the sector is in a double bottom phase for both stock prices and pig prices, and opportunities for left-side layouts are already emerging. The market views a piglet price drop to 100 yuan as an important signal. Currently, piglet prices are at 150 yuan, getting closer to the critical signal point. If the signal is triggered during the September replenishing off-season, it will represent an excellent window for sector layout. Guosen stated that considering the current prices of live pigs and piglets are still at the bottom of the cycle, high-cost production capacity will continue to face cash flow pressures. We expect the reproductive capacity to accelerate further in the next few months, with a potential cyclical reversal in pig prices expected by 2027. Leading pig enterprises are likely to see cash flow improve first and will transform into high-quality dividend targets. Related Hong Kong stocks in the farming sector: Muyuan Foods Group (02714), COFCO JOYCOME (01610), DEKON AGR (02419), WH GROUP (00288)