Pig Prices Fall, Pig Stocks Rise: What's Behind the Divergence?

April 8, 2026, 4:59 PM

LYDD-Global

Guide

Highlights at a glance

China's hog market presents a paradox: hog futures plunge to historic lows while A-share pig stocks rally. This divergence stems from differing time horizons—futures reflect current oversupply, while stocks price in an anticipated cycle turnaround. With spot prices at 8-year lows, industry losses pressure small farmers, potentially accelerating breeding herd reductions. However, analysts note capacity clearance remains gradual, as sustained losses are needed to trigger large-scale cuts. Tightening national breeding sow targets and policy shifts add complexity, though improved sow efficiency may delay the cycle's turning point. The sector's low valuations attract defensive capital rotation, further widening the futures-stocks gap.

Recently, China's hog market has witnessed a noteworthy phenomenon: while hog futures have been falling and spot prices have hit historic lows, A-share pig-related stocks are bucking the trend and strengthening.

On April 7th, the main hog futures contract closed at 9,210 yuan per ton, a new low since its listing. Data from the Ministry of Agriculture and Rural Affairs shows that in the fourth week of March, the national average hog price fell to 10.68 yuan/kg, with some regions dropping below 10 yuan/kg, marking an 8-year low. Meanwhile, the A-share pork sector saw a significant rally, with hog farming stocks like Huatong Co., Ltd. and Giant Agro-Pastoral Co., Ltd. showing strong performance.

📊 Why the "Futures-Stocks Divergence"?

According to interviews, the primary reason for this "futures-stocks divergence" is that the futures and stock markets operate on different time cycles and trading logics.

"Futures price the present; stocks price the future."

Deng Haoran, a researcher on the livestock sector at CITIC Jianuo Futures, explains that the decline in hog futures, especially near-month contracts, reflects a pessimistic market outlook on the short-term supply-demand landscape. Futures prices have fully priced in the current pressure of oversupply. Conversely, the rise in A-share pig stocks is driven by capital betting on a cyclical turnaround. The lower the hog prices and the deeper the industry's losses, the greater the cash flow pressure on small and medium-sized farmers, which is expected to accelerate the reduction of breeding sows and could bring forward the turning point for supply contraction.

Zhu Di, a researcher at GF Futures' agricultural products division, adds that current hog spot prices have been in a bottoming phase for a long time, sufficiently confirming the "pig cycle." Regardless of how long this bottom lasts, the industry is bound to see capacity clearing, making its future prospects positive. Therefore, from a stock investment perspective, the bottom of the cycle is a more suitable time for value investing.

Furthermore, Deng Haoran notes that against a backdrop of heightened volatility in other A-share sectors, the pig farming sector's valuation is at a historical low, offering a strong margin of safety and defensive attributes. The rotation of capital from high-valuation sectors to low-valuation ones has further propelled the (contrarian) rise of pig stocks, ultimately creating the "futures-stocks divergence".

🔄 The Pig Cycle and Capacity Reduction

Since the start of the sixth pig cycle in 2022, hog prices have experienced a prolonged "bottoming period." Zhang Xiaojun, an agricultural products analyst at Green Dahua Futures, believes the turning point of this cycle depends on the actual process of capacity reduction among farmers.

"Currently, the duration and depth of losses are not sufficient to drive the farming sector into a phase of substantial capacity reduction," Zhang says. She points out that the ratio of culled sows to hogs remains above 0.8; most sows at slaughterhouses are first or second-litter sows being culled normally, with no large-scale culling of pregnant sows yet. While corporate cash flow is tightening, there is no large-scale sell-off. Therefore, although the process of capacity reduction has begun, the farming sector has not yet entered a phase of substantial reduction, and a clear turning point in the pig cycle is not yet visible.

Zhu Di notes that historically, the period after the Spring Festival is often a key point for hog prices to bottom out. Recent market data showing a rapid drop in the sales price of binary breeding sows directly reflects weak market sentiment for restocking. Against the backdrop of sustained industry losses, the pace of capacity clearing is likely to accelerate.

🏛️ Policy Tightening and Future Outlook

Notably, national targets for capacity control are being continuously tightened. The national target for the normal inventory of breeding sows was reduced from 40.38 million in 2025 to 39.5 million, and will be further lowered to 36.5 million in 2026.

"Regarding the pace of capacity reduction, policy has shifted from 'flexible guidance' to 'rigid constraints'," Deng says. Annual production filing requirements now mandate that leading enterprises report capacity plans using a unified standard and submit to dynamic supervision. Failure to meet targets will face constraints such as tighter credit. Coupled with the consecutive downward adjustments of breeding sow inventory targets and losses across the entire industry, the pace of capacity reduction in 2026 is expected to accelerate significantly.

However, Zhang Xiaojun believes that with the continuous improvement in sow production efficiency in recent years, the decline in the normal inventory of breeding sows aligns with market dynamics. Market research indicates that some market participants, such as enterprises that purchase piglets for fattening, are optimistic about hog prices in 2027 and have plans to restock in the middle of this year. Based on this, the actual pace of capacity reduction may be delayed compared to market expectations.

Zhu Di adds that regardless of whether they are large enterprises or small-scale farmers, the sunk costs from (earlier) investments are high. Therefore, the industry will find it difficult to actively reduce capacity in the short term, and it will take a sustained amplification of losses to create an effective impetus for capacity reduction.

Central Government Resumes Frozen Pork Reserve Purchases, Pork-Related Stocks Rally

Ended