Dongfang Wealth Securities: The reduction of pig production capacity continues to strengthen, and the beef cattle cycle is worth looking forward to

The Zhitong Finance App learned that Dongfang Wealth Securities released a research report saying that currently pork pig farming is still experiencing deep losses. Since June, the price of piglets has dropped again. Fat boys have both lost money, and the reduction in production capacity is expected to accelerate. Currently on the left side of the bottom of the cycle, farmers with steady cash flow and excellent cost control are expected to benefit. Ancestral breeding fell 6.85% year on year in 2025, and introduction stagnated from January to May 2026, supporting the 2026H2 chicken boom. Upstream chicken breeding companies give priority to benefiting from industry gaps. Although short-term beef cattle breeding profits have recovered slightly, the breeding cycle is long and the supply of calves is difficult to recover in the short term. The bank determined that the industry will maintain a long-term upward cycle in 2026-2028.

The main views of Orient Wealth Securities are as follows:

pig farming

2026H1 is oversupply of pigs, the industry continues to lose deep losses, and the sector ushered in a left-hand layout window. The average price of 2026Q1 and Q2 pigs fell sharply year on year. Pig prices bottomed out in April. From the 3rd week of September 2025 to the 3rd week of July 2026, self-breeding lost 41st week. Outsourced fattening also suffered serious losses, and the cash flow of breeding companies continued to be under pressure. The number of breeding sows peaked in 2025Q2, causing the number of sows to continue to rise in the early 2026 period; the new version of production capacity regulation lowered the reasonable holding of sows to 37.5 million, and the policy forced the elimination of inefficient production capacity to speed up the clearance of inefficient production capacity. Coupled with another drop in the price of piglets in June, the loss of production capacity continued to increase. According to the Ministry of Agriculture, the number of newborn piglets declined for the first time in 17 months in March of this year. The number of newborn piglets changed from month-on-month to increase in April. It takes about 6 months for newborn piglets to be fattened until they are released. Corresponding to this year's Q3 release pressure, the bank determined that Q3 pig prices will continue to fluctuate at a low level, and production capacity loss will continue. Q4 is generally the traditional peak consumption season. Considering the increase in efficiency and the 2026Q1 energy reserve is still higher than normal holdings, the bank believes that 2026H2 does not have a basis for a sharp rise in pig prices, and the supply and demand pattern is expected to gradually improve in 2027.

White feather broiler

The introduction of overseas ancestral breeding has been limited, and the boom in H2 chickens is expected to continue. Affected by avian influenza, ancestral introductions in 2025 fell 6.85% year on year. Introductions stagnated in January-May 2026, and introduction resumed in June. New introductions could only be transmitted to parents for 7 months. New introductions during the year are difficult to ease the tight supply of seedlings in 2026. Supply contraction drove the price of chicken breeders to continue to rise. Parental chicken seedlings surpassed 50 yuan/set in the second quarter, and the 2026H2 price boom is expected to continue.

beef cow

From November 2022 to February 2025, the overall price of live beef and beef continued to decline deeply, with a cumulative maximum drop of more than 30%, mainly due to the expansion of production capacity in the early stages, the volume of beef imports, and the suppression of demand for low-priced pork. Since March 2025, the market has reversed its upward trend. The core driver is that the industry lost money for 2 consecutive years, the stock market was eliminated for 2 consecutive years, and basic supply contracted. Deep losses in the early period led to a low level of healthy cows. The US Department of Agriculture expects China's domestic beef production to drop 5.12% year on year in 2026; at the same time, imported beef will be subject to a three-year quota control, with an additional 55% tariff. Low import supply is limited, boosting domestic meat prices. Although short-term farming profits have recovered slightly, the breeding cycle is long and it is difficult to recover calf supply in the short term. The bank determined that the industry will maintain a long-term upward cycle in 2026-2028.

Risk Alerts

Policy and environmental regulation risks; risk of large-scale outbreaks of livestock and poultry diseases; risk of changes in feed raw material prices.