China's largest hog producer, Muyuan Foods, sold 15 per cent more pigs in September than a year earlier even as it shrank its breeding herd, and at prices below its last reported production cost, a sign that Beijing's campaign to cut pig capacity has yet to reach pork supply.

Muyuan sold 6.42mn commercial hogs last month at an average 10.36 yuan ($1.54) a kg, down 19.6 per cent on the year, the company said in a filing on Monday.

Its herd of breeding sows, the female pigs kept to produce litters, fell 4.5 per cent in the quarter to 2.97mn at the end of September.

That price is below the full cost of about 11.7 yuan a kg that Muyuan reported for June, and below its average cost target of 11.5 yuan for the year. The company lost 6.08bn yuan ($900mn) in the first half.

[explore layer="prices" price="ds:45" pperiod="365d" title="Wholesale pork carcass price at Beijing Xinfadi" subtitle="Yuan a jin, past year. September averaged 7.32 yuan, 7% below a year earlier, after an April low of 6.47"]

Part of September's jump reflects a soft base. Muyuan's sales were up just 0.4 per cent on the year in August, and September volumes fell 8.6 per cent from August.

Over the first nine months its sales rose about 2.5 per cent to 58.73mn hogs, by Cropli's calculation from its monthly filings.

A glass office tower topped with green Muyuan Group signage stands behind a lower building against a clear blue sky

FEWER SOWS, MORE PORK

The drop at China's largest producer reflects national trends. Country-wide, China's sow herd fell 6.5 per cent from a year earlier to 37.80mn at the end of June, according to the National Bureau of Statistics, just above the 37.5mn "normal" level the agriculture ministry set in May, when it cut the target from about 39mn.

Yet hog marketings, the number of pigs sold for slaughter, still rose 1.7 per cent in the first half, and pork output rose 3.3 per cent to 31.19mn tonnes.

[chart slug="china-hog-price-capacity-cuts-national-sow-herd"]

More pigs are coming from fewer sows, and they are going to slaughter heavier.

Leading producers now wean more than 24 piglets per sow a year, and some 29 to 32, Dayou Futures said on 22 September. Average slaughter weights rose 1.1 kg on the year to 128.44 kg in the week to 12 September, according to Yongyi data cited by Founder CIFCO Futures.

"PSY is rising across the industry and slaughter weights are also changing, so the risk that a single indicator is distorted is growing," a source at one listed producer told financial news service CLS in June, referring to piglets weaned per sow per year.

The US Department of Agriculture's Beijing office made the same point in August: "productivity improvements continue to offset much of the impact from declining sow inventories."

[explore layer="stock-chart" ticker="002714" stockCode="SZSE:002714" period="1y" companyName="Muyuan Foods" title="Muyuan Foods share price, past year" subtitle="Shenzhen-listed shares, yuan a share"]

CULLING DEADLINE

In June, the agriculture ministry and the National Development and Reform Commission told large producers to "take the lead" in cutting capacity and output, curbing secondary fattening (buying pigs near market weight to fatten further), culling weak piglets and lowering slaughter weights.

Companies told CLS they had been asked to finish culling by the end of September. Private surveys by Zhuochuang, Mysteel and Yongyi recorded sow-herd falls of 1.67 to 3.01 per cent in August alone, the steepest this year, Dayou said.

Xu Ruijie, a farmer who once kept close to 2,000 sows, culled all but about 100 of them in April and May after almost a year of losses, according to a Southern Metropolis Daily report.

"In past hog cycles prices rose and fell, but at least one batch of pigs a year could be sold at a profit. There was never a whole year of continuous losses," Xu said.

Large producers, with the funds and credit to keep operating at a loss, can hold out longer, slowing the industry's exit of capacity, the same report said, citing Zhu Zengyong, a researcher at the Chinese Academy of Agricultural Sciences' Institute of Animal Science.

PRICES BELOW COST

Of 11 listed producers whose September filings Cropli reviewed, 10 realised between 9.79 and 11.06 yuan a kg. The 11th, Jinxinnong, sold just 28,300 commercial pigs, at 11.87 yuan. Wens Foodstuff's sales fell 10.1 per cent on the year to 2.99mn hogs, at 10.75 yuan.

[chart slug="china-hog-price-capacity-cuts-sep-prices-by-producer"]

A handful of smaller producers kept growing. Fujian Aonong's pig herd, counting all animals on its farms, rose 58.9 per cent on the year to 1.01mn head at the end of September as the restructured company refilled existing pens.

Zhengbang sold 41.5 per cent more pigs in the first nine months, which it put down to its business "gradually recovering". Tianbang Food lost both industrial investors in its pre-reorganisation on 18 September and is seeking new ones.

Officials describe a market on the mend. Chen Bangxun, head of the agriculture ministry's development planning department, said on 29 September that hog prices had stabilised above 11 yuan a kg and that the ministry would keep guiding leading companies to cut capacity, China News Service reported.

Daily commercial series were lower. China Pig Net quoted 10.06 yuan on 30 September, down 17.8 per cent on the year, and SunSirs recorded a fall over the month to 10.20 yuan from 10.92 yuan.

The hog-to-corn price ratio slipped to about 4.6 to 1, SunSirs said, below the 5 to 1 line at which Beijing's first-level warning for excessive price falls applies. When prices entered that band in March, the state began buying pork for its central frozen reserves.

The November live-hog contract on the Dalian Commodity Exchange closed at 10,940 yuan a tonne on 21 September, and the March 2027 contract had fallen below the industry's static production cost, Founder CIFCO Futures said.

IMPORTS SQUEEZED

The glut has cut into imports. China bought 390,000 tonnes of pork in the first half, down 26.4 per cent, according to customs data.

Brazil's pork exports to China fell 26 per cent to 85,400 tonnes in January to September, according to Comex Stat data accessed via Cropli. EU exports fell 28 per cent to 203,600 tonnes in January to July, according to Eurostat.

[explore reporter="br" flow="exports" products="0203" partner="CN" period="ytd" metric="quantity" view="chart" years="2019-2026" title="Brazil's pork exports to China, January–September, 2019–2026" subtitle="Tonnes, HS 0203, January–September of each year. The 2026 total of 85,400 tonnes is down 26% on the year and a fifth of the 2021 peak. Comex Stat, data to September 2026"]

EU pork has faced anti-dumping duties of 4.9 to 19.8 per cent since 17 December, but the USDA said "ample domestic pork production and weak consumer demand remained the primary factors" behind the fall.

[explore reporter="eu" flow="exports" products="0203" partner="CN" period="ytd" metric="quantity" view="chart" years="2019-2026" title="EU pork exports to China, January–July, 2019–2026" subtitle="Tonnes, HS 0203, January–July of each year. The 2026 total of 203,600 tonnes is down 28% on the year and about a sixth of the 2021 peak. Eurostat, data to July 2026"]

The USDA's Beijing office expects China's pork output to rise 0.5 per cent to 59.68mn tonnes this year before falling 2.2 per cent to 58.35mn tonnes in 2027.

The statistics bureau publishes third-quarter herd figures later this month, the first official count since the end-September deadline companies say they were given.