Goldman Sachs believes China pig farming is close to the cycle bottom, and supply contraction will push prices up from H2 2026.

Overview

This is a Goldman Sachs industry outlook report on China’s pig farming cycle, combined with an investment view on Muyuan Foods A/H. The report judges that current domestic pig prices have fallen to the cycle bottom. In the short term, high marketings (slaughter peaks), delayed supply exit, and weak seasonal demand have weighed on prices, but industry losses and policy constraints are expected to force contractions in breeding sow and market hog supply, which should support a price rebound in H2 2026 to 2027.

Core views

The core views are: first, China’s pig cycle is mainly supply-driven while demand is relatively stable; second, the current spot price of Rmb8.7/kg implies that the industry is broadly experiencing negative cash margins, and some mid-sized farms may exit in coming months; third, breeding sow inventory has declined since mid-2025 and may continue to adjust further in H1 2026; fourth, increases in PSY will partially offset the decline in sow inventory, but the pace of PSY improvement is expected to slow; and fifth, industry market hog supply is expected to begin declining from Q2 2026, shifting the market from surplus in 2025 and H1 2026 to tightness in H2 2026 and 2027.

Analysis framework

The report mainly applies a framework based on supply-demand balance, breeding sow inventory, PSY production efficiency, cost curves, repopulation fattening behavior, and asset-based valuation to assess industry cycle and stock-level risk-return. For Muyuan Foods, valuation is derived from near-term 12-month market P/E and discounted long-term 2030E P/E, with earnings forecasts adjusted for pig price assumptions.

Methodology notes

• Industry supply and demandPig supply cycle analysis

  Predict future market hog slaughter through breeding sow inventory and PSY.

  The report believes China’s pig demand is broadly stable, so cycle swings mainly come from supply. Declines in breeding sow inventory affect market hog slaughter with a lag, while PSY improvements will partially offset the decline.

• Cost and exit dynamicsIndustry cost curve

  Use cost bands across producers to judge the price bottom and pressure for supply exits.

  The report estimates that at current prices the industry is broadly cash-loss-making; higher-cost medium-sized and backyard producers face greater pressure, and losses may accelerate capacity exits.

• Valuation methodsNear-term and long-term average P/E valuation

  Muyuan valuation is based on the average of 12-month current-market P/E and discounted long-term 2030E P/E.

  Near-term valuation uses 12x 12-month market P/E, while long-term valuation uses 2030E 8x P/E discounted back to 2026E at a 10% discount rate.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Muyuan Foods A/H

  Core recommended name

  Strengths

  Low-cost advantage, leading market share, integrated farming and slaughter setup, and room for breeding and feed-efficiency improvement.

  Weaknesses

  Short-term earnings are price-sensitive; recurring 2026E earnings were cut by 17% under a low-pig-price assumption.

  Comparison

  Compared with higher-cost producers in the industry, Muyuan is more resilient on the cost curve. The report also presents asset-based valuation scenario comparisons for Wens and NHL.

  Risks

  Pig price uncertainty, biosecurity and disease control risks, execution of cost savings, changes in protein demand, and management succession.

• China pig farming industry

  Beneficiary pool from cyclical upside

  Strengths

  After reaching historical lows in price, supply exit pressure is increasing, and policy constraints help compress capacity.

  Weaknesses

  PSY improvement and repopulation fattening may partially disrupt the timing of supply normalization.

  Comparison

  The supply-demand balance is expected to move from surplus in 2025 and H1 2026 to short supply in H2 2026 and 2027.

  Risks

  Demand weaker than expected, increased repopulation fattening, changes in policy enforcement, and productivity gains offsetting capacity reduction.

Key data

• Current domestic benchmark pig priceRmb8.7/kgAs of April 15, 2026, this is the lowest level in the past 25 years.
• Expected H2 2026 pig priceRmb15.0/kgSignificantly higher than current YTD lows, but reduced by Rmb0.9/kg versus a prior forecast.
• Expected 2027 pig priceRmb15.3/kgThe report expects price improvement to continue into 2027.
• Industry market hog slaughter changeYoY contraction of 4%-7% over the next few quartersEstimated based on breeding sow inventory and PSY trends.
• Expected breeding sow inventorydown 11% from December 2025 to 25.0 million headEquivalent to about a 14% decline from mid-2025 levels.
• Muyuan 2025 market hog slaughter78 million headRepresents a 10.8% share of the China market; the report describes it as a leading hog producer in China and globally.
• Muyuan A/H target priceRmb58.0/HK$64.0Reduced from Rmb62.0/HK$68.0.

Impact & implications

If Goldman Sachs’ view is correct, the investment logic for pig farming would shift from falling prices and profit compression to supply drawdown, price recovery, and earnings normalization. Larger, lower-cost, more scalable players with stronger cash-flow recovery potential may benefit more, and Muyuan Foods is seen as having better medium- to long-term free cash flow generation due to cost advantage, leading market share, and reduced capex intensity.

Risks

• Pig price uncertainty could cause profitability and target-price assumptions to deviate.
• Failure in animal disease control could affect marketings, costs, and valuation.
• If execution of cost reductions disappoints, the relative advantage of leading producers may weaken.
• Changes in protein consumption demand could affect pork demand and price elasticity.
• If repopulation fattening becomes active again, it could disrupt the short-term supply and price recovery path.
• Uncertainty in Muyuan’s succession planning may create execution and governance risks.

What to watch

• Whether breeding sow inventory continues to decline along policy targets and Goldman Sachs’ forecast path.
• Whether market hog slaughter shows a turning point from Q2 2026 and continues into the second half.
• Whether spot pig prices rise from the Rmb8.7/kg bottom region toward around Rmb15.0/kg.
• Whether PSY improvement outpaces expectations and offsets supply contraction.
• Whether repopulation fattening increases due to low pig prices and creates additional supply disruptions.
• Exit pace of mid-sized farms and backyard producers, and cash-loss pressure in higher-cost capacity.