Huatai Securities issued a bullish call on China's pig farming sector after hog prices rebounded 17.7% from June levels and industry data showed accelerated capacity reduction in the second quarter. The brokerage cited Zhengbang Technology's flood-related losses as evidence that extreme weather is driving passive supply cuts, supporting a cyclical recovery thesis.
Huatai Securities turned bullish on China's pig farming sector, citing a 17.7% hog price rebound and accelerated capacity reduction in the second quarter.
"Capacity reduction is accelerating and the medium-to-long-term trend of hog prices bottoming and recovering is becoming increasingly clear," Huatai Securities said in a July 9 research report, adding that the sector may be at an attractive entry point.
The hog price tracked by Wind rose to 11.3 yuan ($1.56) per kilogram on July 9 from a June average of 9.6 yuan, a 17.7% gain. Data from Yongyi Consulting showed industry capacity reduction accelerated in the second quarter of 2026, according to the report.
The report cited Zhengbang Technology Co.'s disclosure that asset losses from Typhoon Maysak flooding in Guangxi may exceed 10% of its 2025 net profit, confirming that extreme weather is driving passive capacity reduction. The combination of voluntary and weather-driven supply cuts supports a cyclical recovery thesis for the sector.
Zhengbang, one of China's largest hog producers, said its subsidiary pig farms and breeding facilities in Guangxi sustained severe damage from Typhoon Maysak, which triggered historically rare rainfall across 63 counties and 14 prefecture-level cities. The storm affected 375,000 people and forced 130,000 evacuations. Preliminary loss estimates for Zhengbang may exceed 10% of its audited 2025 net profit, the company said, though the affected assets were covered by property insurance with the final amount subject to further assessment.
Rival Wens Foodstuff Group Co. said it suffered no significant asset losses from the flooding and has initiated insurance claims, highlighting the divergence in weather resilience across the sector. Most other Guangxi-based listed companies, including paper maker Sun Paper and miner Huaxi Nonferrous Metals, reported normal operations with no material impact. Runjian Co. donated 3 million yuan ($443,348) to support disaster recovery efforts.
The bullish call from Huatai comes as China's pig farming sector navigates a prolonged downturn that has squeezed margins and forced capacity closures. The hog price rebound from June's average of 9.6 yuan, near multi-year lows, suggests the cycle may be turning. Huatai said the combination of voluntary capacity reduction and weather-driven passive supply cuts makes the sector an attractive allocation point. Investors will watch upcoming monthly inventory data from Yongyi Consulting for confirmation of the trend.
This article is for informational purposes only and does not constitute investment advice.
