China Galaxy Securities has released a research report emphasizing the dual-strategy investment opportunities in the hog farming sector. Based on the breeding sow inventory and farming efficiency, hog prices in 2026 are expected to decline year-on-year, with potential intermittent rebounds. The report highlights the combined impact of policy-driven capacity reduction and industry losses on production capacity, recommending a focus on high-quality hog enterprises with significant cost improvements and strong financial positions. Attention is also advised for companies in the downstream farming supply chain and animal vaccine sectors.

Considering the relatively low supply of yellow-feathered broilers and anticipated demand-side improvements, opportunities exist in this segment. The pet food industry is in a growth phase, with leading companies gradually increasing their market share. Key points from China Galaxy Securities' analysis are as follows:

In January 2026, China's CPI increased by 0.2% year-on-year, with the food category declining by 0.7%. Within food items, pork prices fell by 13.7% year-on-year. Month-on-month, CPI rose by 0.2%, with food prices remaining flat and pork prices increasing by 1.2%. In December 2025, agricultural product imports totaled $18.49 billion, up 1.66% year-on-year, while exports reached $10.571 billion, up 0.29%, resulting in a trade deficit of $7.919 billion, a 3.54% increase year-on-year.

In February, the agriculture index underperformed the CSI 300, declining by 0.14% compared to the latter's 0.09% gain. The farming sector led with a 1.02% increase, while agricultural processing and animal health sectors lagged, declining by 3.23% and 3.27%, respectively.

In hog farming, prices fluctuated downward in February, with self-sufficient farms returning to losses. As of February 11, hog prices stood at 12.75 yuan/kg, up 2.7% from the end of 2025. By February 27, profits for self-sufficient and purchased piglet farming were -159.65 yuan/head and 20.83 yuan/head, respectively. The breeding sow inventory at the end of 2025 was 39.61 million heads, down 2.9% year-on-year. Post-Spring Festival, hog prices continued to decline, falling below 11 yuan/kg in early March. The firm believes industry capacity reduction may accelerate amid ongoing losses.

For 2026 hog price trends, annual average prices are projected to decline year-on-year, though intermittent rebounds may occur due to varying impacts of winter diseases. Investors are advised to focus on leading hog enterprises with superior cost control, sound financials, and reasonable valuations.

In the pet food sector, 2025 exports faced slight pressure, characterized by volume growth but price declines. December exports totaled 906 million yuan, down 2.91% year-on-year, with volume up 15.49% to 37,700 tons. The average export price fell 15.93% to 24.02 yuan/kg, hitting a yearly low. For full-year 2025, export value decreased 4.1% to 10.102 billion yuan, while volume rose 7.8% to 361,300 tons. The average export price dropped 11% to 27.96 yuan/kg.

Risks include potential underperformance in livestock and poultry prices, animal disease outbreaks, raw material price volatility, policy changes, and natural disasters.