China Galaxy Securities: Losses in the hog industry may lead to capacity reduction, and pet food export prices are under pressure

According to the China Galaxy Securities research report, there is a continuous emphasis on the balanced layout opportunities in the pig farming industry. Based on the value of breeding sows and considerations of farming efficiency, pig prices in 2025 may show a downward trend year-on-year. Considering the policies for capacity reduction and industry losses, combined with the excellent profits of pig enterprises due to declining costs, the focus should be on high-quality pig enterprises with significant marginal cost changes and good funding conditions. The pet food industry is in a growth phase, with a rising market share of quality enterprises. The bank suggests paying attention to the post-cycle of the breeding chain and recommends leading feed companies and animal vaccine-related enterprises. The price of yellow chickens has a certain correlation with pig prices, and considering the low supply side, there is potential for price increases in the future.

The main points of China Galaxy Securities are as follows:

August CPI year-on-year decline, agricultural product trade deficit slightly decreased year-on-year

In August, China's CPI was -0.4% year-on-year, with food items at -4.3% (pork at -16.1% year-on-year); CPI remained flat month-on-month, with food items at +0.5% (pork at -0.5% month-on-month). In August, China's agricultural product import value was USD 18.748 billion, down 3.13% year-on-year, while export value was USD 8.102 billion, up and down 3.9% year-on-year, resulting in a trade deficit of USD 10.647 billion, down 2.54% year-on-year.

September agricultural index underperformed compared to CSI 300

From early September to the 26th, the agriculture, forestry, animal husbandry, and fishery index was -1.36%, while the CSI 300 rose by 1.19% during the same period. Among the sub-industries, feed (+0.86%) had a relatively high increase, while agricultural product processing (-5.11%) and animal health (-3.78%) performed relatively poorly.

August breeding sow inventory decreased by 0.1% month-on-month, September pig prices hit a new low

Pig prices have rebounded since the low point of 24.1.17, reaching a year-high of 21.06 yuan/kg in mid-August, and then fluctuating downwards; on September 17, 2025, pig prices were 13.71 yuan/kg, down 16% from the end of 2024. On September 26, the profits for self-breeding and purchased piglet farming were -74 yuan/head and -237 yuan/head, respectively; the overall industry loss may lead to capacity reduction. At the end of August, China's breeding sow inventory was 40.38 million heads, down 0.1% month-on-month. Regarding the trend of pig prices in 2025, the bank believes that the annual average price will decline year-on-year, with the difference being that excellent pig enterprises continuously optimize their total costs, leading to profits exceeding expectations. Additionally, the rhythm of capacity changes in pig enterprises since 2025, the industry's secondary breeding situation, and slaughter weights may also be affected by related factors, warranting close attention.

August pet food export volume slightly increased, price decline dragged down total amount

In August, China's pet food export value was 834 million yuan, down 15.5% year-on-year. The export volume was 29,500 tons, up 3.53% year-on-year; the average export price was 28.31 yuan/kg, down 18.38% year-on-year. From January to August 2025, the cumulative export value was 6.764 billion yuan, down 2.35% year-on-year. In terms of volume and price, the export volume was 230,400 tons, up 6.23% year-on-year; the average export price was 29.35 yuan/kg, down 8.08% year-on-year Risk Warning

The risk of livestock and poultry prices not meeting expectations, the risk of animal diseases, the risk of raw material price fluctuations, policy risks, risks from natural disasters, etc