Hong Kong-listed hog stocks are declining, with Muyuan Foods Group Co.,Ltd. dropping over 4% and Dekon Agriculture and Animal Husbandry also falling more than 4%. COFCO Joycome Foods Ltd. is down nearly 2%.

As of August 3, the national average price for foreign-bred three-yuan live pigs has fallen to around 10.32 yuan per kilogram. The main hog futures contract for September 2026 closed at 10,690 yuan per ton, losing over 1,000 points in two weeks since the July 20 peak. Compared to the early July high, the decline exceeds 15%, with the contract hitting a new all-time low during trading.

Current hog prices are persistently below the industry's average production cost line, pushing breeding companies into widespread losses. China Merchants Securities believes the breeding sector is at a cyclical bottom, with feed companies expanding overseas to unlock growth potential.

Historically, mutual funds have allocated heavy positions in pig farming stocks ahead of the cycle's trough, with peak allocations occurring before hog prices reach their zenith. With hog prices now at a historical bottom, and as industry-wide losses extend further, the acceleration of sow capacity reduction could lift the medium-term price center for hogs in 2027. Drawing on historical fund allocation patterns and the fact that current holdings in pig farming stocks have fallen to historical bottom levels, we believe this is the right time to invest in hog breeding stocks.