Hog prices have remained persistently low, pushing Muyuan Foods back into a loss-making position. On August 20, the company released its interim report, revealing first-half operating revenue of 59.41 billion yuan, a 22.3% year-on-year decline. The net loss attributable to shareholders reached 6.078 billion yuan, a stark reversal from the 10.53 billion yuan profit recorded in the same period last year. Furthermore, net cash flow from operating activities swung from a positive 17.351 billion yuan to a negative 2.224 billion yuan.

The weakening performance is primarily attributed to falling hog prices. According to data from the National Bureau of Statistics, the national average hog price dropped 23.1% year-on-year in the first half of the year. During the same period, pork production still grew by 3.3%, and hog slaughter increased by 1.7%, indicating that supply-side pressure has yet to show significant signs of easing. By the end of the second quarter, the national breeding sow inventory had decreased to 37.8 million head, a 6.5% decline year-on-year, approaching the normal holding level of 37.5 million head, suggesting that basic production capacity is beginning to be further reduced.

Against this backdrop of low hog prices, cost management has emerged as a more critical operational variable for Muyuan Foods. In the first half of the year, the company sold 38.615 million commercial hogs. In June, the full cost of hog farming was approximately 11.7 yuan per kilogram, which further declined to 11.5 yuan per kilogram in July, drawing close to the company's annual average cost target. However, this cost reduction does not rely solely on feed prices. Management at Muyuan Foods has previously outlined the future cost-reduction roadmap, which includes epidemic prevention and control, employee and executive incentives, breeding stock genetics, and intelligent technology applications. Essentially, the focus remains on improving production metrics such as survival rates, feed conversion ratios, and daily weight gain.

Additionally, Muyuan Foods stated that non-cash costs, such as depreciation and amortization, currently account for over 10% of the total cost, with cash costs slightly exceeding 10 yuan per kilogram. The company noted that recent national hog prices have risen above this cash cost level. Another area of improvement comes from its slaughtering business. In the first half of the year, Muyuan Foods slaughtered 17.234 million hogs, a year-on-year increase of 50.98%. Revenue from its slaughter and meat business reached 22.061 billion yuan, up 14.04% year-on-year, maintaining profitability after achieving its first annual profit in 2025.

For Muyuan Foods, the two key variables to monitor going forward are when the industry's production capacity reduction will effectively transmit to hog prices, and how much further room there is for cost reduction, particularly given the volatility in feed ingredient prices.