Losing money on every pig sold—pig farmers have heard this over and over throughout the year. In the third week of 10 month, the national live pig price was 10.89 yuan/kg, down a further 1.6% from the previous week. On 10 month 21, the quote for three-way crossbred pigs was 9.86 yuan/kg, still hovering at a low level. Just as the entire industry was counting the days and calculating its losses, Liu Yonghao, chairman of New Hope Group, acknowledged in a media interview that the company had stumbled in this pig cycle, while making one emphatic statement: the words “blowup” and “failure” do not appear in New Hope’s dictionary. Why would an agribusiness giant with annual hog production in the tens of millions make a public statement like this at such a time?
01 Low prices
Pig prices have spent a full year below the cost line
The figures on market platforms are lower than those from official monitoring. On 10 month 21 day, the national average price for pigs weighing over three yuan was 9.86 yuan/kg, down nearly 8% from the previous month. Xu Qingsong, who has conducted market research at several publicly listed pig farming companies, said that pig prices had fallen to a level not seen in twenty years, prices below 12 yuan/kg had persisted for a year, and there were still no signs of improvement.
Prices are low, but costs have not come down. According to estimates by a research institution, the average breeding cost at leading pig farming companies in the first half of the year was around 12.4 yuan/kg, leaving pig prices still some distance below the cost line. The self-breeding and self-raising model has been loss-making per head for several consecutive months; the model of buying piglets for fattening has suffered even greater losses, and there is almost no room for profits across the industry.
02 Giants Speak Out
Why are the giants making such emphatic statements?
Liu Yonghao did not shy away from the questions in the interview. He explained that corporate debt is the norm in modern business. The key is that the debt level has not reached the warning threshold for the industry, that the borrowed money is invested in the core business rather than speculation, and that the national policy direction of supporting the real economy has not changed.
Behind these remarks, the company had just raised its hedging limit. On 9 month 28 day, New Hope issued an announcement stating that, over the next two years, the maximum margin for hedging would not exceed 33 hundred million yuan. It would use futures contracts related to its core business, such as live hogs, soybean meal, and corn, to hedge against price fluctuations, and use over-the-counter options to manage interest rate risk. From the year 2013 to the present, the company has conducted hedging five times, keeping the margin between 1 hundred million and 8 hundred million yuan. This time, it raised the limit fourfold. During the Two Sessions in month 3, Liu Yonghao had said that futures hedging is an important supplement to risk prevention and control, as well as an internationally accepted practice.
03 repayment
The bill for expansion is being paid, one installment at a time
This round of pressure stems from the previous round of rapid expansion. In 2016, Liu Chang announced a strategic plan for pig farming. By 2021, finishing pig capacity had grown from 200 ten thousand head to 3800 ten thousand head. Eighty percent of the funds for pig farm construction came from bank loans. Interest-bearing debt rose from 121 billion yuan in 2018 to 679 billion yuan at the end of 2021. In the first 11 months of 2021, new borrowings totaled 287 billion yuan, including 212.88 billion yuan in bank loans. Almost all of this money went into pig farms, and the cost came quickly: in 2021, the company posted a loss of 95 billion yuan, its first annual loss report since listing. Almost all of the loss came from its pig farming business.
Now, let’s look at the latest semiannual report. The listed company posted a loss of approximately 17 billion yuan in the first half of the year, approaching its full-year loss for 2025; cash and cash equivalents on its books totaled 79.63 billion yuan, while operating cash flow was 16.46 billion yuan, down 68% year on year. Total liabilities stood at 826.81 billion yuan, and the debt-to-asset ratio was 70.7%. Finance costs have risen year after year: approximately 14 billion yuan in 2024, 18 billion to 20 billion yuan in 2025, and in the first half of this year alone, it paid 9.45 billion yuan in interest. The interest coverage ratio fell from 2 in the same period last year to negative 0.36. Earnings from its core business are no longer enough to cover interest payments.
Things are just as tight at the parent-company level. New Hope Group recorded a net loss of 20.78 billion yuan in the first half of the year, compared with a profit of 7.68 billion yuan in the same period last year. At the end of 6, the Group had 111.20 billion yuan in cash and cash equivalents on its books, of which 22.47 billion yuan was restricted and unavailable for use. Meanwhile, short-term borrowings stood at 191.97 billion yuan, and non-current liabilities due within one year totaled 164.91 billion yuan. Operating cash flow in the first half was 18 billion yuan, down nearly seven tenths from the same period last year, with a net cash outflow of 10.85 billion yuan over the six months. What is of even greater concern to pig farmers is the guarantees and repayments: Chengdu Tianfu Xingxinxin, an associated company, was unable to repay its bank loan, so New Hope took over repayment in proportion to its 40% shareholding. It repaid 2800 ten thousand yuan on its behalf in 7, then made two further repayments of 4000 ten thousand yuan and 1200 ten thousand yuan in 9. The total amount of guarantees the company provided for it was 5.845 billion yuan.
04 Decline in production capacity
No one wants to be the first to admit defeat, yet production capacity is quietly declining
This hog cycle is different from those in the past. Previously, small-scale farmers chased rising prices and sold when prices fell. Now, the proportion of large-scale operations has exceeded 70%, while before 2018 more than sixty percent of producers were still small-scale farmers. Xie Rupeng, a deputy to the National People’s Congress, cited a set of figures at this year’s Two Sessions: for every 1% increase in large-scale production capacity, approximately 3% to 5% of small-scale farmers exit the market. As small-scale farmers leave, leading companies are still holding on. International ratings agency Fitch noted in a research report that livestock companies have become more financially capable of absorbing losses, which has instead delayed the clearing of production capacity and prolonged the downturn. Jiang Han, a senior researcher at Pangoal Institution, said that the current downturn may be the longest trough in history. He likened the market to a standoff in which whoever gives in first loses out. The hardest hit are companies with high leverage, heavy debt, and weak cost controls. Xu Qingsong, who has spent years visiting livestock companies for research, said he has observed that industry efficiency is improving and companies can continue to hold on; few are proactively reducing capacity.
Regulatory measures at the national level are also being stepped up. In 5 month, the Ministry of Agriculture and Rural Affairs issued a new comprehensive plan for regulating production capacity, lowering the normal national reserve of breeding sows from 3900 ten thousand head to around 3750 ten thousand head. This was the first reduction in two years. Previously, the National Development and Reform Commission had already called in leading hog companies for talks. In 6 month, the Ministry of Agriculture and Rural Affairs and the National Development and Reform Commission jointly put forward four requirements for large-scale livestock companies: take the lead in reducing production capacity and output, strictly control secondary fattening, cull weak piglets, and reduce slaughter weight. Several publicly listed hog companies said they would make adjustments accordingly. Capacity reduction is indeed progressing. The number of breeding sows fell from 3904 ten thousand head at the end of 3 month to 3602 ten thousand head at the end of the third quarter. Since capacity regulation began, this was the first time the number fell below the benchmark normal reserve of 3750 ten thousand head. However, efficiency gains in farming made up for some of the reduced supply, and the number of hogs available in the market did not decline significantly.
No one can give an exact date for when pig prices will turn around. Right now, most people in the industry are still cutting costs wherever they can, raising pigs well, and waiting for the market to turn. Xu Qingsong put it plainly: whoever can hold out will be the one left standing.