Live pig futures drop nearly 4%, hitting a new record low; with both futures and spot prices falling, when will the pig cycle winter end?

China Securities Journal, April 7 (Editor: Li Xiang) — Today, the domestic live pig market’s futures and spot prices moved downward simultaneously. The main contract of live pig futures briefly fell nearly 4% in the early trading session, touching a low of 9,125 yuan/ton, setting a new low since the contract was listed. On the spot side, the nationwide average price of external three-variant pigs also dropped to around 9.0 yuan/kg in the early session, down more than 76% from the 2019 historical high, reaching a near 14-year low.

Industry insiders pointed out that, from an operating cost perspective, data released by the Price Monitoring Center of the National Development and Reform Commission shows that in the first week of April, the pig-to-grain ratio fell to 3.57:1, a decrease of 1.38% week-on-week. It has been in the first-level warning zone for excessive decline set by the “Pig Meat Reserve Adjustment Plan” for eight consecutive weeks. Since September 2025, the industry has been in deep losses for over seven months, with high-cost, high-leverage breeding entities facing increasing survival pressure.

Futures and spot prices hit bottom together; short-term weakness may be hard to reverse

Today, live pig futures all weakened across the board. The main contract briefly touched a low of 9,125 yuan/ton in the early session, marking a new historical low since listing. By midday, although the decline had narrowed, prices remained in a deep loss phase during the cyclical downturn.

Chart: Daily chart of the main live pig futures contract

Data source: Wenhua Finance, compiled by China Securities Journal

Looking at spot prices, as of the morning of April 7, the nationwide average price of external three-variant pigs also fell to around 9.0 yuan/kg, a nearly 14% decline from early March, about 30% year-on-year. Over 25 provinces across the country saw pig slaughter prices fall below 5 yuan per jin, entering the “4 yuan/jin” era; additionally, the pig-to-grain ratio dropped to 3.88:1, in the first-level warning zone for excessive decline for eight consecutive weeks, far below the industry breakeven point of 6:1.

Chart: Domestic provincial live pig spot prices ( yuan/kg )

Data source: My Steel Network, compiled by China Securities Journal

China Securities Journal notes that supply and demand imbalance is the core contradiction behind the ongoing price decline. From the supply side, the reluctance to sell pigs remains, with nationwide pig slaughter weights still high at over 126 kg. As temperatures rise, demand for fat pigs is insufficient, and breeders lack confidence in holding pigs, leading to increased passive capacity reduction and active culling by multiple breeding entities. On the demand side, after the Spring Festival, the traditional consumption off-season has limited replenishment, compounded by diversion of poultry and meat substitutes, resulting in continued weak sales of fresh pork and a lack of effective support for fresh pork demand.

Meanwhile, since April, feed costs have slightly declined but remain unable to offset the fall in pig prices, and industry losses continue to expand.

Data from Zhuo Chuang Information shows that on April 2, the profit for domestic self-bertilized and self-raised pigs was -332 yuan per head, an increase of 16 yuan per head from the previous week; piglet fattening profit was -236 yuan per head, an increase of 21 yuan per head from the previous week.

Regarding the outlook, futures institutions generally hold a cautious view. Everbright Futures stated that although slaughter volume decreased at the start of the month, and the second fattening cycle in some low-price areas boosted replenishment, leading to a short-term rebound in pig prices, prices stopped rising and declined after last week due to recovery in slaughter volume and continued weight reduction, with weekly average prices still decreasing.

Green Dahua Futures indicated that, in the short term, the supply-demand pattern remains stage-wise strong supply and weak demand, with weight pressure persisting. Under policy guidance, the expectation of weight reduction among breeders is strengthening, and pig prices may continue to stay low in the near term, with attention to the mood of second breeding and frozen product inventory. In the medium term, from the fourth quarter of 2025, the number of new piglets has decreased for three consecutive months, easing supply pressure from June to August this year, with a focus on disease impact. Long-term, the sow inventory’s supply reduction before October this year is limited, and the high point expectations for distant futures contracts are moving downward.

Swine companies’ debt stock exceeds 30 billion yuan, mainly in convertible bonds

The ongoing decline in pig prices also poses significant challenges for pig enterprises with debt. China Securities Journal notes that most of these companies’ bond issues are in the form of convertible bonds. According to Wind data, currently, four pig companies have outstanding bonds, with a total scale of 32.09B yuan.

Data source: Wind, compiled by China Securities Journal

A securities analyst told China Securities Journal that the core pricing logic of pig convertible bonds lies in the strong cyclical nature, with the performance and stock price of the underlying stock being highly correlated with spot pig prices. The beta of the underlying stock is much greater than alpha, so the key driver of the bond price is the expected pig price.

“However, with pig prices remaining low, the conversion value of these bonds continues to shrink. For example, Muyuan’s convertible bond has a conversion price of 43.74 yuan, and its current conversion premium is as high as 31.47%. The implied volatility of the underlying stock is declining as cycle expectations cool, and the time value of options is accelerating decay. Investors should be alert to the increasing probability of early redemption triggering a downward adjustment of the conversion price,” the analyst said.

Industry insiders also pointed out that, in the current downward cycle, investors in convertible bonds should focus on high-liquidity, low-premium targets, and speculate on market rebounds driven by pig price overselling and storage policy implementation, with risk controls such as bond floor protection and stop-loss measures. However, position allocation should not be excessive.