Goldman Sachs: Hog Cycle Inflection Point Approaching, Supply-Demand Gap to Reach 5% in H2
0xBroomberg
Goldman Sachs sees China's hog sector nearing a cycle inflection — H1 oversupply of roughly 6% flips to an estimated 5% deficit in H2, with benchmark hog prices recovering from RMB 10.5/kg to RMB 15.0/kg. The driver is not better demand but cash-burn-forced supply exit.
Prices are still falling — why call an inflection point?
Goldman's timeline: H1 2026 sees a 6% supply surplus; H2 swings to a 5% deficit.
The price path that follows: benchmark hog prices at RMB 10.5/kg in H1, recovering to RMB 15.0/kg in H2, then RMB 15.3/kg in 2027.
This means → the inflection is not about "demand getting better." It is about losses forcing producers out — a textbook supply-side hog-cycle clearing.
How deep are hog-farm losses right now?
By Q2 2026, industry-average hog prices have fallen to roughly RMB 9.5/kg. Large producers' all-in cash cost sits at RMB 11.6–12.9/kg; marginal suppliers — the highest-cost breeders — run at RMB 13.3–13.7/kg.
In plain terms = every kilogram sold loses at least RMB 2 and as much as RMB 4. Almost every operator is burning cash.
Goldman estimates that by end-Q1, roughly 30% of listed hog companies had less than six months of cash runway; by end-Q2 that share may approach 50%.
What happens between "losing money" and "shutting down"?
Capital-structure stress events are already surfacing: Techbank Food signed a restructuring agreement; Kingsino triggered a risk warning on accumulated losses; Longda flagged delisting and default risk; Evergrande Breeding filed for bankruptcy.
This means → the industry is crossing from "P&L losses" into "balance-sheet failure" — not just ugly earnings, but capital structures that can no longer hold.
This reflects that low prices have now penetrated the operating layer and begun damaging capital structures, with contagion accelerating.
How much capacity has actually been cut — and who is lagging?
The top three producers cut sow herds by roughly 8% in Q1 versus mid-2025. But smaller operators are far behind — commercial-hog feed sales to family farms were still up about 25% year-on-year in May.
Goldman expects effective breeding-sow inventory — sows currently producing or capable of producing litters — to fall another 8% from end-2025 to Q3, reaching 28.5 million head.
In plain terms = big companies are already slashing capacity, but smallholders are holding on. This "time lag" means prices won't snap back overnight.
Will frozen-pork inventory and weak demand slow the recovery?
Goldman has cut its demand forecast: domestic pork demand at 58 million tonnes in 2026, down roughly 2% year-on-year; 57 million tonnes in 2027. Net imports are shrinking too — 600,000 tonnes in 2026, down 34%.
Fresh-pork sales as a share of slaughter have weakened since March, running 2–3 percentage points below the prior year; frozen-pork inventories sat at elevated levels through Q2.
This means → even as sow capacity declines, the pace of frozen-inventory drawdown will cap the upside for spot hog prices — the recovery path is unlikely to be linear.
What does the price recovery actually depend on?
Goldman's full-year benchmark hog-price forecast is RMB 12.8/kg, down 8% year-on-year. A small ~1% oversupply persists for the full year, but the direction shifts from H1 pressure to H2 repair.
Two conditions must hold for the recovery to materialise: first, cash-flow stress on marginal capacity keeps pushing exits; second, demand stays weak but does not collapse further.
In plain terms = if frozen-stock drawdown stalls, the price upturn gets delayed; if losses accelerate exits, the recovery slope steepens. The outcome hinges on a race between "exit speed" and "demand floor."
Content is for reference only, not financial advice.