Huatai Securities: Second bottoming of hog prices accelerates capacity reduction

Huatai Securities research report states that as of November 9, Yongyi's national average live hog price was 8.6 yuan/kg, falling below the previous low of this cycle. Huatai Securities believes that the recent second bottoming of hog prices exceeded market and industry expectations, mainly because industry supply and inventory pressures remain relatively large while consumer demand absorption is weak, and it is basically established that the fourth quarter peak season for the live hog breeding industry will not be prosperous. Looking ahead, as hog prices and piglet prices once again refresh previous lows, industry cash flow losses are intensifying, which may drive a better-than-expected pace of sow capacity reduction, opening up room for the elasticity and sustainability of hog prices in the longer term, while sector holdings remain at a relatively low level, and Huatai Securities reiterates the opportunity to position in the live hog sector.