Waiting for Hog Prices to Turn Higher: My Bull Case for the Hog Cycle and How I Choose My Exposure

By the end of the second quarter of 2026, China’s breeding-sow inventory had fallen to 37.8 million head, down 6.5% year over year. Yet during the same first half, hog slaughter increased by 1.7% and pork output rose by 3.3%.

There were fewer sows, but more pork.

That apparent contradiction is the starting point of how I think about this hog cycle. National Bureau of Statistics data

My core view is not simply that “the sow herd is shrinking, so hog prices must rise immediately.” It is this:

Nominal capacity has begun to contract, but whether effective supply is truly falling still needs to be confirmed by PSY, piglet numbers, slaughter weights, and secondary fattening.

I am therefore not betting on an immediate surge in hog prices. I am waiting for the decline in statistical capacity to work its way into the supply of market hogs and, eventually, into producers’ earnings.

In choosing securities, I use Muyuan as the core expression of the hog cycle and Tech-Bank as a convex expression carrying restructuring risk. Choosing between Muyuan’s A- and H-shares is simply a way to optimize the investment vehicle. It must not become an excuse to increase my total exposure to the company.

The three clocks do not move together

At least three clocks matter when analyzing the hog cycle:

Sows and piglets represent future supply.
Market hogs and slaughter weights represent current supply.
Share prices represent the market’s expectations for future earnings.

These clocks rarely bottom at the same time.

The timeline below describes my transmission framework. It is not a forecast of exact dates.

The real lesson from this chart is that I cannot use today’s sow data to explain today’s hog price. Nor can I wait until the entire profit recovery appears in financial statements before admitting that the stock has entered a new cycle.

The difficulty of cyclical investing is that all three clocks must be watched even though they operate in different time zones.

The sow herd is not the complete production function

Breeding-sow inventory is important, but it is not effective supply itself.

A more complete approximation is:

Effective pork supply ≈ breeding sows × PSY × survival rate × slaughter weight

If the industry removes its least productive sows first, the remaining herd may produce larger litters and achieve higher piglet survival rates. A 6.5% decline in the sow herd would therefore not necessarily translate into a 6.5% decline in effective piglet supply.

If producers also hold hogs longer or use secondary fattening to increase slaughter weights, the decline in final pork supply could be reduced further.

The question I care about is therefore not merely whether the sow herd is shrinking. It is whether that decline is large enough to outrun improvements in production efficiency.

The confirmation signals I want to see include:

A sustained year-over-year decline in newborn piglets.
PSY improvements that are insufficient to offset sow reductions.
Total hog inventory moving from growth into contraction.
Falling slaughter weights.
Pork production eventually turning negative.

If only the sow herd declines while piglet supply, finishing inventory, slaughter weights, and pork production continue to rise, the industry has achieved nominal capacity reduction—not an effective contraction in supply.

Secondary fattening changes the timing, not the direction

Secondary fattening is one of the easiest variables to misread in this cycle.

When the market expects hog prices to rise, secondary-fattening buyers purchase standard-weight hogs. This reduces immediate supply to slaughterhouses and can push prices sharply higher. Rising prices then attract more secondary-fattening demand, creating a short-term positive feedback loop.

But secondary fattening does not eliminate supply. It moves today’s hogs into the future and makes them heavier.

Therefore:

Secondary fattening is an inventory transporter and a volatility amplifier, not a source of long-term demand.

It can make hog prices rise earlier, but it can also concentrate the future release of heavier hogs and reverse the previous gains.

I use secondary-fattening activity to assess the rhythm of the next month or two. I do not use it to determine the direction of the entire hog cycle.

Similarly, government rotation or incremental purchases of frozen pork can support sentiment and absorb some immediate supply. But these measures primarily address the problem that prices are too low today. Reductions in sows and piglets address the problem that future supply is too high.

Policy support is secondary evidence. The industry’s own capacity clearing remains the main thesis.

Where I believe the cycle stands

I currently define this stage as:

A volatile bottom accompanied by accelerating capacity reduction, while the market waits for effective supply contraction to reach the slaughter stage.

This does not mean the main upward move has already begun. Nor does it mean that a supply inflection point does not exist.

Near-term supply may remain heavy because of large producers’ output, the release of hogs previously held for secondary fattening, and elevated slaughter weights. But if low hog prices continue to generate industry losses while piglet restocking remains weak, the foundation for a future supply improvement will become progressively stronger.

I do not expect a supply collapse comparable to 2019. I expect a milder repair that could last longer:

Low hog prices force high-cost capacity to exit.
The number of newborn piglets begins to decline.
Secondary-fattening inventory is gradually absorbed.
Slaughter weights fall.
Hog prices move above the industry cost line.
Low-cost producers return to profitability first.

In other words, I am not trading a sudden shortage of pork. I am trading a repricing of the industry cost curve after a prolonged period of losses.

Muyuan and Tech-Bank serve different purposes

Muyuan and Tech-Bank could both benefit from higher hog prices, but they are not the same trade.

My positioning is:

Muyuan provides certainty; Tech-Bank provides convexity.

The Muyuan thesis rests on cost, scale, access to financing, and operating continuity. If the hog-price recovery arrives later than expected, its cost advantage should help it remain in the game longer than most competitors. Once hog prices move above its full cost, scale can amplify the recovery in profits.

Tech-Bank is not simply “a higher-beta Muyuan.”

It is exposed both to the hog cycle and to balance-sheet risk. Even if hog prices rise, the company may first need to reduce operating losses and ease cash-flow pressure. It must then rely on restructuring to improve its capital structure before value can ultimately reach common shareholders.

In the first quarter of 2026, Tech-Bank recorded a net loss attributable to shareholders of approximately RMB707 million. Equity attributable to shareholders of the listed company stood at approximately RMB1.659 billion at quarter-end, illustrating the fragility of both its operations and capital structure. Tech-Bank’s first-quarter 2026 report

The radar chart below is only my qualitative comparison framework. It is not an objective rating or a price-target model. The scores exist solely to explain the different roles the two companies play in my framework.

This chart does not answer which company is guaranteed to rise more. It answers what purpose each company should serve.

Muyuan is better suited to be the core expression of the hog cycle. Tech-Bank is closer to an option on hog prices, operating continuity, and judicial restructuring at the same time.

Tech-Bank’s pre-restructuring period has been extended to November 9, 2026. However, pre-restructuring does not mean that a court has formally accepted the company’s restructuring application. The company has also warned that formal court acceptance would result in a delisting-risk designation, while a failed restructuring followed by bankruptcy could lead to the termination of its listing. Tech-Bank pre-restructuring announcement

A small position can limit the loss if the thesis fails. It cannot turn a negative-expectation trade into a positive-expectation one.

For Tech-Bank, a lower share price is not itself a reason to add exposure. The thesis only strengthens when the probability of survival, the certainty of restructuring, and the value ultimately attributable to common shareholders become clearer.

Muyuan A-shares or H-shares?

Muyuan’s H-shares began trading on the Hong Kong Stock Exchange on February 6, 2026, under stock code 02714. Hong Kong Stock Exchange listing announcement

The A- and H-shares represent the same underlying operating assets.

Holding both does not provide diversification at the company level. The two listings differ in valuation, liquidity, currency exposure, taxes, fees, and investor base, but their underlying risk still comes from the same farms, balance sheet, and hog cycle.

The right question is not:

I already own Muyuan A-shares. Should I buy another allocation through the H-shares?

It is:

Within my predetermined total exposure to Muyuan, which market provides the better vehicle?

I calculate the premium as follows:

A-share premium to H-shares = A-share price ÷ (H-share price × HKD/CNY exchange rate) − 1

After accounting for liquidity, taxes, fees, currency exposure, and the possibility that the discount may persist indefinitely, I currently use the following personal guidelines:

A-share premium to H-shares	My preferred vehicle
Below 20%	A-shares are more convenient
20%–25%	Begin watching the H-shares
25%–30%	Prefer H-shares for new Muyuan exposure
Above 30%	The relative appeal of H-shares becomes significant
Above 35%	Consider an equal-value switch from some A-shares into H-shares

These ranges are personal trading rules. They are not objective valuation conclusions or real-time buy and sell signals.

The most important constraint is:

Switching from A-shares to H-shares may change the vehicle, but combined A- and H-share holdings must not exceed the predetermined total risk exposure to Muyuan.

Cheap H-shares are not risk-free, and an A/H discount is not guaranteed to close. If the company’s earnings do not materialize, the discount will not automatically create a return.

What would prove me wrong?

This trading thesis must be falsifiable.

The most important risk is not merely a broad market decline caused by a financial crisis. It is that the supply gap I expect never appears.

If the entire A-share market suffers a valuation sell-off while sow numbers, piglet supply, slaughter weights, and company costs do not deteriorate, that is closer to share-price risk.

But if the sow herd begins expanding again, PSY continues to improve, slaughter weights increase, and pork output keeps growing, the problem is no longer that the market is mispricing the stocks. It means the expected contraction in supply has failed to materialize.

My conditional action rules

I will not become more confident in a cycle reversal merely because hog prices rise on a particular day.

I place more weight on the following combination:

**Hog prices stop making new lows

the sow herd continues to contract at a reasonable pace

newborn piglet numbers decline

slaughter weights fall

low-cost producers retain their operating advantage**

For Muyuan, I monitor costs, cash flow, sow capacity, and capital expenditure. The cycle thesis only enters the earnings-realization stage if Muyuan’s cost advantage persists while effective industry supply begins to decline.

For Tech-Bank, I additionally monitor the court process, restructuring plan, treatment of debt, equity dilution, and operating continuity. A restructuring headline is not evidence. The terms that determine what remains for existing common shareholders are the evidence.

For the A/H decision, I compare the two markets only within my predetermined Muyuan exposure. If the valuation gap is not large enough to compensate for transaction friction and the risk of a persistent discount, I will not switch merely because the H-shares appear cheaper.

Conclusion

The easiest mistake in this hog cycle is to treat the sow count as supply itself.

The sow herd tells me the direction. PSY and survival rates determine effective capacity. Secondary fattening and slaughter weights determine the short-term rhythm. The industry cost curve determines who survives long enough to benefit from the reversal.

I ultimately use three different tools to express the same view:

Muyuan provides the core certainty of the hog-cycle thesis.
Tech-Bank provides tightly constrained distressed-restructuring convexity.
Muyuan’s A/H choice improves the investment vehicle rather than increasing risk exposure.

I do not need to predict the exact day on which hog prices will bottom.

I need to keep answering three questions:

Is the industry genuinely clearing capacity?
Who can survive until the supply gap appears?
By the time profits begin to recover, how much has the market already priced in?

That is how I understand the hog-cycle trade.

This article records my personal research framework and conditional views. It does not constitute investment advice, a promise of returns, or a recommendation to buy or sell any security. The radar chart and A/H premium ranges are the author’s qualitative research tools rather than objective ratings. Market and company conditions may change; investors should independently verify the information and assume responsibility for their own decisions.