With China's pork sector performing well, investment enthusiasm continues to grow

Investor confidence is evident as livestock ETFs are attracting significant inflows. Large hog companies reported strong sales growth in July, and pork prices are expected to remain strong in the third and fourth quarters. However, it is important to note potential limitations, including consumer resistance to high pork prices and the impact on macroeconomic indicators such as the consumer price index (CPI). Industry participants are advised to remain vigilant and adapt strategies to manage these market dynamics.

With China's pork sector performing strongly relative to the broader market in mid-August, investment enthusiasm continues to rise. In particular, Muyuan and several other listed companies have performed well, stimulating broad market interest in the future trend of pork prices.

According to the latest data, the average price of pork in the country has exceeded 21 yuan per kg (about 2.89 US dollars per kg), indicating the current tight supply and demand situation in the market. The main reasons for the decline in supply are the reduction in production capacity and the impact of the epidemic. At the same time, the decline in farming costs and the market's expectation of high pork prices also pushed up prices to a certain extent.

From a broader perspective, the inflow of funds into the pig farming sector shows that investors are optimistic about the sector. Over the past 60 days, the sector has received nearly 300 million yuan (about 41 million US dollars) in net inflows, significantly increasing market activity in the pig farming sector.

In terms of specific farming company performance, July sales data from three major listed pig farming companies Muyuan, Wens and New Hope showed strong sales growth. Muyuan's pig sales revenue increased significantly by 43.4% year-on-year, which is attributed to the current market conditions.

In addition, low feed prices have also provided good margins for farm companies, and hog prices are expected to remain high in the third and fourth quarters of this year.

In terms of future market expectations, pig prices may remain high in the short term. However, it is worth noting that although the demand side is showing some weakness, limited supply may continue to support pig prices. As demand for fattened pigs increases in the fall and winter, pig prices are expected to rise further. However, continued high pig prices may be limited by end-user acceptance of expensive pork, which may put pressure on the ever-rising pig prices.

Moreover, the sharp rise in hog prices has also impacted macroeconomic indicators, particularly the consumer price index (CPI). Analysis shows that although the CPI rose in July, further increases in hog prices may limit how much the CPI improves on a monthly basis. As farmers and investors face future market changes, they should pay close attention to supply and demand changes as well as policy direction and adjust their market strategies accordingly.