China's hog industry: Accelerated de-stocking of breeding sows in August

Accelerated de-stocking of breeding sows in August. According to SCI data, China's breeding sow inventory fell 1.61% m-o-m and 7.1% y-o-y in August 2026, vs declines of 1.48% m-o-m and 6.6% y-o-y in July, indicating an acceleration in the de-stocking of breeding sows. We expect capacity de-stocking to accelerate in 3Q26 but slow down in 4Q, and sow inventory is unlikely to rebound by end-2026, strengthening the hog price upcycle in 2027. Market concerns over productivity gains are overstated: SCI's 2025 MSY estimate of 21.52 hogs/sow/year skews toward large, efficient farms, while the full-sample MSY derived from official hog production volume and average sow inventory was 17.8, making the 37.5m sow inventory target reasonable. We maintain our constructive view on the 2027 hog price upcycle, prefer Muyuan and Wens (both Buy), and adjust TPs for DBN (Buy, RMB4.90), Tecon (Hold, RMB7.50) and New Hope (Reduce, RMB6.20).