I. Industry Background: Structural Transformation from African Swine Fever to Overcapacity

Since the outbreak of African swine fever in 2019, China's hog farming industry has undergone profound structural transformation. As a major pork-consuming country, the farming landscape dominated by small and medium-sized hog farmers was once the mainstream form of the industry, with such farmers accounting for over 99% of the total farming operations. As late as 2007, there were still over 80 million small and medium-sized farms with an annual slaughter volume of fewer than 500 head, while fewer than 100 large-scale hog farms nationwide had an annual slaughter volume exceeding 50,000 head. In 2017, small and medium-sized farms with an annual slaughter volume of fewer than 500 head still supplied over 70% of the hogs to the overall pork market.

The African swine fever epidemic caused a precipitous drop in domestic hog production capacity, resulting in severe pork supply shortages and sharp price increases. To ensure stable market supply, the state introduced a series of systematic support policies to promote large-scale hog farming and encourage large farming enterprises to expand production capacity. By 2023, the large-scale farming rate for hogs in China had reached approximately 68%, while the market share of small and medium-sized farmers declined year by year from 74% in 2007 to 32% in 2023. In parallel, hog farming enterprises represented by Muyuan Foods and Wens Foodstuff continued to grow and expand. Taking Muyuan as an example, its hog farming scale was still around 200,000 head in 2008, but by 2023 its annual hog slaughter volume had reached as high as 63.82 million head, while Wens Foodstuff's 2023 slaughter volume also reached 26.26 million head.

Large-scale hog farming by enterprises is generally achieved through three models: the self-built model, represented by Muyuan, characterized by heavy assets, long cycles, and high controllability and efficiency; the company-plus-farmer model, represented by Wens, offering advantages of light assets, rapid expansion, and risk diversification; and the leasing model, represented by enterprises such as New Hope Liuhe, Juxing Nongmu, and Tech-Bank. However, in recent years, the hog farming industry has undergone fundamental changes. The number of breeding sows in stock rose rapidly from 20.45 million in 2019 to 43.29 million in 2021, and although it has since declined, it has remained above 39 million. In 2025, the national hog slaughter volume exceeded 700 million head, with pork production approaching 60 million tons, representing year-on-year growth in both metrics.

II.In-Depth Interpretation of 2026 Hog Production Capacity Regulation Policies

1. Continuous Downward Adjustment of Regulatory Targets and Policy Logic

On May 14, 2026, the Ministry of Agriculture and Rural Affairs issued the "Comprehensive Regulation Implementation Plan for Hog Production Capacity (2026 Revision)," stably lowering the national normal target for breeding sows in stock to approximately 37.5 million head. This marked another downward adjustment of the normal stock target since February 2024, reflecting the state's policy direction of stabilizing the hog industry. Reviewing the evolution of production capacity regulation target in recent years, the national target for normal breeding sow stock underwent three key adjustments: approximately 41 million head before March 2024, approximately 39 million head after March 2024, and the current approximately 37.5 million head, with each adjustment ranging between 1.5 million and 2 million head.

Zhu Zengyong, a researcher at the Beijing Institute of Animal Science and Veterinary Medicine of the Chinese Academy of Agricultural Sciences, pointed out that this downward adjustment of the breeding sow target by approximately 1.5 million head was based on a comprehensive consideration of precise supply-demand matching, safety redundancy, and efficiency improvement, reflecting three signals: supply-demand rebalancing, efficiency enhancement, and expectation management. The policy logic shifted from "post-crisis market intervention" to "pre-emptive volume control," combining short-term capacity adjustments with long-term sustainable high-quality development, and transitioning from "ensuring supply" to "ensuring balance" and "ensuring profitability." It is noteworthy that the Plan explicitly tightened the upper and lower limits of the green zone and the upper limit of the yellow zone for breeding sow stock, with the upper limit of the green zone for normal capacity fluctuations adjusted from the previous 105% to 103%, and the lower limit from 95% to 92%, significantly enhancing regulatory precision.

2. Innovation in the Tiered Linked Regulation Mechanism

The Plan achieved important innovations in the regulatory mechanism, proposing the establishment of a tiered linked production capacity regulation system. Relying on the national direct-reporting system for farming operations, it conducted dynamic monitoring of large-scale hog farms across regions, focusing on tracking their numbers and changes in production and operation. Large-scale farms with an annual designed slaughter capacity of 10,000 head or more and national core pig breeding farms, on the principle of voluntary participation and cooperation in capacity regulation, were included in the management of national-level hog production capacity regulation farms. Provincial agricultural and rural departments were required to update the list of regulated farms for the previous year by the end of February each year, and localities were permitted to establish corresponding levels of hog production capacity regulation farms based on actual conditions.

Supplementary incentive measures included that regulated farms responding to the government's capacity regulation call could enjoy priority access to hog industry support policies in accordance with relevant regulations. Meanwhile, the Plan set a target of maintaining the number of large-scale pig farms nationwide at over 130,000, requiring localities to keep the number of large-scale farms generally stable and not to demolish them arbitrarily. The normal stock of core breeding pig groups was to be maintained at over 145,000 head, with a minimum stock of no less than 120,000 head. The establishment of this classified regulation mechanism marked the transition of hog production capacity regulation from the past administrative command-style management to market-oriented, rule-of-law-based, and refined management.

3. Filing Management and Window Guidance for Leading Hog Enterprises

The Plan explicitly strengthened window guidance for large hog enterprises and dynamic early warning of operational risks. Large group farming enterprises with a total breeding sow stock of 100,000 head or more (including their subordinate farming enterprises) were included in the national comprehensive regulation monitoring list for hog production capacity. Provinces were required to determine their regional regulation monitoring lists based on actual conditions, implement annual production filing management for enterprises on the monitoring list, consolidate the filing production responsibilities of farming enterprises on the monitoring list, and improve the follow-up effectiveness evaluation and incentive-constraint mechanisms.

This institutional arrangement means that capacity adjustments by leading hog enterprises are no longer merely their own operational decisions but are incorporated into the rule-of-law framework of national macroeconomic regulation. Enterprises are required to report their annual production plans to agricultural and rural departments at the beginning of each year, including core indicators such as breeding sow stock targets and hog slaughter plans. Government departments are to guide enterprises to reasonably adjust production capacity through window guidance, warning letters, regulatory interviews, and other means. This institutional design both respects the operational autonomy of enterprises and ensures the effective implementation of national capacity regulation targets.

III."Ecological Environment Code": Hog Farming Environmental Protection Enters the "Codification Era"

1. Core Institutional Upgrades of the Code

On March 12, 2026, the Fourth Session of the 14th National People's Congress deliberated and passed the "Ecological Environment Code of the People's Republic of China," which will take effect on August 15, 2026. This is China's second law bearing the name "Code," systematically integrating and synthesizing existing separate environmental laws. Compared with the former "Regulations on the Prevention and Control of Pollution from Large-Scale Livestock and Poultry Farming," the Code achieved three core leaps: legal effect elevated from administrative regulations to national basic law, significantly enhancing enforcement rigidity and authority; regulatory scope extended from large-scale farms to densely populated free-range farming areas, filling the legal vacuum in free-range manure pollution control; and governance logic shifted from "end-of-pipe penalties" to the full-chain management of "source prevention—process control—resource utilization—legal accountability."

The Code incorporated hog farming manure pollution prevention and control into the core scope of agricultural and rural pollution prevention and control and systematic management of agricultural non-point source pollution, fundamentally changing the previous fragmented pattern in which livestock environmental regulations were scattered across multiple laws and regulations such as the "Water Pollution Prevention and Control Law," the "Air Pollution Prevention and Control Law," and the "Regulations on the Prevention and Control of Pollution from Large-Scale Livestock and Poultry Farming." It achieved an integrated institutional loop of unified regulatory standards, unified division of powers and responsibilities, unified enforcement basis, and unified legal liability. Experts from the Animal Husbandry and Veterinary Bureau of the Ministry of Agriculture and Rural Affairs explicitly warned that the environmental storm could eliminate 30% of substandard production capacity, and that the national breeding sow stock could decrease by 5.8 to 7.8 million head between 2025 and 2027.

2. Six Environmental Red Lines and Legal Liability

The Ecological Environment Code imposed constraints on livestock and poultry farming across the entire process, from site selection to discharge, and from procedures to operation and maintenance, with clear red lines drawn for each aspect. Regarding absolute site selection compliance, drinking water source protection areas, ecologically sensitive areas, densely populated areas, and legally designated prohibited farming areas were all strictly off-limits. Regarding indispensable procedures, large-scale pig farms were required to undergo environmental impact assessment before construction, with unapproved construction directly subject to penalties; and were required to obtain pollutant discharge permits in accordance with the law and discharge in compliance therewith. Regarding strict discharge control, the discharge of wastewater and solid waste was prohibited throughout the farming process, and waste such as manure and dead pig carcasses was required to be collected, stored, and transported in a timely manner.

Harmless treatment was the bottom line—the use of untreated kitchen waste for feeding pigs was prohibited, and manure was required to meet standards before being returned to farmland. Regarding odor pollutant prevention and control, malodorous pollutants such as ammonia and hydrogen sulfide generated from hog farming were required to comply with the "Emission Standards for Odor Pollutants." Regarding soil and agricultural product safety control, the application to farmland of livestock manure and wastewater that did not meet agricultural standards and ecological environment protection standards was prohibited. Legal liability was comprehensively upgraded, with significantly increased costs of non-compliance. The maximum fine could reach RMB 2 million, and in serious cases, enterprises could be ordered to suspend production for remediation or cease operations and close down in accordance with the law, with criminal liability pursued where a crime was constituted.

3. Far-Reaching Impact on Capacity Adjustments of Hog Enterprises

The implementation of the Code will have a far-reaching impact on the hog farming industry. On the one hand, the raised environmental threshold will accelerate the exit of backward production capacity. A large number of pig farms with substandard environmental facilities and non-compliant site selection will face closure or rectification, and the clearance of such capacity will help alleviate the pressure of overcapacity in the industry. On the other hand, the rising cost of environmental compliance will further compress the survival space of small and medium-sized farming enterprises, driving continued industry concentration. For large hog enterprises, it is necessary to increase investment in environmental facilities while reducing production capacity, ensuring that existing pig farms meet the environmental standards required by the Code.

It is noteworthy that the Code, for the first time at the legal level, clarified the safeguarding responsibilities of governments at all levels for pollution prevention and control in farming, establishing a comprehensive support system integrating funding, technology, services, and regulation. People's governments at all levels are required to allocate funds in their fiscal budgets to support the prevention and control of pollution from livestock and poultry farming and slaughtering, and to promote advanced and applicable manure treatment and resource utilization technologies. This means that eligible large-scale hog farming enterprises are expected to receive government environmental subsidies and technical support, providing a certain policy buffer for enterprises' environmental upgrades during the capacity adjustment period.

IV. Strategic Responses and Transformation Practices of Leading Hog Enterprises

1. Muyuan Foods: Cost Advantage and Proactive Capacity Reduction

As the industry leader, Muyuan Foods made the most significant capacity adjustments. Public information shows that in 2025, Muyuan reduced its breeding sow stock from the year's peak of 3.621 million head to 3.129 million head by the end of March 2026, a cumulative reduction of nearly 500,000 head. At the 2025 annual shareholders' meeting, Gao Tong, Chief Financial Officer of Muyuan Foods, explicitly stated that it would be difficult for the industry to achieve capacity growth in the short term, and that the company's self-breeding and self-farming volume would not see significant changes in the next two years, with the company shifting more of its work focus toward efficiency improvement.

Muyuan's core competitiveness lies in cost control. In 2025, Muyuan's hog farming cost dropped to RMB 12 per kilogram, and in the first quarter of 2026, farming costs continued to optimize, with the full cost in March falling to RMB 11.6 per kilogram, further expanding its cost advantage and forming the strongest moat against continued pork price declines. At the same time, the company's financial structure continued to improve, with the asset-liability ratio at the end of the first quarter of 2026 falling to 50.73%, down 3.42 percentage points from the beginning of the year, with financial safety continuing to improve. Muyuan is also strengthening its slaughtering and meat business and overseas expansion, with a slaughter volume of 28.663 million head in 2025 and a capacity utilization rate of 98.8%, achieving its first annual profit in the slaughtering business.

2. Wens Foodstuff: Quality Improvement, Efficiency Enhancement, and Product Innovation

Wens Foodstuff was also an active respondent to capacity regulation. Data shows that at the end of 2025, Wens' breeding sow stock was approximately 1.35 million head, which had decreased to 1.28 million head by the end of February 2026, a cumulative reduction of 70,000 head, or approximately 5.2%. The company explicitly stated that it was eliminating inefficient capacity and rationally optimizing its sow population, mainly culling older, high-parity, low-efficiency, low-reproductive, non-mainstream lineage, and health-compromised sows. Wens chose to transform capacity pressure into impetus for product innovation, announcing plans to supply 5 million head of fresh suckling pigs and roasted suckling pigs annually, thereby reducing slaughter weight and avoiding weight-gain retention.

Leveraging the stability of its poultry business, Wens effectively buffered the impact of pork price declines on overall revenue. In the first quarter of 2026, Wens Foodstuff's administrative expenses decreased by 23.38% year-on-year, demonstrating significant cost control effectiveness. The company responded to the industry downturn through multiple measures including share buybacks and expense control, demonstrating the operational resilience of leading enterprises at the bottom of the cycle. Wens' experience shows that diversified business layouts and refined cost management are important safeguards for enterprises to navigate the pig cycle.

3. Industry-Wide "Quality over Quantity" Transformation Trend

In the face of tightened capacity regulation policies, leading listed hog enterprises generally adopted a positive response attitude, with strategies characterized by a common feature of "improving quality over increasing quantity." In addition to the two giants Muyuan and Wens, New Hope and New Wufeng also successively slowed down their slaughter pace in response to regulatory guidance. As of March 2026, over the past nine months, the breeding sow stocks of major leading hog enterprises all showed significant declines: Muyuan Foods decreased by 301,000 head, Wens Foodstuff decreased by 170,000 head, and Shuangbaotai Group decreased by 80,000 head, with the eight enterprises collectively reducing their breeding sow stock by 650,800 head.

In the first quarter of 2026, major hog enterprises generally experienced significant declines in hog slaughter volume on a quarter-on-quarter basis, with 20 enterprises collectively reducing their slaughter volume by 9.7721 million head. Multiple securities firms issued research reports stating that the continued implementation of capacity regulation policies, combined with deep industry losses, would accelerate the clearance of backward capacity. Changjiang Securities stated that policy regulation would help drive the passive clearance of backward capacity, and that the combination of proactive and passive factors was expected to accelerate capacity clearance, with enterprises possessing cost advantages and cash flow advantages expected to enjoy longer profit cycles. The industry is transitioning from a "volume competition" to a "cost, management, and compliance competition" stage of high-quality development.

V. .Strategic Recommendations and Legal Responses for Large-Scale Hog Farming Enterprises**

1. Legal Risk Identification in Capacity Optimization

Against the current background of capacity regulation, large-scale hog farming enterprises face multiple legal risks. Foremost among these are legal risks related to pig farm lease contracts. A large number of pig farming enterprises entered into pig farm lease contracts with terms of 10 to 15 years during the period of rapid expansion, with lessees required to pay millions or even tens of millions of RMB annually in lease and environmental treatment fees. Under the policy requirement of capacity reduction, continued performance of these lease contracts would result in sustained losses, but unilateral termination of the contracts exposed enterprises to the risk of liability for breach of contract. Issues such as disputes over the suitability of leased properties, difficulties in negotiating contract amendments, and obstacles to exercising termination rights were intertwined, constituting the most prominent legal pain points for pig farming enterprises at present.

Environmental compliance risks are equally significant and cannot be overlooked. With the implementation of the Ecological Environment Code, environmental regulation will enter its strictest phase in history. Enterprises need to comprehensively review whether the environmental facilities of existing pig farms meet the Code's requirements, whether environmental impact assessment procedures are complete, whether pollutant discharge permits are valid, and whether manure treatment facilities are operating normally. For pig farms that fail to meet environmental standards, enterprises need to make difficult choices between capacity withdrawal and environmental rectification, and this decision-making process involves complex legal judgments and cost-benefit analyses.

2. Coordination of Policy Compliance and Strategic Adjustment

Facing the dual pressures of capacity regulation and environmental upgrading, large-scale hog farming enterprises need to establish a response mechanism that coordinates policy compliance with strategic adjustment. First, enterprises should closely monitor national and local capacity regulation policy developments, adjust annual production plans in a timely manner, and proactively adapt to the filing management system. Breeding sow stocks should be maintained within the reasonable range required by policy to avoid administrative interviews or loss of eligibility for policy support due to over-scale farming. At the same time, enterprises should make full use of supporting incentive measures for capacity regulation and strive to obtain government financial subsidies and credit support for environmental retrofitting and technological upgrading.

Second, enterprises need to systematically assess the legal compliance status of existing pig farms and establish a classified disposal mechanism. Core production capacity that meets environmental standards and has good operational efficiency should receive increased investment for continued optimization; pig farms that fail to meet environmental standards but are feasible for rectification should have rectification plans formulated and completed before the Code takes effect; and pig farms with non-compliant site selection or excessively high rectification costs should be included in priority withdrawal lists, with orderly exit achieved through negotiation or legal channels. Throughout the capacity optimization process, it is recommended that enterprises engage professional legal teams for full-process participation, ensuring that every decision has a sufficient legal basis and that every step complies with statutory procedures.

VI. Conclusion

The hog farming industry is in a period of deep adjustment, with the combined effect of continued tightening of capacity regulation policies and the impending implementation of the Ecological Environment Code reshaping the industry's competitive landscape and development path. For large-scale hog farming enterprises, this represents both a severe challenge and an opportunity for transformation and upgrading. Those enterprises that can proactively adapt to policy changes, advance compliance construction, and effectively prevent and control legal risks will occupy a favorable position in the industry reshuffle.

The prevention and control of legal risks is a systematic project that requires the high attention of enterprise management and the coordinated cooperation of all departments. It is recommended that large-scale hog farming enterprises establish a long-term mechanism for legal risk prevention and control as soon as possible, embedding legal review into the entire process of business decision-making to prevent legal risks at the source. At the same time, given that the legal issues involved in capacity adjustments are highly professional and complex, it is recommended that enterprises work closely with professional legal teams to ensure that their legitimate rights and interests are fully protected, providing a solid legal guarantee for the smooth implementation of capacity optimization strategies. During the critical period when hog prices are bottoming out, managing cost control, epidemic prevention, and legal risk prevention well, and adjusting production capacity in accordance with the times and circumstances, is an essential course for every large-scale hog farming enterprise.