Live pigs: The capacity consumption battle that no one dares to retreat from

Right now, the hog (live pig) industry is trapped in a suspicion-chain deadlock that no one seems able to break.

The industry has been suffering deep losses for multiple consecutive months. Hog prices have fallen to near the low end of recent years. Losses per hog for self-breeding and self-raising operations have been expanding steadily. Backyard farmers are exiting at an accelerated pace, and the industry’s level of large-scale operations has continued to rise. But the odd part is that these deep losses have not led to any real, substantive contraction in capacity. Instead, leading companies are finding themselves in a “prisoner’s dilemma” where “no one dares to cut production.”

Every company knows this well: the core issue behind the current oversupply situation is excess capacity. But no one is willing to be the first to hit the production cut button. On one hand, the market gaps left behind by backyard farmers exiting are right in front of them. If any company voluntarily reduces its slaughter/market-ready output volume, that reduction would be instantly swallowed up by competitors, leaving it to lose market share painstakingly built up over many years. More fundamentally, the key concern is that once a company proactively scales down, when the market eventually enters a cycle reversal, its own capacity simply won’t be able to keep up with the new market trend. All the losses it has been gritting through and the massive sunk costs it has paid up to that point would be completely wasted—essentially doing all the work of dressing up and ensuring that the competitor who outlasts others gets the benefit.

So the entire industry has fallen into a vicious cycle of “the more you lose, the more you hold on; the more you hold on, the more you expand.” Everyone is waiting for hog prices to reverse; everyone is tightening cash flow and betting that the other side will fall first. But this endless capacity arms race is precisely what keeps pushing back the turning point of the cycle reversal. The endgame of this war of attrition can only be the complete exit of companies whose cash flow finally breaks. Only then will this unbreakable suspicion-chain truly reach a moment of resolution.
Doubao’s writing is much better than mine.