"Longs don't die, shorts don't stop" Over 10 billion in funds battle fiercely in live pig futures

On April 7, the lead hog futures contract 2605 hit a intraday low of 9,125 yuan/ton, extending to a new low since its listing.

In the hog spot market and the stock market, losses have somewhat eased since April—for example, in the domestic hogs (excluding the “third-grade” and above, i.e., outer three varieties) the latest price is 10.12 yuan per kilogram, the same as the spot price at the end of March. Related stocks such as Muyuan Co., Ltd. and Wen’s Group have also not continued to fall; over the same period, some stocks have even posted modest gains.

The reason for the short-term divergence among hog futures, spot, and stock market performance may be related to the intensification of the game between long and short positions in the futures market.

In fact, since the hog price began this round of decline in mid-March, hog futures have been continually setting new position records: overall open interest has risen from around 350,000 lots to the current level of about 500,000 lots.

According to Wind data, as of the close on April 7, the value of open positions in hog futures had already reached 83.36 billion yuan, while the amount of capital deposited (which occupies margin) stood at 13.34 billion yuan.

Although hog prices have already fallen to an absolute low in nearly two decades, longs and shorts in the futures market have yet to decide a winner. Over the past few trading days, futures firms ranked in the top 20 by open interest have continued to “reinforce” and add positions.

Amid the entanglement between long and short funds, the 2605 contract has maintained an inertia-driven decline, continuously printing new lows.

A new low in hog prices, a new high in positions

Since April, the decline in hog spot prices has been less than that of hog futures.

China Hog Industry Network data shows that since April, the domestic hog (outer three varieties) lowest price has been 10.03 yuan per kilogram; the low at the end of March was 10.06 yuan per kilogram. Over the same period, the domestic hog (inner three varieties) lowest price was 9.95 yuan per kilogram, and the low at the end of March was 10.03 yuan per kilogram.

By contrast, in the futures market not only has the decline been larger, but prices are also lower—especially for the 2605 contract, which serves as the “main battlefield” for the current long-short contest and also has the highest trading activity.

After this contract broke below 10 yuan per kilogram at the end of March, on the morning of April 7 it fell to around 9.13 yuan per kilogram at its lowest point, setting a historical low for this variety since it was launched in 2021.

Hog prices, already at an absolute low level in nearly two decades, have also attracted a large amount of capital to enter “buy the dip,” driving the open-interest scale of hog futures to keep climbing.

Wind Information data shows that in early March, total open interest in hog futures fluctuated around 350,000 lots. After that, as the lead contract successively broke below the 11 yuan/kg and 10 yuan/kg integer levels, both open interest and the value of open positions gradually increased. By the afternoon close on April 7, total open interest in hog futures had reached 501,000 lots, an increase of more than 40% compared with early March. This record-breaking open-interest level corresponds to margin in the scale of over 100 billion yuan.

Also, according to Wind statistics, as of the close on April 7, the value of open positions in hog futures was 83.36 billion yuan, and the scale of deposited funds was 13.34 billion yuan. The margin ratio corresponding to these data under this data scope was 16%. Of these figures, the value of open positions can be estimated through the futures settlement price and the contract size (16 tons/lot), so the accuracy of related data is relatively high. The deposited funds, however, differ because each futures firm charges margin standards that vary; therefore, the specific data above can only be used as reference.

However, even using the lower standard, based on a 13% margin ratio for hog futures on April 7 by a leading futures company, the open positions held by both longs and shorts are already at “over 10 billion yuan on the order of” (i.e., in the hundreds of billions) in notional terms.

More importantly, although hog futures keep moving lower in the short term, with the lead contract down to as low as 9.1 yuan/kg, long positions have not given up.

Taking futures firms ranked in the top 20 by open interest as an example, in the past few trading days, the magnitude of long position adding has even been greater than that of shorts. For instance, on April 1, among the top 20 futures company seats, longs increased positions by 4,734 lots, while shorts increased by 2,030 lots on that day. In addition, on March 2 and March 3, the number of lots added by longs in the top seats was also slightly higher than that of shorts, until on April 7 when shorts’ added positions finally overtook longs.

And as the saying goes, “as long as the longs don’t die and the shorts don’t stop,” before long chips have not fully stopped out and exited and before open interest has not clearly fallen, the current operating trend of hog futures is also hard to say that it can be reversed. The change that is foreseeable is simply that the main battlefield for the long-short contest will gradually shift to the next lead contract 2607 as the delivery month of the 2605 contract approaches.

As of the close on April 7, the latest price of hog futures contract 2607 was 10.23 yuan/kg, clearly higher than the 9.21 yuan/kg price of contract 2605. This price gap of more than 1 yuan/kg provides shorts with more room to exert force going forward.

A “group portrait” of a depressed cycle

Hog-raising enterprises are naturally short, but because the absolute price of hog futures is currently so low, selling for hedging (sell hedges) is hard to effectively offset losses in their hog business. For example, contract 2611, which represents the market’s expectation for the November hog price, had a settlement price on April 7 of only 11.98 yuan/kg, which is below the cost lines of most hog-raising enterprises.

Judging from recent earnings briefings and institutional research, among several leading breeding companies with the strongest cost advantages, Muyuan Co., Ltd. and Wen’s Group had hog costs of around 12 yuan/kg in January and February this year. New Hope’s fully allocated cost for fattened pigs in February this year is about 12.3 yuan/kg.

Muyuan Co., Ltd.’s cost target this year is also only about 11.5 yuan/kg, and in the short to medium term it is unlikely to be able to avoid losses through drastic cost reductions alone.

Even if the goal is to reduce losses by selling hedges through farther-month contracts, it still needs to consider that as non-lead contracts, liquidity is insufficient and market capacity is smaller.

With futures prices so low and limited room for self-driven cost reduction, some hog-raising enterprises have already made mental preparations for a “prolonged war,” and are seeking to hedge losses from their breeding business through some new approaches.

The overseas expansion that Muyuan chooses, along with extending downstream into slaughtering and meat-related segments. In March 2025, the company established an overseas wholly owned subsidiary, Vietnam Muyuan Co., Ltd., through its subsidiary; its main business covers providing technology services for hog breeding, intelligent breeding equipment, and so on.

At a recent annual report exchange meeting, the company’s latest guidance has been adjusted to: “In 2026, the company’s goal for overseas business development is to land breeding capacity in Vietnam and connect the technical route for development locally.” Meanwhile, the company also said that compared with 2025, its capital expenditure plan at the slaughter end has increased, with more investment in slaughter and meat-related businesses to raise its self-slaughter ratio.

Wen’s Group, which has some poultry business to hedge against risk and—at least in theory—faces less operational pressure, has also clearly set “going overseas” as an important strategic direction this year. Its initial goal is to secure about 10% of the Vietnam yellow-feathered broiler market; afterward, it plans to gradually expand into other businesses such as hogs and ducks depending on overseas development.

Historical data shows that in 2025 Wen’s Group sold 40.4769 million hogs, including 5.0302 million piglets—making it the second-largest hog-raising enterprise in China after Muyuan.

And against the backdrop of pushing structural overcapacity reduction in China’s hog industry, Wen’s Group has announced externally that it will supply 5 million head of fresh milk pigs and roasted milk pigs and other series of products to the market each year, as an important way to sell piglets. In its view, this move can reduce the outbound slaughter weight of hogs, avoid overgrowth from holding them longer in inventory, thereby easing the problem of excess capacity.

In the previous hog cycle, the company JIDING Smart Agriculture, whose business involves real estate and breeding, chose to hedge across multiple businesses through external mergers and acquisitions. According to a recent announcement, the company plans to obtain control of Jiangsu Huibo Robot Technology Co., Ltd. in total by means such as capital increases and signing acting-in-concert agreements, and to include it within the scope of consolidated financial statements. In response, JIDING Smart Agriculture stated, “This will help the company balance the cyclical fluctuations of its main hog-raising business and promote the company’s expansion through external growth.”