Muyuan Foods Co., Ltd. (SHE: 002714) has swung back into the red amid persistently weak hog prices. On August 20, the company released its interim report, showing first-half revenue of 59.41 billion yuan, down 22.3% year-on-year. Its net loss attributable to shareholders reached 6.078 billion yuan, a sharp reversal from the 10.53 billion yuan profit recorded a year earlier. Operating cash flow also turned negative, shifting from a positive 17.351 billion yuan to a deficit of 2.224 billion yuan.

The deteriorating financial performance is primarily attributed to falling hog prices. According to the National Bureau of Statistics, the national average hog price dropped 23.1% year-on-year in the first half. Meanwhile, pork production still expanded by 3.3%, and hog slaughter volumes grew by 1.7%, indicating that supply-side pressures have yet to ease significantly. By the end of the second quarter, the national breeding sow inventory had fallen to 37.8 million heads, down 6.5% year-on-year, approaching the normal holding level of 37.5 million heads, as the industry's core production capacity begins to contract further.

With hog prices trading at low levels, cost control has become a more critical operational variable for Muyuan. In the first half, the company sold 38.615 million commercial hogs. The full cost of hog farming stood at approximately 11.7 yuan per kilogram in June and further declined to 11.5 yuan per kilogram in July, drawing close to the company's annual average cost target. The cost reduction, however, does not rely solely on feed prices. Muyuan's management has previously outlined a roadmap for further cost cuts, focusing on disease prevention and control, employee and executive incentives, breeding stock genetics, and smart farming applications. At its core, this strategy continues to improve production metrics such as survival rates, feed conversion ratios, and daily weight gain.

Muyuan also told Wall Street News that non-cash costs, including depreciation and amortization, currently account for more than 10% of the full cost, with cash costs slightly above 10 yuan per kilogram. The company noted that recent national hog prices have already exceeded its cash cost level. Another area of improvement comes from its slaughtering business. In the first half, Muyuan slaughtered 17.234 million hogs, up 50.98% year-on-year. Revenue from its slaughtering and meat processing operations reached 22.061 billion yuan, a 14.04% increase, maintaining profitability after achieving its first annual profit in 2025.

For Muyuan, the key variables to monitor going forward remain twofold: when the industry's capacity reduction will translate into higher hog prices, and how much further its cost levels can drop amid potential volatility in feed raw material prices. Risk Warning and Disclaimer: Markets involve risks, and investment requires caution. This article does not constitute personal investment advice, nor does it take into account individual users' specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article align with their particular circumstances. Investment decisions made based on this article are at the investor's own risk.