Hua Yuan Securities released a research report indicating that, according to Yongyi statistics, as of April 6, hog prices fell to 9.01 yuan per kilogram (with some provinces already dropping below the 9 yuan/kg threshold). The industry is facing losses of nearly 400 yuan per head for self-breeding operations, and supply pressures remain high in the first half of the year, potentially worsening cash flow strain for breeders. Sentiment toward replenishing herds is significantly subdued, with piglet prices weakening and profits under pressure (piglet prices have dropped by approximately 100 yuan over the past month, with losses nearing 80 yuan per head). In the second quarter, the industry may face substantial losses for both market hogs and piglets, which could drive a voluntary reduction in production capacity. Furthermore, the hog industry is undergoing significant policy transformation, with considerable variance in operational performance. Companies leading in cost efficiency and those integrating with agricultural communities may enjoy excess profits and valuation premiums. Key views from Hua Yuan Securities are as follows: Hog prices have fallen below cash costs for top performers, and the central government's No. 1 document emphasizes comprehensive capacity regulation. The latest hog price from Yongyi (April 6, 2026) dropped to 9.01 yuan/kg (with some provinces breaching the 9 yuan/kg level), resulting in losses of nearly 400 yuan per head for self-breeding operations. Supply pressures in the first half of the year remain substantial, likely exacerbating cash flow challenges for breeders. Pessimistic sentiment is spreading upstream, potentially accelerating capacity reduction. Herd replenishment sentiment is clearly dampened, with weaker piglet prices and compressed profits (piglet prices have declined by about 100 yuan recently, with losses per head approaching 80 yuan). The second quarter may see deep losses for both market hogs and piglets, prompting proactive capacity cuts. Industry policies are undergoing profound changes, shifting focus toward solution-oriented enterprises. The 2026 Central No. 1 document highlights strengthened comprehensive capacity regulation, with the Ministry of Agriculture and Rural Affairs proposing specific measures such as annual production filing management for leading hog breeding enterprises and orderly adjustment of national sow inventories to better align market supply and demand. Industry policies are transitioning toward "protecting farmers' rights and stimulating corporate innovation." Future growth stocks may place greater emphasis on technological content, balancing farmer interests, business model innovation, and the ability to mobilize existing production factors. High-quality industry development is imperative, with significant variance in operational performance. Cost leaders and companies integrating with farmers may achieve excess profits and valuation premiums. Recommendations include DEKON AGR (02419), representing a "platform + ecosystem" model driven by technology and services. Key players to watch include leading hog breeders such as Muyuan Foods (002714.SZ) and Wens Foodstuff Group (300498.SZ), as well as Shennong Group (605296.SH), Julong Animal Husbandry (603477.SH), Tecon Biology (002100.SZ), Lihua股份 (300761.SZ), COFCO Jiakang (01610), Kingkey Smart Agriculture (000048.SZ), and Kingsino Technology (002548.SZ). In the broiler sector, the contradiction between high capacity and weak demand persists, potentially boosting market share for leaders. The sector experienced overall volatility this week. On April 7, live chicken prices were 3.4 yuan per jin, down 3.7% month-on-month and 6.3% year-on-year. Chick prices were quoted at 3.2 yuan per bird, flat month-on-month but up 8.6% year-on-year. Due to avian influenza incidents in major French breeding regions, France may fully suspend grandparent stock exports to China. In 2025, French imports accounted for 40% of China's grandparent stock updates, with the remainder largely domestically bred. The outbreak in France could further reduce or halt imports, potentially driving parent stock prices higher. In 2026, the white-feathered broiler industry continues to face the challenge of high capacity and weak demand. Losses are pressuring breeding farms to cut capacity, potentially allowing integrated enterprises and contract farming companies to expand their market share. Leaders are expected to maintain their advantages in 2026. Focus on two main themes for sustainable ROE improvement: 1) Leading companies with high-quality imported breeding stock, which may achieve excess profits due to their position in the industry chain and breed advantages, such as Yisheng Livestock and Poultry (002458.SZ); 2) Fully integrated industry leaders, whose breeding profits are not squeezed by upstream costs and possess high-quality downstream food assets, such as Sunner Development (002299.SZ). Risks include price fluctuations in breeding products, outbreaks of large-scale uncontrollable diseases, major food safety incidents, macroeconomic systemic risks, and extreme weather events leading to large-scale crop failures and rising grain prices.