Dekon Swings To Red On Chinese Pork Oversupply

The major hog producer said it expects to report a net loss of up to 1.4 billion yuan in the first half of 2026, reversing a 1.23 billion yuan profit a year earlier image credit: Bamboo Works Key Takeaways: Dekon swung sharply into the red in the first half of 2026, as prices for its core hog-raising business plunged 32.7% in June compared with a year earlier The company’s hog output rose 25.6% in June year-on-year despite the plunging prices, showing the industry remains heavily oversupplied Some serious crowding is happening in the Chinese pig pen.

That’s the central message coming in a new profit warning from Dekon Food and Agriculture Group (2419.HK), which said it fell sharply into the red in the first half of this year due to a nationwide glut of China’s favorite meat.

Dekon’s warning comes just days after larger peer Muyuan Foods (2714.HK; 002714.SZ) issued a nearly identical message.

Industries like pork are famously cyclical, as producers rush to build up new capacity when prices are high and supplies are tight, resulting in oversupply.

In this case, China encountered a major pork squeeze in late 2019, just before the pandemic, when prices nearly tripled to as much as 38 yuan per kilogram during an outbreak of African swine fever.

By comparison, Dekon was able to collect just 9.63 yuan per kilogram of each hog that it sold in June, according to a monthly business update issued by the company on Thursday.

That figure was down 24.4% from what it charged in January, and 32.7% lower than the 14.31 yuan per kilogram it got in June 2025.

The plunging prices plunged Dekon into the red, as the company said it expects to report a loss of between 1.2 billion yuan ($177 million) and 1.4 billion yuan for the first half of this year, a 180-degree turn from 1.23 billion yuan profit it reported in the first half of 2025.

The company said that tanking hog prices dropped the gross margin for its hog-breeding business, which accounts for about 85% of its revenue, into negative territory, meaning each hog cost more to raise than Dekon could recoup from selling the animals. "Whilst the group has strived to improve production efficiency and lower breeding costs through technological research and development and innovation, lean production management and business model upgrades, as well as hedging operational risks by adopting financial derivative instruments such as hog futures, the adverse impact of persistently low hog prices on profitability has substantially outweighed the benefits brought by such initiatives," the company said.

Muyuan’s profit warning, issued on July 10, was nearly identical.

It said it expects to report a loss of between 5.7 billion yuan and 6.7 billion yuan for the first half of this year, reversing a 10.5 billion yuan profit in the year-ago period.

It also cited plunging prices, though its year-on-year decline of 28% for that metric looks slightly milder than what Dekon reported, probably reflecting Muyuan’s larger size that results in better gross margins.

Dekon’s gross margin stood at 13.7% last year, more than four percentage points below Muyuan’s 17.8%.

We should also note that Dekon’s 2025 gross margin was down sharply from the 23.0% it reported in 2024, as the company blamed falling prices for both hogs and also its smaller chicken-raising business.

Surprisingly, investors didn’t seem too concerned about the latest gloomy outlook.

Dekon’s stock actually rose 6.8% on Thursday, the day after the announcement.

But even after that rally, the stock is still down 22.3% this year.

The shares trade at a trailing price-to-earnings (P/E) ratio of 13, based on last year’s profit, which looks relatively strong for such a mature industry.

But we should also note that’s below Muyuan’s ratio of 16.

Churning out hogs Next we’ll take a look at some of the numbers that show why China’s hog industry is in such a state of oversupply.

We previously pointed out that many industries are similarly cyclical, as producers rush to build up new capacity during times of tight supply and high prices.

But China seems especially prone to such cycles, which plague everything from steel to new energy vehicles and solar panels, perhaps reflecting the relative youth of its market-based economy.

Dekon’s numbers nicely illustrate the trend, which shows how companies continue to add new capacity even when it’s clear that prices are falling.

In the first six months of this year the company sold 5.91 million hogs, up 15.4% from the 5.12 million it sold in the year-ago period.

That metric rose by an even larger 25.6% year-on-year in June to 1.03 million hogs from 820,000, showing Dekon continued to keep boosting its output even as it lost money on every hog it sold.

But falling prices more than offset the big increase in hog output, causing the company’s revenue from hog sales to tumble 18.4% to 8.18 billion yuan in the first half of the year from 10.02 billion yuan a year earlier.

While Chinese consumers are undoubtedly quite happy about the low prices, another beneficiary is pork products makers like WH Group (0288.HK), owner of the U.S.

Smithfield (NASDAQ: SFD ) brand, but also a major seller of finished pork products in China.

WH Group hasn’t given any first-half profit or revenue guidance, but it reported that its profit rose about 25% in the first quarter of this year to 476 million yuan.

In one slightly positive sign for the industry, Dekon reported its average selling price of 9.63 yuan per kilogram of hog in June was actually up slightly from 9.42 yuan in May, potentially showing prices have bottomed out.

But given the fact that the company and its peers continue to flood the market with hogs, it’s also quite possible the slight uptick is just a statistical anomaly, and the downward pressure will continue in July.

Dekon’s big first-half loss means the company is almost certain to lose money for all of 2026, though it was also in the red as recently as 2023, when it reported an annual loss of 1.78 bill