The Bearish Turn in U.S. Hog Supply: Implications for Protein Sector Equity Performance

The U.S. hog market has entered a bearish phase in 2025, driven by a confluence of supply-side challenges and shifting global demand dynamics. Reduced slaughter rates, disease outbreaks, and policy headwinds have created a fragile environment for producers and processors alike. These developments are not only tightening pork supplies but also reshaping equity valuations and institutional positioning in the protein sector. For investors, understanding the interplay between supply-demand imbalances and corporate strategies is critical to navigating this evolving landscape.

Supply-Side Pressures: A Perfect Storm

The bearish outlook for U.S. hog supply is rooted in three key factors: disease, policy, and weather. Porcine Reproductive and Respiratory Syndrome (PRRSv) and African Swine Fever (ASF) have persisted as major disruptors, reducing herd sizes and export capabilities. According to a report by , Q4 2025 pork production is projected to decline by 0.3% year-over-year to 7.2 billion pounds, with the total 2025 commercial output revised downward by 25 million pounds to 27.5 billion pounds due to lower slaughter numbers and disease pressures.

Policy shifts, particularly in China, have compounded these challenges. Beijing's efforts to curb domestic pork overproduction have led to oversupply and weak consumption, while U.S. exports face trade restrictions such as tariffs and sanitary barriers according to market analysis. Meanwhile, weather-related disruptions-though less prominent than in prior years-have further strained supply chains, with processors grappling with higher average hog weights as producers delay slaughter to maximize margins according to market analysis.

Equity Performance: Resilience Amid Volatility

Despite these headwinds, the protein sector has shown pockets of resilience. Pilgrim's Pride Corp. (PPC) and Tyson Foods, Inc. (TSN) have adopted divergent strategies to mitigate supply imbalances, with varying impacts on their equity valuations.

Pilgrim's Pride, a Zacks Rank #1 (Strong Buy), has leveraged its multi-protein portfolio to insulate itself from beef-centric supply shocks. Its focus on poultry and pork has paid dividends: the company's shares surged 95.2% year-to-date as of late 2024, driven by a 12.7% increase in fiscal-year EPS to $4.79. Analysts attribute this growth to cost-cutting measures, automation investments, and strategic expansion in U.S. and Mexican markets. Structural cost pressures-particularly elevated feed and labor expenses-remain a drag on long-term profitability according to industry analysis.

Tyson Foods, a Zacks Rank #3 (Hold), faces a more complex landscape. While its diversified portfolio of chicken, pork, and beef provides some stability, the beef segment continues to underperform due to tight cattle supplies and rising input costs. In 2024, Tyson reported adjusted operating income of $1.82 billion-a 95% increase year-over-year-but its stock has risen only 21.2% in the past year, reflecting investor caution according to company reports. The company's focus on operational efficiency, including plant closures and digitalization, has helped offset some pressures, yet its forward P/E ratio of 15.71X (in line with the meat industry average) suggests limited upside in a high-cost environment according to industry analysis.

Institutional Positioning and Valuation Metrics

Institutional ownership trends highlight divergent investor sentiment. Pilgrim's Pride has attracted increased institutional confidence, with its strong earnings performance and strategic investments in automation and prepared foods segments according to analyst commentary. Conversely, Tyson's beef-centric exposure and margin volatility have led to a more cautious institutional stance, despite its broader diversification.

Valuation metrics further underscore these dynamics. Pilgrim's Pride's forward P/E ratio, while elevated, reflects optimism about its operational improvements and market share gains. Tyson's lower P/E, by contrast, signals a discount for its exposure to cyclical supply shocks and input cost inflation according to industry analysis. Analysts note that both companies face earnings headwinds in 2026, with Pilgrim's Pride's EPS estimates rising modestly to $5.45 and Tyson's to $2.82 according to industry analysis.

Looking Ahead: Navigating Uncertainty

The bearish turn in U.S. hog supply is unlikely to abate soon. Disease outbreaks and trade uncertainties will continue to weigh on export demand, while domestic producers face margin compression from higher feed costs. For equity investors, the key differentiator will be companies' ability to innovate and diversify. Pilgrim's Pride's focus on value-added products and automation offers a blueprint for resilience, whereas Tyson's reliance on beef exposes it to greater volatility.

Institutional investors are likely to favor firms with agile supply chains and diversified protein portfolios, even as broader sector valuations remain pressured. As one analyst noted, "The protein sector is at a crossroads-companies that adapt to structural cost pressures and global demand shifts will outperform those clinging to traditional models."

For now, the bearish narrative in hog supply persists, but it also creates opportunities for selective investors willing to bet on innovation and operational excellence in a challenging market.