① In May, the average sales price of listed pig enterprises exceeded the new high for the year, and their profitability improved significantly. ② in the secondary market, pork concept stocks have been favored in the past three months, among which Shennong group rose more than 40%. ③ The bulls expect the market in the second half of the year, and Muyuan Foods believes that the price of the hog market will maintain a relatively good performance in the second and third quarters of this year.
Cailian News Agency, June 7th (Reporter Liu Jian, Wang Ping'an) Under the upswing of the pig cycle, the average sales price of listed pig enterprises in May has completely exceeded the new high for the year, and their performance has gradually been realized. According to insiders, under the background of continuous clearance of sows for 17 consecutive months, the supply and demand situation of live pigs will be further improved in the second half of the year, and the pig price is expected to maintain a high and volatile range, and the annual profit of listed pig enterprises is expected.
In May, the trend of the hog market continued to rise, and the national average price approached 20 yuan/KG, with a monthly increase of more than 20%. At the same time, the sales prices of many listed pig enterprises also hit a new high for the year.
Specifically, the sales prices of leading pig enterprises such as Muyuan Foods (002714.SZ), Wens Foodstuff Group (300498.SZ), and New Hope Liuhe (000876.SZ) in May were RMB 15.52/KG, RMB 15.83/KG and RMB 15.42/KG respectively, with an increase of 4.86%, 4.28% and 8.59% respectively. Other pig enterprises, such as DongE E-Jiao (001201.SZ), ST ZhengBang (002124.SZ), and Shenzhen Kingsino Technology (002548.SZ), have also increased to varying degrees.
As pig prices continue to rise, the profitability of listed pig enterprises has significantly improved, and their performance has gradually been realized. For example, Muyuan Foods stated in a latest survey that the total cost of raising a pig in May was 14.3 yuan/KG. If calculated based on the sales average price of RMB15.52/Kg, each standard pig weighing 120KG could make a profit of RMB146.4.
In addition, Wens Foodstuff Group and New Hope Liuhe achieved profitability in May. Insiders said, due to the continuous clearance of pig production capacity in 2023, especially the repeated occurrence of disease from August to November last year, which led to a lot of passive clearance, the pressure on pig output eased after the Spring Festival, and the market is expected to encounter a temporary 'gap' from June to August. After a new round of bullish sentiments in mid-May, the supply side is temporarily tight, and individual farmers in the breeding end have a strong reluctance to sell their stocks, which has pushed up the recent pig price increase and significantly improved the profitability of the breeding end.
At present, front-line breeding farms are also enjoying the benefits of rising pig prices. One farmer told Cailian News Agency, "selling pigs recently has been profitable. If we can maintain this price level, I am optimistic about my profitability this year."
According to Zhuochuang Information data monitoring, as of June 4th, the profit of self-bred and self-raised live pigs was RMB594.43/head, and the profit of raising piglets was RMB 804.43/head. In the first five months of 2024, the average profit of self-bred and self-raised live pigs was RMB40.20/head, an increase of 135.72% YoY, while the average profit of piglets and fattening pigs was RMB222.95/head, an increase of 166.66% YoY.
It is worth mentioning that as the spot market heats up, pork concept stocks are also favored in the secondary market. According to Choice data monitoring, in the past three months, Shennong group (605296.SH), DongE E-Jiao, ST ZhengBang, Muyuan Foods, Wens Foodstuff Group, and New Hope Liuhe rose by 43.17%, 32.23%, 25.39%, 21.52%, 11.90%, and 9.74%, respectively.
Looking forward to the second half of the year, the logic of the pig cycle rising may continue. By the end of April 2024, the national inventory of sows had dropped to 39.86 million head, a YoY decrease of 0.15%, which was close to the level of 39 million basic holdings.
According to brokerage research reports, from the perspective of historical replay, the clearance rate of each pig cycle has all been over 8%, and a clearance rate of 8%-10% is enough to support a new round of price increases. Under the official data caliber, from the fourth quarter of 2018 to the third quarter of 2019, due to the impact of non-African swine fever, the clearance rate of sows was rapid, and the cumulative decrease exceeded 35%; from the third quarter of 2021 to the end of the first quarter of 2022, the cumulative decrease of sows was 8.5%; from December 2022 to March 2024, the cumulative decrease of sows was 9.1%.
Muyuan Foods also said in its latest investor relations event that the recent rise in pig prices is partly due to the gradual manifestation of the previous clearance effect of pig production capacity, and may also be a short-term disturbance caused by factors such as secondary pig fattening and pressure on pig breeding. However, in the long term, the price of the hog market is expected to maintain a relatively good performance in the second and third quarters of this year.
Shanghai Ganglian E-commerce Holdings analyst Xu Xueping believes that after this year's Spring Festival, hog prices bottomed out and rose, coupled with the decrease in feed costs this year. The profitability of hog farming has improved, and the farming end has emerged from the loss dilemma that has lasted for more than a year. With the improvement of the supply and demand of live pigs, it is expected that the mid-term pig prices will still rise, and there is still room for improvement in the farming end profits.