In previous cycles of the chicken and pig industries, the "resonance of chickens and pigs" was a common occurrence. However, despite the rise in pig prices this year, it has not yet affected the decline of White Feather chicken, whose prices have hit a two-and-a-half-year low. Has the saying "if pigs rise, then all poultry rises" failed? Can White Feather chickens once again achieve the same level of growth as pigs?

On June 12, Finance Association reporters interviewed several industry insiders and analysts, who pointed out that weak demand on the consumer end is the main reason for the continuing sluggishness of White Feather chicken prices. Workers from the securities departments of Shengnong Development (002299.SZ) and Xiantan Share (002746.SZ) both said that while pigs and chickens are somewhat related, they do not follow exactly the same pace. If pig prices continue to rise, there is a possibility that the price of White Feather chickens may rebound.

According to Sun Yanan, an industry analyst for Zhuochuang Information's poultry industry, the increase in pig prices has had a positive effect on chicken prices, but there is a critical point at which this happens. "Currently, whether from a time perspective or a perspective of the extent of the rise, the changes in pork prices are not yet sufficient to promote widespread chicken substitution. In the next few months, the supply and demand situation for White Feather broilers is still not optimistic, and the market for chicken products in June and July may continue to show a weak trend."

The aforementioned people at Shengnong Development also mentioned that the concentration of the White Feather broiler industry is relatively high, and even though the industry has been in a slump for a long time, it is generally more resilient, and it is unlikely that capacity clearance will occur soon. Therefore, major companies in the industry consider expanding their industrial chains and exploring new markets as the main strategy for survival during a weak market. For example, Shengnong Development's food revenue has continued to increase, and Chunxue Foods (605567.SH) has vigorously expanded its overseas market. Shengnong Development's parent chicken products also achieved their first export.

Chickens and pigs are going in opposite directions.

One side is enjoying sunshine, while the other is still in the grip of a harsh and cold winter.

Public data shows that national pig prices surged from 15 yuan/kg at the end of April, with many regions now exceeding 19 yuan/kg, an increase of more than 20%. Meanwhile, the price of White Feather broilers in Shandong fell to 3.40 yuan/jin on June 12, less than the year's low point of 3.5 yuan/jin in March of last year, and lower than the low point of 2022, setting a new two-and-a-half-year low.

Due to the impact of lower raw chicken prices and poor downstream market demand, companies face high inventory pressures, and the comprehensive sales price of products continues to decline. According to statistics from Zhuochuang Information, the composite sales price of White Feather chicken products has fallen from 9,360 yuan/ton at the beginning of May to 9,000 yuan/ton on June 12, a cumulative decrease of 3.85%.

The most crucial factor causing the continued decline in White Feather chicken prices is oversupply. With regards to the number of broilers from the White Feather industry, slaughtering exceeded 8.4 billion in 2023, a year-on-year increase of over 10%, indicating that the industry's capacity is rapidly expanding.

"The main issue is the weak demand downstream." Nán Fēng, a White Feather chicken industry insider, told Finance Association reporters. In May and June, chicken supply was actually rather scarce, with a shortage of chickens in some areas. However, it was unexpected that market demand would fall even faster, so "under these circumstances, even dealers do not dare to take on more goods, only using and ordering as much as needed, resulting in an inability to reduce frozen inventory."

"In terms of realizing from the demand side, the prices of chicken products from various channels in the meat chicken market have been unusually sluggish since 2024. The demand of canteens, fast food restaurants, retail and wholesale markets has fallen by 20%-30%." Sun Yanan said that the capacity of meat chickens continued to expand, coupled with a decline in demand, especially in June, which is still in the off-season for chicken products, so this is the main reason why chicken prices have fallen to their lowest point of the year.

Can pigs drive chickens?

Can the recent recovery in the pig market bring warmth to White Feather chickens?

Overall, analysts believe that while it is likely that this scenario will occur, triggering it will require certain conditions, and given the different market conditions that White Feather chickens are facing this year, it is difficult to judge the effect.

A worker from the securities department of Shengnong Development said that although theoretically, an increase in pig prices would have a positive effect on the price of White Feather broilers, the two do not necessarily increase at the same rate."From a historical perspective, there is often a certain time lag. The pig price has only risen for a short period of time, and it may take some time before it has a radiating effect on broilers."

Sun Yanan stated that pork and chicken are the two main protein meats in China, and they have a certain substitution effect in downstream food processing and terminal consumption. However, substitution requires a certain threshold, and this situation will only appear when pork prices rise to a certain high level. At present, although the increase in pork prices is relatively obvious, it is not as high as in 2019. In late October 2019, the price of Bai Tiao pork reached a historical high of 52.74 yuan/kg, and the price of Baiyu broiler chicken also climbed to 7.00 yuan/jin.

In addition, the difference in consumption structure between Baiyu chicken and Huangyu chicken and live pigs will also bring variables to the "chicken-pig resonance".

The person in charge of a listed company related to Baiyu chickens in China stated to the Cailian Press that the consumption structure of Baiyu chickens is different from that of Huangyu chickens and live pigs. The former is mainly used for industrial consumption and group meals, while the latter is more focused on household consumption. "Chicken paws and chicken legs, which are more favored for household consumption, still have a reasonable price, but even if the price of pork rises again, it is difficult for consumers to choose cheap chicken breast meat to replace pork. Industrial consumption has been weak in recent years, and household consumption has been better restored, which is a factor that makes chicken-pig resonance difficult this time."

The person further stated that in recent years, the concentration of the Baiyu chicken industry has been continuously improving, and the total slaughter volume of the top 10 companies in the industry is close to half of the industry, exceeding the live pig industry. Large-scale enterprises account for a higher proportion and are generally more resilient, so it will be more difficult and slower to eliminate excess capacity during the industry downturn.

Expanding the industrial chain and focusing on overseas markets for self-help.

In the short term, the supply and demand pattern of the Baiyu broiler chicken is still not optimistic, and the industry turning point may not appear soon.

From the statistical data of Zhuochuang Information, it is expected that the output of broiler chickens in June will maintain a slow growth trend, and although the output in July is expected to decrease, the space for decline is not large. At that time, universities will gradually go on vacation, and the demand for catering group meals will decline. Although the tourism season in July will have a certain boost for fast food, the driving effect is also limited.

In this case, listed companies in the Baiyu chicken industry are practicing hard, opening up the market, and increasing the proportion of the food end, which become the survival chips of listed companies in the market downturn.

In the overseas market, due to inflation in many countries, the export profit of Baiyu chicken products is better. From the beginning of this year to now, the export volume of domestic white feather broiler chickens has increased significantly, with a year-on-year increase of more than 50% in the first quarter.

Taking Chunxue Food as an example, the gross profit margin of its overseas sales in 2023 can reach 17.04%. Therefore, the company is vigorously promoting product exports. In 2023, the company's overseas revenue accounted for more than 26%. The company plans to focus on both the foreign and domestic markets in 2024, focusing on developing foreign markets. The export volume is expected to exceed 30,000 tons, an increase of more than 50%.

Shandong Xiantan and Fujian Sunner Development will also actively explore overseas markets this year. It is worth noting that in May this year, 3,500 sets of "Shengze 901" parent breed chicken chicks from Fujian Sunner Development successfully arrived in Tanzania. This is the first time that "Shengze 901" has gone abroad and entered the African chicken breed market.

In terms of cost, according to institutions such as Tianfeng Securities, Fujian Sunner Development benefited from feed and management optimization. The full cost in the first quarter of this year was within 10,500 yuan/ton, a year-on-year decrease of about 1,000 yuan/ton.

Another focus of Shandong Xiantan is prefabricated food. The company stated that the R&D, brand construction, and sales market of prefabricated food products in the first phase of the project have steadily progressed, and the production capacity of prefabricated food products is gradually being released. Fujian Sunner Development also comprehensively promotes the great food strategy. In the first quarter of this year, the company's food sales increased by 14.44%.