Pig prices have already been displayed on the right side.
A-shares continued to perform sluggishly today, falling below 3,000 points during the session. There was no clear leading sector on the market, with building materials, breeding, gold stocks, and oil and gas taking turns to perform.
From the perspective of ETFs, breeding ETFs and agricultural ETFs are active performers. During lunchtime, China National Chemical Fund's breeding ETF, Fuguo Fund's agricultural ETF, Huaxia Fund's agricultural 50 ETF, Ping An Fund's breeding ETF, and CMB Fund's animal husbandry and breeding ETF rose by 0.68%, 0.59%, 0.48%, and 0.47% respectively.
The recent performance of the breeding sector is due to the continuous rise in pork prices. According to the Ministry of Agriculture and Rural Affairs, the average price of piglets in May was 38.70 yuan/kg, up 5.38% from the previous month and 6.04% year-on-year. The price of live pigs in May was 15.65 yuan/kg, up 6.9% compared to the beginning of the year. The price of pork in May was 25.23 yuan/kg, up 4.1% compared to the beginning of the year.
According to CCTV Finance, since May, the national pig production capacity has been basically reduced, and pig prices have continued to rise. Experts pointed out that the national average price of live pigs in the second week of June was 18.41 yuan/kg, increasing by 25.7% from early March. With the reduction of pig production capacity and the rising prices, the benefits of breeding farmers have significantly improved, and their enthusiasm for increasing breeding has also increased. A breeder from Qingdao, Shandong Province, said that selling a pig now can earn about 500 yuan, a significant increase in profits.
Institutions generally believe that pork prices have entered the right side of the reversal. The research report by China Securities Co., Ltd. pointed out that with the background of the reduction of pig production capacity, the expectation of rising pork prices has not changed, and major breeding companies have achieved profitability in May. It is expected that the future pig prices will still be mainly upward trending in shock.
Everbright Securities research reports indicate that the right side has already unfolded, emphasizing the investment opportunities in cyclical reversal. Upstream capacity continues to shrink, combined with pressure on the breeding end, and the recent pig prices have started to rise sharply. As it enters 24H2 and with the digestion of producer behavior and the realization of capacity gaps, the trend of cyclical growth will become more clear, and there will be considerable height and sustained prosperity in the future cycle.
In addition, the Ministry of Commerce has decided to initiate anti-dumping investigations into imported relevant pork and pork by-products originating from the European Union, which has also stimulated the rise of the pork sector to some extent.
Finally, A-shares are currently in a state of oscillating decline, and market sentiment is relatively sluggish. Capital is again favoring dividend-themed sectors. As a sector with a clear right-side reversal, the pork sector will naturally attract some sectoral inflows.
Currently, the ETFs related to the pork sector in A-shares are breeding ETFs and agricultural ETFs, and the indices they track are China Securities Agriculture, CSI Grand Agriculture, CS Modern Agriculture, and China Securities Animal Husbandry.
The China Securities Agriculture Theme Index selects stocks of listed companies whose business involves fields related to agricultural products, agricultural machinery, fertilizers and pesticides, veterinary drugs, etc. as index samples to reflect the overall performance of listed companies related to the agricultural theme.
The CSI Grand Agriculture Index selects stocks of listed companies whose business involves soft drinks, agricultural products, food, agricultural chemicals, forestry products, agricultural machinery, animal health, and land transfer, as index samples to reflect the overall performance of listed companies in the large-scale agriculture field.
The CSI Modern Agriculture Theme Index selects 30 listed companies whose business involves fields related to agricultural products, seeds, feeds, animal health and breeding, livestock products, fishery products, and agricultural machinery as index samples to reflect the overall performance of listed companies related to modern agricultural themes.
The CSI Animal Husbandry and Breeding Index selects samples of listed companies whose business involves animal feed, veterinary drugs and animal husbandry and breeding as index samples to reflect the overall performance of relevant listed companies in the animal husbandry and breeding industry.
From the distribution of the top ten weightings of the four indices, the China Securities Agriculture Index and the CSI Grand Agriculture Index also involve the consumer sectors such as the chemical and food and beverage/tobacco industries. The former includes Jiangsu Yangnong Chemical, Qinghai Salt Lake Industry, and Asia-Potash International Investment, while the latter includes Qinghai Salt Lake Industry and Dongpeng Holdings.
In contrast, CS Modern Agriculture Index and CSI Animal Husbandry Index are more biased towards the agriculture and animal husbandry sector, with little difference in the composition of the top ten weighted stocks, which are both 70%. The top ten constituent stocks have two different stocks, the former being Yuan Longping High-Tech Agriculture and Heilongjiang Agriculture, and the latter being Juxing Biology and Tangrenshen Group.
In terms of scale, the largest one is currently the Guotai Fund Livestock Breeding ETF, with a latest scale of 4.87 billion yuan, tracking the CSI Animal Husbandry Index. The second is the Richfund Agricultural ETF, with a latest scale of 1.598 billion yuan, tracking the CSI Agriculture Index.
It is worth mentioning that despite the continuous rise in pork prices this year, looking at the annual performance of related ETFs, the annual growth rate is still negative and none are positive.
China Galaxy Securities research report indicates that at the current point in time, pig prices have entered an upward trend. We believe that the average pig price in 2024 will rise year-on-year, and the H2 price will be better than H1 with high certainty. We recommend actively laying out the hog farming sector during short-term corrections, and considering the continuous cost reduction by excellent pig enterprises, this round of farming profits are expected to exceed market expectations.
