On July 9th, Cailian Press (Reporter Liu Jian, Wang Ping'an), under the background of the pig cycle, the sales prices of many listed pig companies have achieved six consecutive month-on-month increases, and the profitability of the breeding end has improved significantly. From the performance forecasts of some pig companies in the second quarter, New Hope (000876.SZ), Leshan Giantstar Farming & Husbandry Corporation (603477.SH), ST Tianbang (002124.SZ), and Shen Nong Group all achieved profits in the Q2 single quarter.

The decrease in the supply of pig production capacity supported the continuous high pig prices in the second quarter, driving the breeding end to turn losses into profits. Theoretically, the supply of pigs in the second half of the year is still lower than the same period last year, and pig prices are expected to continue to maintain a high shock range, and the breeding end profit can be expected for the full year. Some analysts interviewed said, 'there should be no problem with an average profit of 300-400 yuan/head for the whole year in farming.'

Monthly sales price of pigs has risen for six consecutive months.

Recently, many listed pig companies announced their sales briefings for June. The sales price increased month-on-month again, and most of the pig companies' sales prices have exceeded the high point of 18 yuan/KG in six consecutive months. Specifically, in June, the average sales prices of Musanze Co., Ltd. (002714.SZ), New Hope, Da Bei Nong Technology Group Co., Ltd. (002385.SZ), and ST Tianbang were 17.73 yuan/KG, 18.07 yuan/KG, 18.11 yuan/KG, and 18.25 yuan/KG, respectively, with a month-on-month increase of 14.24%, 17.19%, 15.64%, and 14.92%. The remaining pig companies Shen Nong Group (605296.SH), East Hope Group Co., Ltd. (001201.SZ), and Hunan Zhenghong Science and Technology Development Co., Ltd. (000702.SZ) have also increased to varying degrees.

As far as the sales briefings already published are concerned, the sales of body pigs of Musanze Co., Ltd., New Hope, Da Bei Nong Technology Group Co., Ltd., and ST Tianbang in June were 5.068 million, 1.2865 million, 0.3583 million, and 495,100 respectively, with a month-on-month decrease of 13.51%, 5.88%, 29.89%, and 11%. Only Shen Nong Group’s sales volume increased slightly month-on-month.

An industry insider told the Cailian Press reporter, 'Because the demand side is relatively stable, the sustained increase in pig prices is due to the decrease in supply, which reflects the elimination of sows in the early stage.'

In fact, from the perspective of listed pig companies, most of the pig companies have shown a certain decline in sales volume month-on-month.

From the published sales briefings, the sales of live pigs for Musanze Co., Ltd., New Hope, Da Bei Nong Technology Group Co., Ltd., and ST Tianbang in June were 5.068 million, 1.2865 million, 0.3583 million, and 495,100, with a month-on-month decrease of 13.51%, 5.88%, 29.89%, and 11%, respectively. Only Shen Nong Group’s sales volume increased slightly month-on-month.

Profitability will become the main trend for the whole year.

Behind the continuous rise in pig prices, the profitability of the breeding end has improved significantly month by month. Previously, many pig companies stated that they have been profitable since April. From the semi-annual performance forecasts recently released by many listed pig companies, the pig breeding sector in the second quarter has become mainstream with profit. Specifically, Leshan Giantstar Farming & Husbandry Corporation, New Hope, ST Tianbang and Shen Nong Group all achieved profits in the second quarter. Among them, New Hope is expected to achieve a profit of 0.75 billion yuan in the Q2 single quarter. New Hope stated, 'In the second quarter, the pig market warmed up, and pig prices rose compared with the same period last year. Combined with the improvement of the company's production management, the breeding cost steadily decreased, and the expected profit for the single quarter in Q2 will be about 0.75 billion, reducing the losses by more than 50% year-on-year for the first half of the year.'

Specifically, Leshan Giantstar Farming & Husbandry Corporation, New Hope, ST Tianbang, and Shen Nong Group achieved profits in the Q2 single quarter. Among them, New Hope is expected to achieve a profit of 0.75 billion yuan in the Q2 single quarter. New Hope stated, 'In the second quarter, the pig market warmed up, and pig prices rose compared with the same period last year. Combined with the improvement of the company's production management, the breeding cost steadily decreased, and the expected profit for the single quarter in Q2 will be about 0.75 billion, reducing the losses by more than 50% year-on-year for the first half of the year.'

The aforementioned industry insider told the Cailian Press reporter, 'Since the second quarter, both self-breeding and fattening of piglets have achieved profitable status, and the profitability is increasing month by month. Since June, the profit of self-breeding and fattening has remained at around 600 yuan/head. The lowest point of the profit for the entire Q2 of self-breeding and fattening was 80 yuan/head, and the highest point reached 650 yuan/head. Therefore, the profitability of the pig companies for the entire Q2 was relatively impressive.'

Looking forward to the second half of the year, the start of the pig cycle has become the support for the improvement of listed pig companies' performance. Can the high pig prices be maintained in the second half of the year? Zhu Zekun of Zhuochuang Information told the Cailian Press reporter, 'Under the influence of the elimination of pig production capacity last year, theoretically, the supply of pigs in the second half of this year will not be particularly large, and it will be significantly less than the same period last year. Based on this, the probability of a significant drop in pig prices is not great, and it will remain in the range of 17.5-19.5 yuan/KG. Within this range, the profit of pig breeding will be about 400-700 yuan/head. Therefore, under the good expectations in the second half of this year, there should be no problem with an average profit of 300-400 yuan/head for the whole year in farming.'

It is worth mentioning that reducing costs and increasing efficiency is another support for the performance of the pig industry in the second half of the year. Caixin reporters noticed that many pig companies have been reducing their breeding costs since February, and they plan to continue doing so in the second half of the year. For example, at the earnings conference of New Hope Liuhe, the company stated that "the complete cost of producing fat pigs at the operating site has been reduced to 14.7 yuan/kg so far, and it can be reduced to below 14.2 yuan/kg by the end of the year if this trend continues".