It is expected that the extreme value of this cycle will appear in September-November 2024, which is also the traditional peak season for pig consumption, and the marginal improvement in demand may enhance price performance.
According to the Zhixing Finance APP, Guosheng Securities issued a research report stating that in the first half of 2024, pig prices continued to rise, and the highest weekly pig market price of the Ministry of Agriculture reached 18.44 yuan/kg, a year-on-year increase of 29.6%, and the industry gradually emerged from the loss zone. The high pig prices under weak consumption and limited second child policy are essentially a reflection of the unexpectedly excessive reduction in production capacity. In the seasonal efficiency suppression of winter 2023, the better-than-expected performance in the first half of the year is more reflected in the piglet layer, while the second half of the year may be reflected in the sow layer. In addition, it is expected that the extreme value of this cycle will appear in September-November 2024, which is also the traditional peak season for pig consumption, and the marginal improvement in demand may enhance price performance. With the marginal improvement of consumption combined with the supply reduction in the second half of the year, pig prices are expected to rise again, and the hog sector may start another bullish trend.
Zhongsheng Securities' main points are as follows:
Hog farming: right side open, elastic and promising.
According to the research report released by Guosheng Securities, in the first half of 2024, pig prices continued to rise, and the highest weekly pig market price of the Ministry of Agriculture reached 18.44 yuan/kg, a year-on-year increase of 29.6%, which was accompanied by the industry gradually emerging from the loss zone. The high pig prices under weak consumption and limited second child policy are essentially a reflection of the unexpectedly excessive reduction in production capacity. In the seasonal efficiency suppression of winter 2023, the better-than-expected performance in the first half of the year is more reflected in the piglet layer, while the second half of the year may be reflected in the sow layer. Guosheng Securities believes that in this round of adjustment of sow production capacity, the time point for the accelerated clearance of breeding sows is November 2023, December 2023 and January 2024, and the month-on-month decline in breeding sows is 1-2%. In the process of enlarging the slope of production capacity adjustment, there will often be an amplification of efficiency data such as breeding rate.
According to the rhythm of the sow, it is expected that the extreme value of this cycle will appear in September-November 2024, which is also the traditional peak season for pig consumption, and the marginal improvement in demand may enhance price performance. With the marginal improvement of consumption combined with the supply reduction in the second half of the year, pig prices are expected to rise again, and the hog sector may start another bullish trend.
Poultry farming: inflection point is approaching, prosperity follows.
White chicken: waiting for the improvement of consumption. Since 2022, the industry seems to have stepped out of the boundary line of insufficient production capacity through the self-regulation capacity of white chickens. However, whether it is mandatory moulting or delayed elimination, it will have a great impact on the performance of broiler performance. At the same time, although the amount of updated parent chicken may recover after 2023, the proportion of imports is no longer as before. In the total amount of parent chicken updated by 2023, the proportion of American, New Zealand and domestic breeds is 29.8%, 28.2% and 42.1% respectively. However, the utilization rate of domestic breeds of parent chicken is obviously insufficient. In January-May 2024, the proportion of American, New Zealand and domestic breeds in the sales volume of parent chicken chicks was 59.3%, 24.0% and 16.7%, respectively. The opaque performance of breeding chickens and the seasonal rebound and resonance of protein consumption are potential catalysts for price trends in the second half of the year.
Yellow chicken: welcoming the resonance with pigs and chickens. In April 2024, the average inventory of in-production parent yellow-feathered broilers nationwide was 36.782 million sets, a year-on-year decrease of 5.3%. Since the demand elasticity of yellow chickens is relatively large, in most scenarios, it is a follower of other protein prices. Under the low production capacity position, we predict that yellow chickens will achieve prosperity resonance with pigs in the second half of the year.
Later cycle: prosperity follows the recovery of pig cycle, mainly in the feed and animal health sector. Feed: Pig prices began to rise continuously from the second quarter of 2024. It is expected that pig feed in the second half of the year may become positive compared to the same period last year. Aquatic feed: The price of aquatic feed is expected to rebound this year as well, and it is also expected to welcome recovery growth. At the same time, under the background of consumption upgrading, the production of special fish has grown rapidly in recent years, and the demand for high-end aquatic feed is expected to continue to improve. Animal health sector: Animal health is a relatively optional production material, so it is more affected by pig prices. From the historical perspective, it can be seen that the animal health index rises after the pig breeding index by two to three quarters, and the animal health index rises after the pig price by one to two quarters. At present, it is at the bottom of the performance. In the second half of 2024, when the breeding industry is prosperous, the performance growth rate of the animal health sector may be improved.
1) Feed: From the second quarter of 2024, pig prices began to rise continuously. It is expected that pig feed in the second half of the year may become positive compared to the same period last year. Aquatic feed, whose price is expected to rebound with the marginal improvement of aquatic product consumption and is expected to welcome recovery growth, is good for the sustained growth of high-end aquatic feed demand under the backdrop of consumption upgrading. 2) Animal health sector: Animal health is a relatively optional production material, so it is more affected by pig prices. From the historical perspective, it can be seen that the animal health index rises after the pig breeding index by two to three quarters, and the animal health index rises after the pig price by one to two quarters. At present, it is at the bottom of the performance and is expected to achieve good performance growth in the second half of 2024 when the breeding industry is prosperous.
2) Animal health sector: Animal health is a relatively optional production material, so it is more affected by pig prices. From the historical perspective, it can be seen that the animal health index rises after the pig breeding index by two to three quarters, and the animal health index rises after the pig price by one to two quarters. At present, it is at the bottom of the performance. In the second half of 2024, when the breeding industry is prosperous, the performance growth rate of the animal health sector may be improved.
Genetically modified seeds: After the three-year trial from 2021 to 2023, genetically modified varieties have achieved large-scale seed breeding in the first quarter of this year, and the profit increment of genetically modified may be reflected in the earliest in 2024Q4. It is also optimistic about the overall upward movement of the industry and the reshaping of the pattern brought about by genetic technology and seed industry policies. At the same time, the prepayments for seed industry in the third quarter and the policy-intensive period in the fourth quarter are expected to bring about significant catalysts.
After the three-year pilot from 2021 to 2023, genetically modified varieties have achieved large-scale seed breeding in the first quarter of this year, and the profit increment of genetically modified may be reflected in the earliest in 2024Q4. It is also optimistic about the overall upward movement of the industry and the reshaping of the pattern brought about by genetic technology and seed industry policies. At the same time, the prepayments for seed industry in the third quarter and the policy-intensive period in the fourth quarter are expected to bring about significant catalysts.
Recommendations on symbols to watch
Hog farming: Muyuan Foods (002714.SZ), Wens Foodstuff Group (300498.SZ), Tangrenshen Group (002567.SZ), Hunan New Wellful Co., Ltd. (600975.SH), Tecon Biology Co. Ltd. (002100.SZ), Shenzhen Kingkey Smart Agriculture Times Co.,Ltd. (000048.SZ), Leshan Giantstar Farming&Husbandry Corporation (603477.SH), Zhejiang Huatong Meat Products Co., Ltd. (002840.SZ), New Hope Liuhe Co., Ltd. (000876.SZ), and so on.
Broiler chicken: Shandong Yisheng Livestock & Poultry Breeding Co., Ltd. (002458.SZ), Fujian Sunner Development Co., Ltd. (002299.SZ), Shandong Xiantan Co., Ltd. (002746.SZ), Shandong Minhe Animal Husbandry Co., Ltd. (002234.SZ), Wellhope Foods Co., Ltd. (603609.SH), and so on. Yellow chicken: Jiangsu Lihua Animal Husbandry Co., Ltd. (300761.SZ).
Fodder: Guangdong Haid Group Co., Ltd. (002311.SZ), Bonjour Technology Co., Ltd. (603151.SH), Wellhope Foods Co., Ltd. (603609.SH). Seeds: Beijing Dabeinong Technology Group Co., Ltd. (002385.SZ), Yuan Longping High-Tech Agriculture Co., Ltd. (000998.SZ), Shandong Denghai Seeds Co., Ltd. (002041.SZ).
Animal health: Wuhan Keqian Biology Co., Ltd. (688526.SH), Pulike Biological Engineering, Inc. (603566.SH), Jinyu Bio-Technology Co., Ltd. (600201.SH), China Animal Husbandry Industry Co., Ltd. (600195.SH).
Risk Warning: Agricultural product price fluctuation risk, epidemic risk, policy risk, industry competition and product risk.