On September 9, Cailian Press (CLC) (reporter Liu Jian, Wang Ping'an) reported that pig breeding is profitable and currently at a peak for the year. Recently, most A-share listed pig companies have released their sales reports for August. The leading pig companies, Muyuan Foods (002714.SZ) and Wens Foodstuff Group (300498.SZ), have seen both their sales volume and prices rise. Muyuan Foods, known as the "King of Pigs," has achieved a daily profit of nearly 100 million yuan, while other breeding companies have also seen varying degrees of recovery.

Looking ahead, after interviewing multiple sources, Cailian Press has learned that as the temperature decreases and holidays increase, pig prices may continue to remain high. Coupled with gradually declining breeding costs, breeding companies may continue to maintain a considerable profit trend for the year. In the longer term, due to the slow recovery of production capacity and cautious expansion at the breeding end, the profitability period of breeding is expected to be extended.

Pig companies achieve record profits in a single month for the year

According to the sales report from Muyuan Foods, the company sold 6.241 million live pigs in August, an increase of 1.35% month-on-month and 10.03% year-on-year. Sales revenue was 14.024 billion yuan, an increase of 4.62% month-on-month and 29.77% year-on-year. The average selling price for commercial pigs in August was 19.71 yuan/kg, an increase of 7.70% compared to July. If we consider the latest announced completely cost of 13.7 yuan/kg by Muyuan Foods and roughly estimate the weight of a market pig at 120 kg, the company achieved a breeding profit of approximately 4.5 billion yuan in August, with a daily profit of nearly 150 million yuan.

Another major pig company, Wens Foodstuff Group, also saw both sales volume and prices rise in August. The company sold 2.354 million pigs (including hogs and fresh products) in August, with revenue of 5.863 billion yuan. The average selling price for hogs was 20.45 yuan/kg, with a month-on-month change of 1.32%, 9.73%, and 7.92% respectively, and a year-on-year change of 9.78%, 42.27%, and 21.44% respectively.

Most second-tier listed pig companies also experienced varying degrees of recovery. In August, ST Tianbang (002124.SZ), Kingsino Technology (002548.SZ), Zhengbang Technology (002157.SZ), Beijing Dabeinong Technology Group (002385.SZ), and Shennong Group (605296.SH) all saw significant increases in sales revenue and average selling prices compared to the previous month and the same period last year.

Analyst Wang Hongyan from Shanghai Ganglian E-commerce Holdings' Agriculture Department told Cailian Press, "On the one hand, as the pig market gradually recovers, consumers' demand for pork may increase, which drives up the price of pigs. On the other hand, pig companies may have made significant progress in improving breeding efficiency, optimizing product structure, and expanding sales channels, thereby increasing sales volume and prices."

Other industry insiders pointed out that the previous continuous capacity reduction is reflected in the trend of current pork prices, combined with seasonal factors, so the breeding side naturally shows a warming trend.

In addition to the factors of market recovery, cost reduction and efficiency improvement of pig enterprises has become another important guarantee for profit enhancement. As of July, the first-tier muyuan foods, shennong group, and wens foodstuff group have reduced the complete breeding cost to below 14 yuan/KG, respectively 13.8 yuan/KG, 13.7 yuan/KG, and 13.8 yuan/KG. The breeding costs of other pig enterprises such as special treat and beijing dabeinong technology group have also decreased to varying degrees in the first half of the year.

Cost reduction has made pig enterprises more resilient to the risk of falling pork prices. Some industry insiders believe that currently, regardless of whether it is a group farm or a small-scale individual farm, breeding costs have changed, and the breeding costs of some individual farms are between 13-14 yuan/KG. 'Under these costs, even if the price falls, the breeding farm can still make a profit.'

The expansion of the breeding side is cautious, and the industry's profit expectations are expected to extend.

Looking ahead, the recent stabilization of pork prices indicates that the high pig market in the second half of the year may continue in Q4.

Wang Hongyan told Cailian Press reporters, 'The third and fourth quarters are usually the peak season for meat consumption, especially as temperatures drop and holidays increase, the demand for pork may rise. The increase in demand may further push up the price of pork, coupled with the decrease in breeding costs, which will create better profit conditions for pig enterprises.'

In a recent investor relations event, muyuan foods also stated that due to the gradual emergence of the impact of previous capacity reduction, the supply of live pigs in the second half of this year is still tight, coupled with support from the traditional peak consumption season on the demand side, there will be a certain gap between supply and demand in the live pig market. The company is optimistic about the future price of the live pig market and expects it to remain at a good level.

In the longer term, affected by the longer loss period, the preference for a lower inventory and second progress and the increased efforts of listed pig enterprises to repair their balance sheets, the speed of pig production capacity recovery is significantly slower than that in 2022. The month-on-month increase in the inventory of sows in July 2024 is only 0.1%. According to the data monitoring of shanghai ganglian e-commerce holdings, the month-on-month increase in the inventory of sows at the end of August is 0.32%, and the growth rate has also narrowed.

Industry experts interviewed by Caijingshe reporters said, 'Now is the most profitable period for breeding this year. However, due to factors such as long-term losses and financial pressure, the expansion of the breeding sector is not very active. It should still achieve small profits in the first half of next year, although the level of profitability may not be as high as the second half of this year.'

According to Choice data, as of September 8th, the average price of live pigs in the country was 19.92 yuan/KG, which has increased by 5.5 yuan/KG since the beginning of the year.

(2024 Pig Price Trend Chart Source: Choice)