Tianfeng Securities: The bull cycle has a long duration and few disruptive factors; current beef cattle prices have entered an upward channel

According to the Zhitong Finance APP, Tianfeng Securities released a research report stating that milk prices are under pressure in H1 2025, and the performance of dairy companies in their interim reports is diverging. Compared to pig farming, the replenishment cycle in the beef industry is significantly longer. From calf rearing to marketable cattle, the entire cycle typically takes about 2 years, much longer than the 10-month replenishment cycle for pigs. This longer production cycle characteristic causes industry capacity adjustments to lag, resulting in longer-lasting cyclical prosperity phases. Additionally, unlike traditional livestock and poultry, the supply-side disturbances in cattle farming are fewer (such as the molting phenomenon in the poultry industry), making the trend of capacity changes more certain. Currently, beef prices are entering an upward channel, and the prices of cull cows are also warming up. Considering that cull cows account for a significant proportion of the biological assets of farms, the price recovery's impact on current profits cannot be ignored and is expected to become an important driving force for the short-term performance of dairy companies. The main points from Tianfeng Securities are as follows: Dairy Cow Sector: Supply Strongly Contracts, Depletion May Have Entered the Final Stage! Depletion may have entered the final stage. Milk prices have declined for 4 years, and the industry has been in loss for 1.5 years, leading to a depletion of dairy cow capacity by about 8% (as of August 2025). With the third quarter silage feed procurement season approaching, the demand for funds has surged, which may force farms with poor financial conditions to accelerate the passive clearance of their stock. Based on the capacity at the end of 2024, the firm estimates that the industry is likely to complete capacity bottoming by the end of this year or in H1 2026, achieving a turning point in milk prices. Under the tight supply-demand pattern, milk prices are expected to rebound. On the supply side, the capacity depletion from 2023 to 2024 is gradually being realized, coupled with the international bulk powder price inversion suppressing imports, making it difficult to disturb the supply tightening situation in the short term; on the demand side, short-term consumption is boosted by the Mid-Autumn Festival and National Day to the next Spring Festival, while in the medium to long term, it benefits from the implementation of childcare subsidy policies and the continuous improvement expectations brought by the increase in per capita consumption demand. The tight supply-demand pattern supports a strong upward sustainability of milk prices. Beef Cattle Sector: Super Cycle Turning Point Has Emerged! Domestic beef cattle capacity has been completely cleared: Domestic beef cattle farming has low concentration and weak risk resistance, and this round of loss cycle has lasted over 600 days, with an average loss of 725 yuan per head (daily loss peak of 1420 yuan per head) (data source: Steel Union). Continuous losses drive deep depletion of breeding cows (Aige predicts a depletion rate exceeding 10%) and gradually transmit to the beef cattle stock, with beef cattle stock entering a downward trend in 2024, and it is expected that beef cattle supply will enter a contraction channel in H2 2025. External disturbance factors are decreasing: Multiple suppressive factors (climate, policy, declining stock) have led to a continuous shrinkage of capacity in major foreign production areas, resulting in a long-term global beef supply gap. Against this backdrop, the narrowing of domestic and foreign price differentials weakens arbitrage space, promoting a significant decline in import volumes in H1 2025, further reinforcing the tight domestic supply pattern. Given the long replenishment cycle for beef cattle, the height and duration of this price super cycle may exceed expectations. Specific Targets With the continuous reduction in cow production + the decrease in dairy cow culling + limited import increments, the supply of commodity beef cattle is expected to enter a contraction channel in H2 2025. A large cycle for domestic beef cattle is anticipated. Recommended stocks: China Shengmu, Bright Dairy, Fortune, etc. 2) The current depletion in the dairy cow industry may be nearing its end, and the financial pressure from the Q3 silage procurement season may accelerate the marginal clearance of capacity, waiting for raw milk prices to bottom out and rebound Recommended to pay attention to: YOURAN DAIRY, China Shengmu, Modern Farming, Ausnutria Group, Tianrun Dairy, etc. Risk Warning: Breeding epidemic risk, price fluctuation risk, changes in import and export policy risk, market systemic risk, downstream consumption recovery not meeting expectations, calculation deviation