Huafu Securities: Sentiment boosts pig prices rebound, focus on the sustainability of entry into the second breeding

According to the Zhitong Finance APP, Huafu Securities released a research report stating that the concentrated market release of large pigs in the previous period led to a decrease in the inventory of large pigs, widening the price difference for fat pigs and increasing the enthusiasm for secondary fattening. From October 11 to 20, the sales proportion of secondary fattening was 2.09%, an increase of 1.07 percentage points month-on-month. In addition, the drop in temperature has driven a recovery in basic consumption, and low pig prices have stimulated a reluctance to sell among farmers, collectively pushing pig prices to rebound. In the long term, the recent downward shift in pig price levels, deepening losses in farming, and the advancement of capacity control policies are expected to enhance the expectation of industry capacity reduction, which may drive the long-term pig price center upward.

The main viewpoints of Huafu Securities are as follows:

Pig Farming: Emotion drives pig price rebound, focus on sustainability of secondary fattening entry

Pig prices rose last week. The concentrated market release of large pigs in the previous period led to a decrease in the inventory of large pigs, widening the price difference for fat pigs and increasing the enthusiasm for secondary fattening. From October 11 to 20, the sales proportion of secondary fattening was 2.09%, an increase of 1.07 percentage points month-on-month. In addition, the drop in temperature has driven a recovery in basic consumption, and low pig prices have stimulated a reluctance to sell among farmers, collectively pushing pig prices to rebound. On October 24, the national average price of live pigs was 11.81 yuan/kg, an increase of 0.63 yuan/kg week-on-week.

The average weight of live pigs continued to decline last week. During the week, the enthusiasm for secondary fattening increased, and group enterprises sold live pigs smoothly, with a slight decrease in average weight week-on-week. At the same time, individual farmers, due to the widening price difference for fat pigs, showed increased reluctance to sell, leading to a significant decline in average weight. As of the week of October 24, the average weight of live pigs was 127.90 kg (a decrease of 0.35 kg week-on-week), with group farms averaging 123.94 kg (a decrease of 0.14 kg week-on-week) and individual farmers averaging 142.21 kg (a decrease of 0.57 kg week-on-week).

In the short term, the expected output from the sample enterprises of Steel Union/Zhuochuang/Yongyi in October is +5.48%/+7.32%/+5.14% month-on-month, indicating a significant increase in supply. The short-term rise in pig prices is mainly driven by seasonal consumption recovery and the warming of secondary fattening sentiment. However, the rise in pig prices will increase the costs of secondary fattening, so attention should be paid to the sustainability of secondary fattening entry. In the long term, the recent downward shift in pig price levels, deepening losses in farming, and the advancement of capacity control policies are expected to enhance the expectation of industry capacity reduction, which may drive the long-term pig price center upward. In September, Yongyi/Steel Union/Zhuochuang's breeding capacity decreased by -0.84%/-0.33%/-1.05%, with last month showing a month-on-month increase of +0.07%/-0.80%/-1.11%. Attention should be paid to changes in breeding capacity.

In terms of targets, it is recommended to pay attention to Bangji Technology (603151.SH), Tiankang Biology (002100.SZ), MUYUAN (002714.SZ), Wens Foodstuff Group (300498.SZ), and Dekang Agriculture and Animal Husbandry (02419).

Livestock Sector

Beef Cattle: Short-term prices slightly retreat, long-term beef cattle cycle may rise. On October 24, the prices of calves and fattened bulls were 32.13/25.67 yuan/kg, with a week-on-week decrease of -0.19% and -0.23%, respectively, and a cumulative increase of 33.26% and 9.05% since the beginning of the year. In the medium to long term, due to previous long-term losses, a large amount of production capacity has been cleared, and the reduction effect of breeding cows will gradually transmit, leading to a tightening of beef cattle supply in the medium to long term, with beef prices expected to enter an upward cycle in 2026-2027 Raw Milk: Milk prices fluctuate at low levels, and capacity reduction is expected to continue. Currently, the raw milk price is at the bottom of the cycle, with the industry raw milk price at 3.04 yuan/kg on October 17, unchanged week-on-week, and down 31% from the cycle peak. Losses in raw milk are expected to drive continued capacity reduction. As capacity reduction leads to supply contraction, the raw milk price cycle is expected to stabilize and rebound subsequently. Pay attention to YouRan Dairy (09858) and China Shengmu (01432).

Poultry Sector

Broilers: Prices remain stable overall. Currently, the market has a high empty house rate, and breeding companies have tight chick placement plans, coupled with strong performance in broiler prices, resulting in firm chick prices. On October 24, the industry white feather broiler price was 6.88 yuan/kg, up 0.01 yuan/kg week-on-week; the industry broiler chick price was 3.32 yuan/chick, up 0.03 yuan/chick week-on-week. The ongoing avian influenza epidemic overseas continues to spread, with France lifting import restrictions while the U.S. and New Zealand still have import interruptions, which may further shrink upstream capacity for broilers. Pay attention to the sustainability of import restrictions. It is recommended to focus on Yisheng Industries (002458.SZ), Shengnong Development (002299.SZ), and Wellhope (603609.SH).

Layer Chickens: Egg prices decline, chick prices remain stable. Last week, the average price of eggs was 6.06 yuan/kg, up 0.07 yuan/kg week-on-week, and layer chicks were priced at 2.65 yuan/chick, up 0.05 yuan/chick week-on-week. With egg prices declining, we await capacity reduction to drive a recovery in egg prices. It is recommended to focus on Xiaoming Co., Ltd. (300967.SZ).

Agricultural Products: Soybean meal prices rebound from the bottom, pay attention to the guidance of China-U.S. negotiations.

On the spot market, last week, spot prices fell and then rose, with the soybean meal spot price at 2984 yuan/ton on October 24, down 26 yuan/ton week-on-week. On the futures side, at the beginning of last week, soybean meal futures prices continued to decline, with the main contract dipping to a low of 2852 yuan/ton, and then rebounding from the bottom due to support from import costs and declining soybean meal inventories. On October 24, the soybean meal 2601 contract closed at 2933 yuan/ton, up 65 yuan/ton week-on-week. Recently, oil mills have seen poor crushing profits, increasing their willingness to maintain prices, limiting the downside for soybean meal prices. In the medium term, soybean meal prices are expected to run strong under the support of import costs. From October 24 to 27, China and the U.S. held economic and trade consultations in Malaysia, continuing to pay attention to changes in China-U.S. trade policies and planting weather in South America. It is recommended to focus on soybean meal ETFs.

Risk Warning

Risks include animal disease outbreaks, fluctuations in commodity prices, and natural disasters