According to the Zhitong Finance APP, Guotai Junan released a research report stating that the pressure on capital for forage procurement in the 8-9 month period is significant, and the social inventory is expected to accelerate its reduction. In 25H2, the industry is expected to benefit from reduced production due to heat stress on the supply side and the effects of previous heifer liquidation, entering a supply-demand balance channel during the peak demand season. Affected by the reduction in imported beef volume (down 9.5% year-on-year in 25H1), beef/live cattle prices have reversed from low levels since 25, rising about 10%/20% from previous lows, and prices are expected to further increase under supply reduction. The resonance of the meat and dairy cycles gives strong profit elasticity to livestock companies. It is recommended to increase holdings in leading livestock companies Youran Dairy (09858) and CH Modern D (01117), and pay attention to China Shengmu (01432) and AUSTASIA GROUP (02425).
<h2>Guotai Junan's main points are as follows:</h2>
Raw milk prices continue to decline, with a supply-demand balance expected in 25H2
In the 8-9 month forage procurement season, the pressure on capital for ranch storage is significant, and the social inventory is expected to accelerate its reduction. In 25H2, the industry is expected to benefit from reduced production due to heat stress on the supply side and the effects of previous heifer liquidation, entering a supply-demand balance channel during the peak demand season. Benefiting from the fading impact of previous concentrated expansion, reduced replenishment of lactating cows, and warming demand, the upward trend in milk prices in 26 is highly certain. Policy implementation further boosts dairy demand. In July 25, the fertility subsidy policy was officially implemented, which is expected to boost dairy product consumption demand; the new national standard for sterilized milk will be implemented in September, prohibiting UHT milk from using reconstituted milk as raw material, further weakening the impact of imported bulk powder, and domestic raw milk demand is expected to be boosted.
Beef prices have reversed from low levels, entering an upward cycle in 25
In recent years, beef prices have gone through three cycles: 1) 2010-2017: The increase in per capita disposable income drove the growth of high-end beef demand, leading to a rapid rise in beef prices due to supply shortages; 2) 2018-2022: The impact of African swine fever caused pork and poultry prices to soar, leading to a rapid rise in beef prices due to increased demand; 3) From 2023 to present: Beef prices have continued to decline in 23, mainly due to the pressure on demand from low-priced imported beef and the release of production capacity from increased inventory during the upward phase, as well as low prices of substitute pork and poultry.
Beef prices are entering an upward cycle in 25, benefiting from supply reduction and weakened import impact
Due to losses in ranching, the inventory of breeding cows continues to decrease, and the supply gap is expected to further widen under excessive slaughtering. The industry's loss has continued to increase in recent years, with the number of newborn calves from January to November 24 decreasing by over 8% year-on-year. In 25Q2, the national cattle inventory decreased by 2.1% year-on-year to 99.92 million heads. Affected by the reduction in imported beef volume (down 9.5% year-on-year in 25H1), beef/live cattle prices have reversed from low levels since 25, rising about 10%/20% from previous lows, and prices are expected to further increase under supply reduction. China's investigation into imported beef measures will end in November, and if import restrictions are introduced in the future, it may further boost domestic beef demand.
Resonance of meat and dairy cycles, strong profit elasticity
With the resonance of meat and dairy cycles, livestock companies have strong profit elasticity: 1) Gross profit side: benefiting from the reversal of milk prices and the contraction of unit costs. Assuming that sales milk prices increase by 10%/20% year-on-year, leading dairy farming companies are expected to achieve an improvement of over 6pct/10pct in gross profit margins
With cost control and operational efficiency improvements, the cost of milk per kilogram is expected to decline further; 2) Impairment of biological assets: The valuation of breeding cows and the income from culling cows are expected to boost revenue. With cattle prices increasing by 20%/40%, the total income from culling cows for leading livestock companies is expected to increase by approximately 200 million to 400 million yuan; AUSTASIA GROUP and CHINA SHENGMU, which operate beef cattle businesses, are expected to directly benefit from the rebound in live cattle prices. In addition, the fair value of breeding cows is expected to benefit from the reversal of milk prices, decreased feeding costs, and optimization of herd structure.
Risk Warning
Depletion of stock, price reversal not meeting expectations, fluctuations in feed costs, food safety issues

02425

01432

09858

01117

CITIC Securities released a research report indicating that raw milk prices continue to decline, and it is expected that the inventory will accelerate reduction in the second half of 2025. Beef and live cattle prices are likely to rise due to weakened supply reduction and import impacts. With the resonance of the meat and milk cycles, the profitability elasticity of livestock companies is strong. It is recommended to increase holdings in YOURAN DAIRY and CH MODERN D, and pay attention to CHINA SHENGMU and AUSTASIA GROUP. The implementation of policies will further boost dairy demand, and it is expected that the upward trend in milk prices in 2026 is highly certain

Zhitong

AUSTASIA GROUP

CHINA SHENGMU

YOURAN DAIRY

CH MODERN D

CITIC Securities: Under the resonance of the meat and dairy cycle, the profitability elasticity of livestock companies is relatively strong