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On December 22, Huatai Securities Research Report pointed out that under the high supply pressure, the peak season of pig prices in 2023 will not be prosperous, the loss period of pig breeding will be extended, and it will be difficult to show signs of profitability in the short term. Under the background of cash flow pressure and the rise of pig diseases, it is expected that the trend of sow production capacity is expected to deepen, and the bottom inflection point of the pig cycle may be expected in the second quarter of 2024.
Whether from the perspective of capitation or PB, the valuation of hog breeding stocks is still at the bottom of history, and the margin of safety for sector allocation is high. Considering that the stock price inflection point in the previous pig cycle is usually ahead of the pig price, it is recommended to lay out the pig breeding sector.
Due to the outbreak of African swine fever, the pig breeding industry has been severely damaged, the number of live pigs has dropped sharply, and the market supply is insufficient. With the government's policy support and subsidy measures, the pig breeding industry has gradually recovered, but it still faces many challenges such as epidemic prevention and control, environmental protection requirements and rising breeding costs. At the same time, as consumers' concerns about food safety and quality increase, the aquaculture industry is also facing pressure to improve standards and promote green farming.
- Changes in the number of live pigs
Judging from the changes in the national pig herd from 2019 to 2022, during the African swine fever period in 2019, the pig inventory declined significantly, resulting in a significant increase in pig prices. In 2020, the number of live pigs has not yet returned to the previous level, so pig prices fluctuated at a high level throughout the year. Since 2021, the number of live pigs has basically returned to the level before swine fever, the supply is sufficient, and the price of pigs has declined.
Since entering 2022, the number of live pigs has fluctuated and declined, and from the price point of view, pig prices have shown an upward trend since April 2022, indicating that the market price has ushered in a recovery after the industry continues to promote production capacity. However, on the whole, the current pig inventory is still at a historical high, the number of live pigs is sufficient, and the medium and long-term price increase is difficult to sustain.
From the perspective of the number of fertile sows, it takes 10-11 months to breed from fertile sows to fat pigs, that is, the number of fertile sows can affect the number of pigs slaughtered after 10 months. From 2019 to the first half of 2021, the number of fertile sows continued to rise, mainly due to the expansion of production capacity after the plague in Africa; Since the inflection point in July 2021, the number of fertile sows in mainland China has been 41.92 million, equivalent to 102.2% of the normal holdings, with normal production capacity and in the green area.
The rise in pig prices since April 2022 is more of a normal reaction of the market after the reduction of production capacity, but with the month-on-month recovery of the number of fertile sows in May, and the fertile sows are still in a reasonable range, the future pig prices lack further upward momentum.
-- The scale of the pig breeding market
As the largest producer and consumer of pigs, the market size of the mainland pig breeding industry is huge. Here, the average weight of pigs slaughtered * average weight of pigs slaughtered * average price of pigs is used as the standard to measure the market size of the industry. Among them, the data released by the Ministry of Agriculture and Rural Affairs of the Ministry of Agriculture and Rural Affairs of the number of pigs slaughtered shows that the average price of live pigs in 22 provinces and cities is used as the annual average price, and the average weight of pigs slaughtered is calculated according to 120kg/head. From 2016 to 2020, although affected by factors such as pig price fluctuations and changes in the number of slaughters, the market size of the mainland pig breeding industry has always remained above 1 trillion yuan. In 2020, in the context of a sharp rise in pig prices, the market size of the mainland pig breeding industry reached 2.16 trillion yuan. In 2021, affected by the decline in pig prices, the market size of the mainland pig breeding industry fell to 1.63 trillion yuan.
In the view of Zhu Zengyong, a researcher at the Beijing Institute of Animal Husbandry and Veterinary Medicine, Chinese Academy of Agricultural Sciences, 1. The supply of pork is expected to decline slightly, and the number of pigs slaughtered is expected to fall by 1%-2%; Pork imports are expected to be revised down slightly to 1.5 million to 1.6 million tonnes. 2. Consumer demand has picked up, and income and catering consumption have supported the gradual recovery of consumer demand. 3. The average price of live pigs rose slightly throughout the year, the production cost of live pigs decreased, and the breeding was slightly profitable.
Note: This article is for content purposes only and does not constitute any investment advice.
Prospective Economist APP Information Group
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