The Zhitong Finance App learned that Shanxi Securities released a research report saying that the fourth “loss bottom” of the current cycle in 2024 is the first time since 2006 that 4 “loss bottoms” have occurred, and the cycle bottoming out is expected to gradually come to an end. Referring to the experience of the first two cycles, the inflection point of the pig breeding index is generally 6-9 months ahead of the inflection point of the pig price cycle. Whether looking at the reversal in 2024 or the reversal in 2025, the bank believes that attention should be paid to the timing of pig breeding stocks at the fourth “bottom of loss”. Due to industry practices such as secondary fattening, the bank tends to think that the high point of the future pig cycle is likely to be higher than the high point of the normal cycle before the outbreak of “African Swine Fever” in 2018.

The views of Shanxi Securities are as follows:

Pig prices continued to rise last week (May 13 to May 19).

According to tracking pig prices in key provinces and cities, as of May 17, the average price of three-yuan pigs outside Sichuan/Guangdong/Henan was 15.15/16.00/15.35 yuan/kg, respectively, up 1.34%/1.59%/0.99% from last week; the average pork price was 20.76 yuan/kg, up 1.71% from last week; the average wholesale price of piglets was 24.71 yuan/kg, up 2.66% from last week; the average price of binary sows was 31.00 yuan/kg, down 0.03% from last week; profit from self-breeding was - 15.21 yuan/head, the profit from purchasing piglets was 132.17 yuan/head. As of May 17, the weekly price of white feather broilers was 7.75 yuan/kg, down 1.15% from the previous month; the price of broiler seedlings was 3.15 yuan/feather, up 1.61% from the previous month; breeding profit was -1.70 yuan/feather.

The fourth “loss bottom” in the current cycle in 2024 is the first time since 2006 that there have been 4 “loss bottoms”, and the bottom of the cycle is expected to gradually come to an end.

The US pig industry still has an obvious pig cycle during the period of high scale. Currently, the scale of China's pig industry is still much lower than that of the US, and pig prices in China will still show cyclical fluctuations in the future. Due to industry practices such as secondary fattening, the bank tends to think that the high point of the future pig cycle is likely to be higher than the high point of the normal cycle before the outbreak of “African Swine Fever” in 2018.

Referring to the experience of the first two cycles, the inflection point of the pig breeding index is generally 6-9 months ahead of the inflection point of the pig price cycle.

The upward cycle of the pig breeding index often begins during or near the penultimate “loss bottom” period. It hasn't been until pig prices break out of the last “loss bottom”; the upward cycle of the pig breeding index has already been interpreted more than half. It can be seen from this that the penultimate “loss bottom” of the pig price cycle bottoming out stage or a better time to lay out large-scale pig breeding stock opportunities, not the last “loss bottom,” let alone wait until the breeding industry enters a profit period.

Whether looking at the reversal in 2024 or the reversal in 2025, according to the rules of interpretation of breeding stocks mentioned above, the bank believes that emphasis should be placed on the timing of pig breeding stocks at the fourth “bottom of loss”.

If the fourth “loss bottom” is the last bottom, the subsequent deductive logic of farming stocks may gradually move from the “capacity removal” stage to the “cycle reversal” stage. Under a pessimistic scenario, if the fourth “bottom of loss” is the penultimate bottom of loss, then it is still a good time to lay out large-scale opportunities for pig breeding stocks. The bank recommended pig breeding stocks such as Wen's shares (300498.SZ), Tang Renshen (002567.SZ), Dongrui shares (001201.SZ), Shennong Group (605296.SH), Superstar Agriculture and Animal Husbandry (603477.SH), and New Hope (000876.SZ).

As upstream raw material cost pressure falls and downstream trends improve, Haida Group's worst moment in the current cycle may have passed. Currently, the valuation is at the bottom of history. We recommend Haida Group (002311.SZ) for speculative opportunities.

According to the bank's “loss period+low PB” strategy, Shengnong Development (002299.SZ) has already entered the allocation window. The bank believes that excellent operation of the entire industry chain is one of the core competencies of pet food brands. As the domestic brand effect gradually increases, the high growth of domestic brands is expected to continue, and recommends the leading domestic pet food brand Guobao Pet (301498.SZ), which maintains a leading position in omni-channel sales performance.

Risk warning: risk of aquaculture epidemic; risk of natural disasters; risk of fluctuations in feed raw material prices.