The Zhitong Finance App learned that Huatai Securities released a research report saying that recently, various sources disclosed data on how many sows were able to breed in July. Overall, under official standards, sows that can reproduce are being kept at an accelerated pace, and there are major differences in data from various parties. According to the bank's analysis, the data differences between the parties were clearly mainly due to differences in the composition of large-scale households and retail households in the monitoring sample. After a recent rapid rebound in pig prices, it has entered a period of shock, or due to short-term factors such as pressure barriers and secondary fattening. The bank expects pig prices to return to a slump in the future, and the trend of removing sow production capacity is expected to continue. It is recommended to gradually lay out the pig breeding sector.
The main views of Huatai Securities are as follows:
Official-caliber sows are being removed at an accelerated pace, and the data differences between the parties are obvious
Recently, various sources have successively disclosed data on sow breeding in July. Specifically: 1) The National Bureau of Statistics & Ministry of Agriculture and Rural Affairs (official) Caliber: In July, the number of sows that could be raised nationwide was 42.71 million, a decrease of 0.6% over the previous month (0.2% decrease from the previous month), and the cumulative removal rate from January to July was about 2.71%. 2) Animal Husbandry Association Caliber: In July, the Association's designated monitoring scale saw a slight increase of +0.8% over the previous month (0.4% increase from the previous month), and the cumulative removal rate from January to July was about 3.5%. 3) Yongyi Consulting: In July, monitoring companies were able to keep sows reduced by 0.22% over the previous month (1.68% decrease from the previous month), and the cumulative removal rate from January to July was about 6.79%. 4) The caliber of 20 large pig companies: In July, 20 large pig companies were able to keep sows increased by 1.0% over the previous month (2.0% increase from the previous month), with a cumulative increase of about 4.81% from January to July. 5) My steel net caliber: In July, monitoring companies were able to breed sows increased by 0.01% month-on-month (0.57% decrease from last month), of which the scale increased by 0.02% over the previous month (down 0.49% from the previous month), and the cumulative removal margin of sows that were able to breed from January to July was about 1.49%.
According to the bank's analysis, the data differences between the various parties are clearly mainly due to differences in the composition of large-scale households and retail households in the monitoring sample. What is reflected behind this is that the extent of retail diversification is greater than that of large-scale households, and that group pig companies continue to expand against the trend.
Pig prices fluctuated after a rapid rebound, and short-term supply pressure still exists
After a recent rapid rebound in pig prices, it has entered a period of shock. The farming side has reversed losses, or is mainly due to short-term factors such as pressure barriers and secondary fattening. Judging from the Ministry of Agriculture and Rural Affairs data on sows that can breed, continued to recover from May to December 2022, with a total increase of 5.1% over a period of 8 months. Considering that last year's sow supplement determined this year's supply and demand pattern, crushing and secondary fattening will only affect the pace of supply, making it difficult to reverse supply and demand. The bank expects this rebound to be similar to July 2021. After that, pig prices are likely to return to a slump, and the trend of sow production capacity removal is expected to continue.
It is recommended to focus on leading companies
Recently, pig prices have entered a period of shock, and listed companies with high growth, excellent cost control, and good debt and cash flow conditions are expected to present allocation opportunities. The bank suggests focusing on leading companies with high volume growth and cost advantages.
Risk warning:Pig prices fell short of expectations, the number of pigs released by listed companies fell short of expectations, the price of raw materials rose, the risk of an African swine fever epidemic, etc.