The Zhitong Finance App learned that Debon Securities released a research report saying that in December, the decline in breeding sows continued, the decline in Yongyi's caliber narrows, and the decline in Steel Union's caliber widened. Overall, the industry is still continuing to lose production capacity. In the short term, frozen goods stocks are high, pig supply pressure is still high, and pig prices are being boosted limited during the peak season; in the long run, 24H1 supply is expected to increase year-on-year. Combined with the fact that consumption may be low after the Spring Festival, pig prices are expected to see a low point in this cycle. As losses accumulate and increase in magnitude, capacity removal is expected to accelerate. It is recommended to seize the layout opportunities on the left side of the cycle.

Currently, sector valuations are low. It is recommended to focus on: steady leaders Muyuan Co., Ltd. (002714.SZ), Wen's shares (300498.SZ), flexible stocks Xinwufeng (600975.SH), Huatong shares (002840.SZ), superstar agriculture and animal husbandry (603477.SH), and Tang Renshen (002567.SZ).

Debon Securities's views are as follows:

Pigs: Pig prices fluctuated and fell, and growth continued to decline in December.

1) Pig prices fluctuated and fell, and the industry continued to lose money. At the beginning of January, there were still some large backlogs of large pigs in the early stages, and supply pressure still existed. However, after the winter solstice, demand inertial decline, and pig prices fluctuated and fell. On January 4, the average price of pigs nationwide was 14.07 yuan/kg, -0.64% from week to week. On January 5, the profits of self-raised and outsourced piglets were -233.21/-214.46 yuan/head, respectively, compared to -11.87/-8.30 yuan/head compared to the previous week.

2) The pickling campaign has come to an end, and the slaughter volume of slaughtering enterprises has declined markedly. After the market experienced preparations for the winter solstice, the southern pickling campaign has come to an end, and there has been a marked decline in slaughter volume by slaughter companies. On January 5, Yongyi's sample company slaughtered an average of 171,800 heads per day, -6.53% from week to week. In terms of frozen products, frozen goods inventories declined slowly due to the lower price of fresh products and the small price difference with frozen products, frozen goods shipments were not smooth. On January 4, the frozen goods storage rate was 19.53%, -0.64pct week over week.

3) There is still pressure on large pigs to come out, and the average weight of pigs continues to rise. At the beginning of January, some large pigs were still on the market, supporting last week's weight gain. However, with the end of pickled pork, demand for large pigs declined, and the breeding side's willingness to increase weight was reduced. It is expected that the weight of pigs will average or decline in the future. From December 29, 2023 to January 4, 2024, the proportion of pigs over 150 kg released was 7.65% (-0.11pct). The average weight of pigs released was 123.53 kg (+0.06% weekly ratio), and the price difference between 200kg/175 kg pigs and standard pigs was 0.18/0.13 yuan/kg (-0.02/-0.06 yuan/kg), respectively.

4) Production capacity removal continues, and emphasis is placed on pig cycle layout opportunities. Steel Union's energy efficiency in December 2023 was -2.09% month-on-month (-1.92% month-on-month in November), with a cumulative decrease of 5.91% in January-December. Yongyi's energy yield was -0.84% month-on-month in December 2023 (-1.57% month-on-month in November, -0.85% month-on-month in October), and the cumulative decline in January-December was 11.05%.

In December, the decimation of breeding sows continued. The decline in Yongyi's caliber narrowed, and the decline in steel caliber increased. Overall, the industry is still continuing to lose production capacity. In the short term, frozen goods stocks are high, pig supply pressure is still high, and pig prices are being boosted limited during the peak season; in the long run, 24H1 supply is expected to increase year-on-year. Combined with the fact that consumption may be low after the Spring Festival, pig prices are expected to see a low point in this cycle. As losses accumulate and increase in magnitude, capacity removal is expected to accelerate. It is recommended to seize the layout opportunities on the left side of the cycle. Currently, sector valuations are low. It is recommended to focus on steady leaders Muyuan Shares, Wen's Shares, and flexible targets Xinwufeng, Huatong Shares, superstars Agriculture and Animal Husbandry, and Tang Renshen.

White chicken: The birth parent's surrogate is gradually entering a downward range, and pay attention to the pace of changes in parents' production capacity.

1) Most companies are still in the process of stopping seedlings, and chicken seedlings are operating at a low price. Currently, some companies in the Shandong chicken seedlings market have begun to resume their quotations, but most companies are still in the process of stopping their seedlings. The supply of chicken seedlings in the market is low. Large-scale farms have resumed patching one after another. Retail market investors still have a wait-and-see mentality, are less motivated to fill the shelves, and chicken seedlings are running at a low price. On January 5, the price of chicken seedlings was 1.26 yuan/feather, which was the same from week to week. On January 5, the price of white feather broiler was 7.59 yuan/kg, -1.04% week over week.

2) Supply contraction is transmitted step by step, gradually entering the reduction range in the maternity parent's generation register. As of December 17, 2023, the Association's parent-generation reserve account had 17.018,400 units (-0.29% week over week), and the parent generation had 204.287 million sets in stock (+0.48% week over week). The parent generation inventory had dropped 9.13% from the high point in early November.

On December 26-28, 2023, 11 HPAI outbreaks occurred in Oklahoma (non-commercial farm), California, Missoula and other places in the United States. The outbreaks covered commercial turkey farms and non-commercial farms. A total of 2.341,800 birds were affected. We need to pay close attention to the impact of the overseas bird flu epidemic on introduction. Looking ahead to the future market, restrictions on introduction have now been transmitted downstream to the parent generation. 24H1 commercial chicken seedlings are expected to decrease significantly, driving up the commodity price boom. It is recommended to focus on Shengnong Development, Minhe Shares, and Yisheng Shares.

Seed industry: The commercialization of genetically modified genes has been implemented, and the transformation of the seed industry has officially begun.

On December 29, 2023, the 7th session of the 14th National People's Congress Standing Committee voted to pass the Food Security and Security Law. The law clarifies that the country establishes a food security responsibility system and implements shared responsibility between the party and government for food security. The industrialization of biological breeding is an important means of safeguarding the country's food security. On December 7, 2023, the Ministry of Agriculture and Rural Affairs issued an announcement stating that 51 genetically-modified varieties have been officially approved, marking the commercialization of genetically modified genes and the beginning of seed industry transformation, which will drive the expansion of market space and increase industry concentration. Leading breeding companies are expected to fully benefit from the first-mover advantage. It is recommended to focus on Dabeinong, Longping Hi-Tech, Denghai Seed Industry, and Quanyin Hi-Tech.

Risk warning: risks such as animal disease outbreaks, commodity price fluctuations, natural disasters, etc.