China is the second largest producer of broilers in the world, and the consumption of chicken and pork has certain substitutability. On the supply side, according to the data of the U.S. Department of agriculture, the global broiler production in 2020 was 99.063 million tons. Among them, the output of broilers in China is 14.6 million tons, which is the second largest broiler producer in the world, accounting for 14.74% of the world. On the demand side, in China's livestock and poultry consumption market, pork consumption is the largest consumer category of Chinese residents, and chicken consumption is second only to pork. From the trend of per capita consumption of pork and chicken, it can be seen that there is substitution in the consumption of chicken and pork.
There is room to improve the concentration of broiler breeding in China. The pattern of China's broiler breeding industry is relatively scattered, and there is room for improvement in concentration compared with the United States. In 2020, China's top five broiler enterprises listed a total of 2.852 billion feathers, with Cr5 accounting for 25.91%. In the United States, the top five enterprises with broiler slaughter volume in 2019 listed a total of 4.644 billion feathers, with Cr5 accounting for 49.62%. Under the catalysis of policies, the continuous improvement of urbanization and other factors, it is expected that there is room for further improvement of broiler breeding concentration in China.
Investment strategy: cover for the first time and give a cautious recommendation rating to the broiler breeding industry. White feather chicken: the stock of white feather chicken of grandparents and parents is at a relatively high level, and the short-term supply is still abundant. It is expected that the price of Chinese white feather chicken may still have some downward space when the consumption peak season weakens. The superimposed feed cost remains high, the reduction of breeding profit will accelerate the liquidation of the industry, and the capacity removal of white feather chicken is expected to be steadily promoted in 2022. Yellow feather chicken: under the joint action of multiple factors, farmers have started the process of capacity reduction, and the slaughter volume of yellow feather chicken has continued to decline since 2019. At the same time, since 2021, the stock of Chinese yellow feather broilers in grandparents and parents has shown a double downward trend. It is expected that the price of Chinese yellow feather broilers is expected to stabilize and recover in 2022. At the same time, as the demand for pork and chicken has certain substitutability, if the production capacity of breeding sows can be continuously reduced, the inflection point of pig cycle is expected to drive the rise of chicken price. In the follow-up, we need to continue to pay attention to important data such as stock and price and the performance of broiler breeding enterprises, so as to find appropriate layout opportunities. In terms of subject matter, we can focus on the whole industry chain leaders Fujian Sunner Development Co.Ltd(002299) (002299), Jiangsu Lihua Animal Husbandry Co.Ltd(300761) (300761), ice fresh leaders Hunan Xiangjia Animal Husbandry Company Limited(002982) (002982), major chicken seedling companies Shandong Yisheng Livestock & Poultry Breeding Co.Ltd(002458) (002458) and Shandong Minhe Animal Husbandry Co.Ltd(002234) (002234), broiler breeding leaders Shandong Xiantan Co.Ltd(002746) (002746) and Wens Foodstuff Group Co.Ltd(300498) (300498), etc.
Risk tips: national policies, large-scale outbreaks of avian influenza and other diseases, less than expected capacity reduction, downward chicken prices, higher feed costs, intensified market competition, etc.
