Matters:
On February 24, 2022, Russian President Vladimir Putin announced the official start of military operations against Ukraine through a televised speech, which exacerbated the risk of conflict between Russia and Ukraine. We believe that Russia and Ukraine, as important grain exporters in the world, the occurrence of local military operations may affect the normal agricultural production and trade, resulting in a shortage of global wheat, barley and other crops, and global food prices may continue to remain high.
Guoxin agricultural viewpoint: 1) Russia and Ukraine are important exporters of barley and wheat. The occurrence of local military operations may affect the development of normal agricultural production and trade, resulting in a shortage of global wheat, barley and other crops. 2) The price fundamentals of wheat and corn in China have strong support. Due to the late sowing of wheat due to the weather in the North last winter, it may reduce the output this year. At the same time, as the main crop of corn forage substitution, wheat price plays a certain supporting role in corn price. In addition, soybean meal prices are continuously disturbed by La Nina weather in South America, and the range of production reduction may be expanded. 3) On the whole, the global grain market will remain tight in supply and demand in 2022, and the global grain price may continue to rise. On the one hand, it is good for the planting and seed sector, on the other hand, the rise of the cost of feed raw materials may accelerate the breeding loss, the reversal of the pig price cycle is ready to accelerate, and we are optimistic about the investment opportunities of the pig sector. 4) Risk tip: uncertainty risk caused by bad weather and potential risk caused by uncontrollable animal epidemic. 5) Investment suggestion: it is expected that global food prices will remain in the channel of high prosperity in 2022, and the planting and seed sector and pig breeding sector may continue to benefit. In terms of specific targets, the planting sector is good Jiangsu Provincial Agricultural Reclamation And Development Co.Ltd(601952) ; Recommended for seed sector: Yuan Longping High-Tech Agriculture Co.Ltd(000998) , Shandong Denghai Seeds Co.Ltd(002041) , Beijing Dabeinong Technology Group Co.Ltd(002385) . Recommendations for pig breeding sector: Zhejiang Huatong Meat Products Co.Ltd(002840) , Fujian Aonong Biological Technology Group Incorporation Limited(603363) , Leshan Giantstar Farming&Husbandry Corporation Limited(603477) , Tecon Biology Co.Ltd(002100) , Dongrui Food Group Co.Ltd(001201) , COFCO jiajiakang, Muyuan Foods Co.Ltd(002714) , Wens Foodstuff Group Co.Ltd(300498) .
Comments:
Russia and Ukraine are important exporters of barley and wheat. Local military operations may affect the development of normal agricultural production and trade.
Russia and Ukraine are one of the main wheat and barley producing regions in the world, and their wheat and barley exports play an important role in the total global imports. In terms of global wheat imports, Russia and Ukraine accounted for 17.58% and 9.95% of the total global wheat imports respectively in 2021, accounting for 27.53% in total. From the perspective of global barley imports, the barley exports of Russia and Ukraine accounted for 13.15% and 17.53% of the total global barley imports respectively in 2021, accounting for 30.67% in total. In addition, for China's imports, Russia is China's seventh largest source of wheat imports. In 2021, China's wheat imports from Russia accounted for 0.5% of China's total wheat imports; Ukraine is China's third largest source of barley imports. In 2021, China's barley imports from Ukraine accounted for 25.75% of China's total barley imports. We believe that Russia and Ukraine, as important grain exporters in the world, the occurrence of local military operations may affect the normal agricultural production and trade, resulting in a shortage of global wheat, barley and other crops, and global food prices may continue to remain high.
The shortage of wheat may drive up the price of corn, and the price of soybean meal may continue to be disturbed by the weather in South America.
We believe that the grain price fundamentals of wheat and corn in China have strong support, especially the late sowing of wheat in northern China affected by the weather last winter, which may reduce the output this year. In addition, the price of corn has continued to rise since 2020. Therefore, some enterprises use lower price wheat to partially replace corn to reduce the cost of feed production, Therefore, the rise of China's wheat price this year may make the feed industry reduce its substitution proportion, so as to increase the demand for corn feed and support the price of corn. In addition, soybean meal prices have also risen strongly recently. Under the background that the main soybean producing areas in South America are affected by La Nina weather, the uncertainty of soybean and soybean meal supply is also increasing this year, or they may face a significant reduction in production, so they are optimistic about the price trend of soybean meal.
In 2022, we are optimistic about the upward trend of grain price boom, focusing on the planting chain and pig sector.
Overall, it is expected that the global and China's grain supply and demand will remain tight in 2022, and the grain price will be in the channel of high prosperity. From the perspective of stocks, on the one hand, the planting and seed sector will benefit from the core, and high food prices are expected to continue to drive farmers' enthusiasm for planting, directly benefiting seeds and planting demand. On the other hand, as the main raw materials of feed, the price rise of corn, soybean meal and wheat will directly raise the cost of pig breeding industry, so as to accelerate the overall loss of the breeding industry, or further accelerate the clearing of breeding capacity, which is conducive to the reversal of pig price cycle.
Investment suggestion: top-down sector key recommendation.
It is expected that global food prices will remain in the channel of high prosperity in 2022, and the planting and seed sector and pig breeding sector may continue to benefit. In terms of specific targets, the planting sector is good Jiangsu Provincial Agricultural Reclamation And Development Co.Ltd(601952) ; Recommended for seed sector: Yuan Longping High-Tech Agriculture Co.Ltd(000998) , Shandong Denghai Seeds Co.Ltd(002041) , Beijing Dabeinong Technology Group Co.Ltd(002385) . Recommendations for pig breeding sector: Zhejiang Huatong Meat Products Co.Ltd(002840) , Fujian Aonong Biological Technology Group Incorporation Limited(603363) , Leshan Giantstar Farming&Husbandry Corporation Limited(603477) , Tecon Biology Co.Ltd(002100) , Dongrui Food Group Co.Ltd(001201) , COFCO jiajiakang, Muyuan Foods Co.Ltd(002714) , Wens Foodstuff Group Co.Ltd(300498) .
Risk tips
1. Uncertainty risk caused by bad weather. Agricultural planting enterprises are directly engaged in agricultural planting and production, and seed companies also need planting to produce seeds. In case of bad weather, it may damage the products of the listed company and cause losses to the company.
2. Potential risks caused by uncontrollable animal epidemic. Agricultural livestock and poultry breeding enterprises mainly focus on large-scale breeding. If an uncontrollable animal epidemic occurs, it may cause high mortality of livestock and poultry of listed companies, lower feed demand than expected, and have a negative impact on the planting chain and breeding chain.
