Affected by the strong bottom sentiment of pig price, the A-share pork sector continued to strengthen on January 5, Fujian Aonong Biological Technology Group Incorporation Limited(603363) once realized the daily limit for two consecutive boards, but there was no significant rebound in pig futures recently. The continued strength of the pork sector has triggered extensive discussion on when the inflection point of the "pig cycle" will come.
the trend of pork concept stocks is different
Statistics show that as of last weekend, the average price of pigs in 22 provinces and cities in China was 16.3 yuan / kg, up 1.9% on a weekly basis.
The bottom sentiment of pig price is strong, and the A-share pork plate has continued to strengthen recently. Data show that in the morning of January 5, pig concept stocks rose in a large area. Among them, Fujian Aonong Biological Technology Group Incorporation Limited(603363) once realized the daily limit of two boards, New Hope Liuhe Co.Ltd(000876) , Leshan Giantstar Farming&Husbandry Corporation Limited(603477) , Tecon Biology Co.Ltd(002100) all increased by more than 5%. However, the subsequent gains narrowed. As of the close, Fujian Aonong Biological Technology Group Incorporation Limited(603363) rose more than 8%, New Hope Liuhe Co.Ltd(000876) rose more than 5%, Wellhope Foods Co.Ltd(603609) rose more than 4%, Henan Shuanghui Investment & Development Co.Ltd(000895) , Shenzhen Kingsino Technology Co.Ltd(002548) rose more than 2%.
Pig futures did not rebound significantly. According to Wenhua financial data, as of the closing on January 5, the main contract of pig futures reported 14245 yuan / ton, which is still in the operation range since December 2021 (13735 yuan / ton - 14860 yuan / ton).
pig de capacity trend continues
"The previous round of pig cycle market is of great educational significance to the market. The market as a whole has a wide understanding of the observation indicators of pig breeding industry. Therefore, it is not difficult to understand the logic of capital rush when looking forward to the new round of pig cycle industry." Chen Xueli, an analyst in the agriculture, forestry, animal husbandry and fishery industry of Kaiyuan securities, said that from the recent net inflow of funds in the livestock breeding sector, the layout of the pig cycle has quietly started in early September 2021.
From the operation of pig enterprises in 2021, from the second quarter of 2021, the pig price fell from a high level and fell near the cost line in June. In the third quarter, the pig price further fell (the average price was 14.3 yuan / kg), and the low point even reached 10.56 yuan / kg, resulting in a deep loss in the industry.
Taking listed companies as an example, due to the impact of outsourcing piglets, sows, rising feed costs and elimination of pigs, the complete breeding cost of listed pig enterprises in 2021 was at a historical high, and the loss in the third quarter also hit a historical record. "In order to survive, at present, large pig enterprises mainly adopt strategies such as reducing cost and increasing efficiency, slowing down expansion and reserving funds to avoid expanding losses." According to market participants.
De capacity of pig industry has become a new market trend. "At the current time, the industry is in the key stage of removing excess capacity. In the first half of 2022, the industry will enter the game stage of capacity removal, and the clearance of cost inferior capacity will be accelerated. This round of industry capacity removal is expected to reach about 15% (compared with the high point from May to June 2021) 。 There is a positive correlation between the pace and extent of pig capacity removal and the timely and long range of losses. Therefore, there is a strong certainty that the industry capacity will continue to be removed in the first half of 2022. " Chen Xueli said.
when will the inflection point come
The data show that by the end of November 2021, the number of fertile sows in China was 42.96 million, down 1.2% month on month, 4.8% higher than the normal number. From the data, the speed of capacity removal in the industry has slowed down recently due to the rebound of pig prices, but the trend of capacity removal is still continuing. Some analysts believe that the pig industry is expected to usher in a new round of cycle reversal in 2022 with the elimination of production capacity. Some analysts believe that under the background of overall oversupply of pork, even if the pork price rebounds in the second half of 2022, it is difficult for pig enterprises to obtain higher breeding profits.
Sealand Securities Co.Ltd(000750) Cheng Yisheng, an analyst in the agriculture, forestry, animal husbandry and fishery industry, said that in the long run, the excessively decentralized industry pattern has brought greater integration opportunities. Since the occurrence of classical swine fever, leading enterprises have accelerated their production capacity layout and gradually increased their market share. In the downward stage of the cycle, the advantage of cost leading enterprises will be easier to win. In the past, free range farmers had a greater impact on the cycle. With the increase of scale, the production capacity change of scale field will determine the inflection point of the industry. From the average market value, most companies have been at or close to historical lows, and the pig sector has long-term investment space.
"The current pig cycle has been 44 months since it started in May 2018, which is very close to the typical length of the past pig cycle. Therefore, a new pig cycle may start in the second quarter of 2022." Guo Yuwei and Lu political commissar of the macro research department of industrial research said, however, China's pork consumption gradually declined after peaking in 2014. According to the current adjustment and reduction rhythm of sow production capacity, pork supply and demand may not return to a more balanced state until the first quarter of 2023. Under the background of overall oversupply of pork, it is difficult to obtain high breeding profits even if the pork price rebounds in the second half of 2022.
(China Securities Journal)
