Market review this week
Last week (2022 / 3 / 212022 / 3 / 25), the CSI 300 index fell by 2.14%, and the agriculture, forestry, animal husbandry and fishery index rose by 3.93% over the same period, outperforming the CSI 300 index by 6.07 percentage points, ranking first among 28 Shenwan industries. In terms of sub sectors, the growth and decline of planting / fishery / Shenzhen Agricultural Products Group Co.Ltd(000061) processing / livestock and poultry breeding / feed / animal health care sectors last week were 7.93%, 4.96%, 4.48%, 3.75%, 2.53% and - 0.05% respectively.
Core ideas of this week
[live pig] the production capacity of the pig decreased or slowed down in February. It is suggested to grasp the cyclical trend change direction
The epidemic prevention and control caused poor transportation, and the pig price stopped falling and rebounded.
According to the monitoring of Boya Hexun, the average price of pigs nationwide this week was 11.91 yuan / kg, up 0.16% month on month and down 55.47% year-on-year; The self breeding loss was 549.21 yuan / head, a month on month decrease of 0.38% and a year-on-year decrease of 147.00%; The loss of purchased breeding was 287.03 yuan / head, a month on month decrease of 11.23% and a year-on-year decrease of 48.42%; The average price of compound feed for fattening pigs was 3.78 yuan / kg, up 0.8% month on month and 11.50% year-on-year. However, we believe that the recent rebound in pig prices is unsustainable. The slight rise in pig prices this week is mainly due to the severe situation in the prevention and control of covid-19 pneumonia in China, the strict control of roads in many places, the obstruction of pig marketing and transportation, the increased willingness of farmers to support prices and reluctant to sell, the increased difficulty of purchasing slaughtering enterprises, the increased market bullish sentiment, and the price rise of large-scale farms in the North took the lead in driving the general rise of pig prices across the country. However, the epidemic prevention and control also had an impact on consumption. The slow delivery of white striped pork in the wholesale market reflected the weak terminal demand and was unable to support the rise of pig prices. Some areas in the North rose and fell in the late week. We observed that in the middle and early March, some large-scale farms were less than expected. Towards the end of the month, in order to achieve the goal of marketing or speed up the progress of marketing, the epidemic prevention and control in many places has been strict recently, and it may be difficult for terminal consumption to recover significantly in the short term. It is expected that pig prices will fall again in a stampede manner in the next two weeks.
In March, the range of capacity removal may be expanded month on month, and a new round of accelerated elimination may be started in the second quarter.
In March, the national pig prices fell sharply in a row, while the feed cost continued to rise after the conflict between Russia and Ukraine in late February, and the losses of farmers continued to increase. We expect the decline in the number of fertile sows in China to expand month on month in March. However, according to the data of Yongyi consulting, at present, the price of eliminated sows is still 50% higher than that of fattening pigs. The price of eliminated sows reflects that the sentiment of market capacity deregulation is not strong enough. Under the background that the market is generally optimistic about the market in the second half of the year, the elimination of sows by retail investors and large-scale farms is still slow, and some farmers with sufficient funds are still willing to continue to supplement sows, Only a small number of large breeding enterprises with tight funds will consider eliminating some sows to alleviate the pressure. The elimination of sows in the first half of this year is not ideal, which may cause that the supply of pigs in the second half of this year is still sufficient, so that the price reversal in the second half of this year is less than expected or the inflection point of the cycle is delayed. However, the recent outbreak of covid-19 epidemic in many places has suppressed consumption, and the probability of pig price will grind to the bottom for a long time after the deep decline from April to may, which will have an impact on the enthusiasm of farmers to continue to fill the hurdles from November to December last year, so as to accelerate the speed of farmers' elimination of sows, and the main body of capacity removal in the future is local moderate scale enterprises with an annual output of 10005000 commercial pigs. We continue to recommend investment opportunities in the pig sector. At present, the capacity has been continuously de converted. In the short term, we should weaken our attention to the speed and range of capacity de conversion, and focus on the direction of the trend change of the pig cycle.
[white feather broiler] meat wool chicken will be released again after the schedule is cut off, while the delivery rhythm of frozen chicken products is slow. It is expected that the price of meat wool chicken will stop rising next week, and there is a risk of decline in the later stage.
The supply of chicken breeds has decreased slightly in recent years, which has stimulated farmers to make up the fence and increase the number of contracted chicken breeds. However, the high feed cost has inhibited the enthusiasm of hurdling, and it is estimated that the price will increase after next week's chicken price rises.
[planting chain] what is the impact of geopolitical conflict and drought in South America on China's Shenzhen Agricultural Products Group Co.Ltd(000061) price?
By March 25, 2022, the spot price of corn in China had reached 2833 yuan / ton, up nearly 5% from the beginning of January; The spot price of wheat reached 3213 yuan / ton, up 11% from the beginning of January; The spot price of soybean reached 5505 yuan / ton, up 6% from the beginning of January; The spot price of soybean meal reached 5150 yuan / ton, up more than 40% from the beginning of January.
China's soybean, corn, wheat and other Shenzhen Agricultural Products Group Co.Ltd(000061) still rely on some imports and are greatly affected by the international market. We believe that Russia, Ukraine, Brazil and Argentina are the main suppliers of China's Shenzhen Agricultural Products Group Co.Ltd(000061) imports. The conflict between Russia and Ukraine and the dry weather in South America may have an impact on global grain production and supply, and the fluctuation of global grain prices may have a linkage impact on China's planting chain. Specifically: (1) more than 85% of China's soybeans are imported from Brazil and the United States. The weather in the main soybean producing areas of South America is suffering from drought, resulting in the soybean output of Argentina, Brazil and Paraguay far lower than originally expected, affecting the global soybean supply, and the soybean price outside China may rise in linkage; (2) China has a high self-sufficiency rate of wheat and rice and is less affected by the international market, but some of the high-quality wheat imported for the production of bread may cause a certain conduction pressure, but the impact is limited; (3) There is still a certain gap between supply and demand of corn in China, and the growth rate of import volume in the past two years is more than 10%. In the 21st / 22nd year, the import volume of corn reached 29.85 million tons, mainly from Ukraine and the United States. Last year, the proportion of imports from Ukraine reached 30%. The recent conflict between Russia and Ukraine may have an impact on the export and shipment of corn in Ukraine. However, China's corn output in 2021 / 22 broke a record high, adding that this year's demand side was affected by the removal of pig production capacity, sorghum The substitution effect of Shenzhen Agricultural Products Group Co.Ltd(000061) such as barley may decline, and the impact of import fluctuations on China's corn price may be unsustainable. The recent continuous rise of corn price is also hindered by the poor transportation caused by the epidemic prevention and control. It is expected that the corn price is expected to decline slightly after the epidemic prevention and control is lifted.
In addition, we should also be concerned that if the conflict between Russia and Ukraine continues to intensify, the pricing of energy such as crude oil and natural gas will rise sharply, which will lead to a sharp rise in the prices of major agricultural materials such as pesticides and chemical fertilizers, which will have a potential negative impact on food production outside China in the future.
Investment advice
[pig breeding] in the cold winter of breeding, we select the target based on the two main lines of "not going bankrupt" and "expected marketing", and recommend Hunan New Wellful Co.Ltd(600975) , Muyuan Foods Co.Ltd(002714) and other enterprises with abundant cash flow and cashable marketing.
[white feather broiler] the industrial chain has experienced a loss for one year. The deep loss in the downstream inhibits the enthusiasm of making up the fence. The decline in the price of chicken seedlings affects the profits of the incubator, or forces the chicken breeding farm to take the initiative to reduce the production capacity. We may see the month on month contraction of the supply of chicken seedlings in the third quarter of 2022, and pay attention to the changes in the stock of grandparents' generation chickens and parents' generation chickens in production. Recommend enterprises that focus on the layout of the whole industrial chain business and the target of the upstream main chicken seedling sales business.
[dynamic insurance] the sector has fallen to a reasonable range due to the drag of pig price. It is expected that the reversal of pig price in the second half of 2022 will lead to the upward prosperity of the industry, and the sector is expected to usher in valuation repair. It is suggested to lay out at a low level. It is recommended to focus on Pulike Biological Engineering Inc(603566) , which has obvious advantages in subunit vaccine research and development, and industry leaders with rich product reserves.
Risk tips
Covid-19 epidemic spread risk, international situation change risk, policy implementation less than expected risk, etc.
