[core view]
Important events:
On March 29, during the fifth round of Russia Ukraine negotiations, the head of the Russian delegation mezinski said that the negotiations between the two sides were very constructive. Russia was studying the Ukrainian proposal, and the relevant information would be reported to President Putin.
On March 31, the Ministry of agriculture of Ukraine said that although affected by the war, Ukrainian farmers have sowed about 400000 hectares of various spring crops, an increase of 10% over the same period last year.
Recently, there are signs of easing the situation in Russia and Ukraine. At the same time, the recent smooth statement of the Ukrainian Ministry of agriculture in spring has laid confidence in stabilizing and increasing income. But just last week, the outgoing Minister of agriculture made a statement about the sharp reduction of spring broadcasting, which was almost opposite. We believe that the situation of agricultural production in Ukraine remains to be seen, and the short-term Shenzhen Agricultural Products Group Co.Ltd(000061) bulk market and agricultural sector may still face event driven fluctuations.
But we might as well look back at the core drivers of this round of global Shenzhen Agricultural Products Group Co.Ltd(000061) bulk market. The direct reason is the rise of regional Shenzhen Agricultural Products Group Co.Ltd(000061) prices caused by the rising planting costs of basic bulk commodities such as petroleum and chemical industry and the sluggish global supply chain. Therefore, the core reasons are: first, the disturbance of supply chain and the rise of bulk cost under the global epidemic; second, the bulk commodity market derived from the situation in Russia and Ukraine. Therefore, the epidemic situation and the situation in Russia and Ukraine are the two bull noses of the current round of global Shenzhen Agricultural Products Group Co.Ltd(000061) market.
In terms of trend, the global epidemic will always end and the situation in Russia and Ukraine will always ease up. The US Department of agriculture (USDA) predicted a total grain supply of 358997 million tons in March of the year 21 / 22, an increase of 8.31 million tons compared with the February forecast and 55.07 million tons compared with the year 20 / 21. There is no shortage of total supply. In the long run, the Shenzhen Agricultural Products Group Co.Ltd(000061) bulk market and the sentiment of the planting sector will always fall. In terms of trading, it is suggested to pay attention to the fluctuation of the planting sector, and pay attention to the long-term logic of the agricultural sector - the general trend of large-scale breeding and the revitalization of the seed industry
Aquaculture industry:
In terms of pigs, according to the monitoring of the national development and Reform Commission, the specific price of pig grain has been continuously lower than 5:1 recently, which is in the level-1 early warning range of excessive decline. 40000 tons of frozen pork were collected and stored on April 2 and 3. We believe that the national development and Reform Commission issued a level-1 early warning on the decline of pig prices and started the collection and storage work, which will stabilize the market fluctuation to a certain extent, boost the confidence of pig trading in the short term, add holiday factors, bring some support to pig prices, and the market of pig sector in the short term is expected to continue to catalyze. The price of pig breeding has been significantly adjusted recently. According to China pig network, as of April 2, the price of live pigs (foreign three yuan) was 12.64 yuan / kg, up 2.3% from last week. However, global supply chain pressure and regional disputes push up Shenzhen Agricultural Products Group Co.Ltd(000061) bulk prices, indirectly increasing the cost of breeding feed, and the breeding profit is still in the deep loss range. As of April 2, the profit of pig self breeding was -531.05 yuan / head, and the de production capacity of the industry will continue. From the feed data, on March 15, the feed industry association announced the feed production situation from January to February 2022. The total output of industrial feed in China was 43.84 million tons, a year-on-year increase of 3.5%. The output of pig feed increased by 2.19 million tons year-on-year. On a monthly basis, the pig feed output in February was 9.24 million tons, a month on month increase of - 23.1%. We believe that the month on month decline in February was due to the suspension of the Spring Festival and statistical factors. The overall feed output and demand of the industry are still at a high level, reflecting that the inventory of the pig industry is still relatively loose. Under the slowdown of demand after the festival, the pig price is difficult to be strong in the short term. (see the figure of "stock and pig feed output" for details) the sales of major pig listed enterprises in February: the pig market weakened with the slowdown of demand after the festival, the pig price decreased, the superimposed feed cost increased, and the breeding loss further expanded. In terms of quantity, after the Spring Festival, the overall demand slowed down, the price of pigs was low, the main enterprises accelerated their marketing before the festival, superimposed the market downturn after the festival, and the marketing shrinkage was obvious. In February, the main pig enterprises sold 2.8333 million pigs (excluding the original animal husbandry), with a month on month decrease of 31.5%. In terms of price, after the pig line in February, it entered the off-season, the overall demand slowed down, and the pig market fell. The sales prices of pigs of major pig enterprises decreased significantly in February. Zhengbang, Wenshi, New Hope Liuhe Co.Ltd(000876) , tianbang were - 9.7%, - 10.9%, - 12.8%, - 13.8% month on month respectively, and muyuan decreased by 16.1% from January to February compared with December last year.
We believe that the game of pig sector has entered the stage of 3.0. The classic cobweb model reflects the market logic of price reduction - production reduction - short supply - price increase - production increase - price reduction. From the historical and recent performance of the capital market, the game of the capital market against the pig sector has gradually evolved from the initial "price increase" (stage 1.0) to "production reduction" (stage 2.0) to "price reduction" (stage 3.0). The capital market has digested the expectation of price reduction at the beginning of the year, and formed a certain expectation of production reduction and upward expectation in the future cycle in advance. "The lower the price, the lower the production and the higher the share price". The logical chain of "cobweb model" of capital market game continues to move forward.
According to our calculation, in history, the average market value of the top pig enterprises listed in the 19-20 pig cycle reached the level of 1200018000 yuan, while the average market value of the top pig enterprises listed in the 15-16 pig cycle reached the level of 8 Tcl Technology Group Corporation(000100) 00 yuan (as shown in the figure below). We believe that the starting background of the 19-20 year pig cycle is relatively special, and the short-term impact of environmental protection and non plague factors on the industry's production capacity is very obvious. At present, if the pig cycle reverses, it is more driven by the profits of cyclical industries. Referring to the valuation, the pig cycle of 15-16 years (i.e. the average market value of about 8000 yuan) is more comparable. We believe that under the current valuation level, the market has reflected a certain expectation of cycle reversal in advance, but the downward profit promotes the de production capacity and the consumption level still need to be continuously observed and verified, and the pig sector will enter a more intense game stage.
In terms of trading, considering that the capital market has reflected the expectation of a certain reversal of pig cycle, it is suggested to pay attention to the fluctuation caused by the short-term price reduction and production reduction. From the perspective of recent breeding profits, the breeding profits of self breeding and outsourcing piglets have entered the deep loss range, and the de production capacity will be accelerated. Bargain hunting intervention is a more appropriate strategy. However, this round of pig cycle will return to the Epic Cycle of 19 years, which does not have the external environment of environmental protection and non plague impact on production capacity. It is suggested to maintain rational expectations.
In terms of broilers, we believe that the supply and demand fundamentals of yellow feather chicken will promote the market cycle upward. 1) On the supply side, the long-term breeding loss in the early stage makes the industry's production capacity obvious. According to the China Animal Husbandry Association, the stock of parents of yellow feather broilers has been in a low position for nearly four years. We believe that the overall production of yellow feather broilers in 22 years will be at a low level in recent years. 2) On the demand side, as the market of live pigs and other animal proteins bottoms out, the substitution squeeze of yellow feather broiler demand will gradually ease and the margin will be better. In addition, the consumption of live poultry suppressed by the epidemic has been fully digested in the past two years, with marginal improvement; In the short term, it is supported by consumption at the end of the year, boosted by long-term economic recovery, and the yellow feather broiler sector is expected to usher in a business cycle.
Pay attention to the relevant targets of Jiangsu Lihua Animal Husbandry Co.Ltd(300761) , Hunan Xiangjia Animal Husbandry Company Limited(002982) , Wens Foodstuff Group Co.Ltd(300498) and other sectors.
In terms of industrial chain integration, we believe that head breeding enterprises extend to downstream slaughtering and processing, food manufacturing and even terminal sales by virtue of their advantages of upstream integration and large-scale, with continuous enrichment of business and continuous improvement of value. Head breeding enterprises are expected to rely on their core advantages to continuously improve their competitiveness and open the performance growth curve.
Highlights: China's leading large-scale aquaculture [ Muyuan Foods Co.Ltd(002714) ] with obvious cost advantages, new forces of large-scale aquaculture [ Fujian Aonong Biological Technology Group Incorporation Limited(603363) ] with capacity advantages and expansion potential, [ New Hope Liuhe Co.Ltd(000876) ] and [ Fujian Sunner Development Co.Ltd(002299) ] with rapid progress in industrial chain integration.
Planting industry: the seed industry has ushered in a historic opportunity of "three-phase superposition". During the policy period, on February 11, the State Council issued the "14th five year plan" to promote agricultural and rural modernization. In the chapter "promoting innovation driven development", it once again emphasized the revitalization of the seed industry - strengthening the protection of germplasm resources, carrying out breeding innovation, strengthening the construction of seed industry base and strengthening the supervision of seed industry market. During the industrial period, bulk grain prices remained high, farmers' willingness to grow grain increased, and corn and rice seed stocks, supply and demand were optimized, promoting the prosperity of the seed industry. The technical period is 22 years, and biological breeding is expected to be popularized. It is expected that the biological breeding promotion plan in the near future is expected to be clear: 1) the low version of the plan only involves the promotion in Inner Mongolia and Yunnan; 2) On the basis of the low version, the medium version also popularizes the main corn producing areas in Northeast China; 3) The higher version will be fully released. We believe that considering the national determination to promote the revitalization of the seed industry and the current actual situation of planting, there is a high probability that the Chinese version will be finally launched.
On February 28, the Ministry of agriculture and rural areas issued the work plan for the supervision of agricultural genetically modified organisms in 2022. We believe that this year's plan has the following three characteristics. 1) "Stricter". This year's work plan proposed to strengthen the supervision of seed production and operation and "prevent illegal genetically modified seeds from going to the ground" (last year proposed to "strictly prevent illegal genetically modified seeds from flowing into the market"). 2) "Full coverage", the inspection coverage rate of relevant enterprises, scientific research institutions, breeding and production bases should reach 100%. 3) "Industrialization". The plan proposes "creating a healthy and orderly environment for the development of biological breeding industrialization". It can be seen that biological breeding industrialization is approaching, and 22 years is expected to be the first year of implementation.
In the medium and long term, we are firmly optimistic about the prospects of the national seed industry and the improvement of the fundamentals of relevant seed enterprises. Under the banner of seed industry revitalization, the iteration and reconstruction of the industry are constantly implemented from top to bottom, which is highly deterministic. "Iteration" refers to the iteration of biological breeding technology. In January, relevant policies on transgene and gene editing were implemented to support the efficient approval of relevant varieties and show the determination and strength of the policy. "Reshaping" is the reshaping of the industry pattern. At the national conference to promote the work of supporting excellence of seed enterprises, it was once again emphasized that "we should improve and strengthen a number of seed industry leading enterprises with integrated innovation ability and adapt to market demand, and create the backbone force for the revitalization of seed industry". The leading seed enterprises with scientific research advantages will become more and more prominent. "Top down" refers to the implementation of policies, systems, supervision and law enforcement under the banner of seed industry revitalization. The overall industry fundamentals will be better and better.
In terms of trading, we believe that although there is a time cycle for the achievement of the industry performance, the revitalization of the seed industry is sustained and certain. The cashing cycle will inevitably lead to the settlement of "impetuous" funds and fluctuations, but it also brings opportunities for bargain hunting allocation to "long-term" funds. Retreat from the "floating foam" with high short-term expectations, and with the style suppression coming to an end, there will be better trading opportunities.
Key recommendation: seed industry leader [ Yuan Longping High-Tech Agriculture Co.Ltd(000998) ] with genetically modified trait reserve, and [ Beijing Dabeinong Technology Group Co.Ltd(002385) ] with leading genetically modified technology and multiple businesses.
Pet industry: pet industry is a high-quality track catering to social development and consumption trend. According to the white paper on China's pet industry, China's pet industry has a market scale of 100 billion, with a compound annual growth rate of nearly 20%. At present, overseas giants occupy a high share of China's pet food and medical market segments. We believe that the branding of domestic OEM enterprises will continue to accelerate, and have comparative advantages in understanding and deepening Chinese traditional and modern channels. The pet industry will usher in opportunities for domestic substitution, and we will continue to follow up and pay attention. Key recommendation: China's pet food industry leader [ Yantai China Pet Foods Co.Ltd(002891) ].
Grain and oil industry: affected by the Shenzhen Agricultural Products Group Co.Ltd(000061) cycle, the disturbance of global supply chain under the epidemic and other factors, the prices of soybean and other oilseeds have risen, the cost side pressure of grain and oil enterprises has become prominent, and the squeezed profits have declined significantly. We believe that the performance of grain and oil enterprises is expected to boost with the marginal improvement of the pressure on the cost side - the future Shenzhen Agricultural Products Group Co.Ltd(000061) cycle and the recovery of consumption after the easing of the epidemic on the demand side. Focus on integrated supply chain management and operation of leading enterprises.
Key recommendation: grain and oil leader [ Yihai Kerry Arawana Holdings Co.Ltd(300999) ], which is expected to develop in the overall kitchen business.
Risk tip: the economic recovery is less than expected, the epidemic situation, etc
