The pig industry has a typical periodicity. Generally speaking, it takes four to five years, showing a cycle of “price rise – capacity expansion – oversupply – price fall – de capacity”. Since last year, many investors in the market, especially analysts from seller institutions, have believed that the pig cycle will reach the bottom in the first quarter of this year at the latest. It is from that time that pig concept stocks have rebounded, Since this year, pig stocks have become a rare contrarian rising sector in weak markets. Pig stocks such as Fujian Aonong Biological Technology Group Incorporation Limited(603363) ( Fujian Aonong Biological Technology Group Incorporation Limited(603363) . SH), Wens Foodstuff Group Co.Ltd(300498) ( Wens Foodstuff Group Co.Ltd(300498) . SZ) have risen well, with the highest increase of more than 100%.
The counter trend rise of pig raising concept stocks in the secondary market is actually a response to the expectation that pigs will reach the bottom of the cycle. For example, real estate stocks, in fact, the relaxation of policies is far from being reflected in the income statement of real estate enterprises, but the stock price in the secondary market has been started, and Poly Real Estate ( Poly Developments And Holdings Group Co.Ltd(600048) . SH) began to rebound earlier, with an increase of about one time. To a large extent, the speculation in the capital market is the expectation, which is quite a test of investors’ forward-looking judgment. This column is highly optimistic about the agricultural sector this year. The fundamental logic is that in the era of global inflation, it will eventually be transmitted to agriculture. For example, the transmission effect of high price oil will lead to a rise in the price of Shenzhen Agricultural Products Group Co.Ltd(000061) which will further increase the planting area of crops and the demand for agricultural substances, including chemical fertilizers, herbicides and other substances. In fact, there are many listed companies in this industrial chain, and the valuation is relatively cheap at present.
To get back to business, why is the “bottom grinding” of this pig cycle so long? Now it’s the second quarter. The pig cycle has obviously not reached the bottom, that is, the bottom area. The reasons behind it are: first, this round of pig cycle has greatly improved the industry concentration, such as Muyuan Foods Co.Ltd(002714) ( Muyuan Foods Co.Ltd(002714) . SZ), Wens Foodstuff Group Co.Ltd(300498) , New Hope Liuhe Co.Ltd(000876) ( New Hope Liuhe Co.Ltd(000876) . SZ). These large enterprises are large-scale breeding, with obvious large-scale effect, and the ability of leading enterprises to resist cycle fluctuations must be stronger, This will extend the time course for the pig cycle to reach the bottom.
In the last round of pig cycle, there were many retail investors, and the industry concentration was far less than today. Once the pig cycle went down, it was easy for loss making farmers to go to production capacity. Some farmers even killed fertile sows and sold them as pork.
Secondly, the last round of pig raising has made many enterprises rich. Pork is a rigid demand in China, and many capital have a crush on this one. A large amount of capital enters the pig raising industry with the help of capital. When the pig cycle is in the downward period, the ability to resist the cycle is certainly much stronger than that of retail investors. At present, the capital is fighting hard. Except for a few leading enterprises such as Muyuan Foods Co.Ltd(002714) and so on, the pig industry is basically in full loss. At this time, the competition is who has stronger capital strength, who has stronger cash flow, and who can carry the “winter” of this pig cycle!
As far as the pig industry is concerned, at present, first, the price of pork is basically in a downward trend. Second, the upstream raw materials, corn and soybean meal are rising. In fact, pig enterprises are under pressure on both sides, which can be described as “Davis double kill”. The range of losses is increasing. It is reasonable to say that the pig industry is accelerating to catch up with the bottom. This is indeed the case, but what exceeds the market expectation is that compared with the previous pig cycle, This round of “catching up with the bottom” will take a lot of time. The core reason is the increase of industry concentration and the influx of capital.
Therefore, the concept stocks of pig cycle have not reached the real bottom yet, and the expectations of this industry are still very clear. The concept stocks of pig breeding still have great investment opportunities in the future, especially the head pig breeding enterprises. However, after this strong rebound, if there are still no clear signs of “catching up with the bottom”, the concept stocks of pig breeding will have a correction process, especially the performance of pig breeding enterprises in the first quarter report, which will be difficult to see, Investors are advised not to chase up pig stocks.
After the adjustment, such as the range of 20% to 30%, or even only about 15%, the time for pig concept stocks to leave the cyclical bottom is getting closer and closer, and a big market will come!
