Report guide
The recent covid-19 epidemic prevention and control situation is grim, the transportation of pigs and frozen products is interrupted, and the release of short-term supply is limited. However, the epidemic has impacted on terminal consumption. In April, there may be a risk of further decline in pig prices, breeding losses and hopeless high prices in the second half of the year. Under the background of accelerating the elimination of production capacity in the second quarter is highly certain; The white feather chicken industry chain continues to suffer losses, the contraction of upstream supply accelerates, and the avian influenza in the United States may affect the supply of breeding chickens in China.
Key investment points
Market review this week
The agriculture, forestry, animal husbandry and fishery sector underperformed the market. Last week (2022 / 4 / 6-2022 / 4 / 8), the CSI 300 index fell by 1.06%, and the Shenwan agriculture, forestry, animal husbandry and fishery index fell by 4.72% in the same period, 3.66 percentage points lower than the CSI 300 index, ranking 28th among the 28 Shenwan level industries.
From the sub sectors of agriculture, forestry, animal husbandry and fishery, the animal health / planting / Shenzhen Agricultural Products Group Co.Ltd(000061) processing / feed / livestock and poultry breeding / fishery sector rose or fell by - 2.89%, - 3.56%, - 3.92%, - 3.93%, - 5.74% and - 6.28% respectively last week.
Core ideas of this week
[pig] the second pulse of pig cycle is close at hand, and the callback is the gold buying point
According to the monitoring of Boya Hexun, the average price of pigs nationwide this week was 12.46 yuan / kg, up 1.86% month on month and down 45.98% year-on-year; The self breeding loss was 511.57 yuan / head, with a month on month decrease of 3.67% and a year-on-year decrease of 171.57%; The loss of purchased breeding was 282.58 yuan / head, with a month on month decrease of 3.36% and a year-on-year decrease of 48.35%. We have observed that the recent covid-19 epidemic prevention and control situation is grim. Similar to the covid-19 epidemic just broke out in early 2020, many governments took road closures, circuit breakers and other measures to cut off the spread of the epidemic, resulting in the obstruction of logistics and transportation. It is also difficult for households to adjust the price of frozen goods in the short term, but it is also difficult for households to adjust the price of frozen goods in the short term.
At present, the price of eliminated sows is still 50% higher than that of fattening pigs, and the price difference between eliminated sows and fattening pigs is small, which reflects that under the background that the market is generally optimistic about the market in the second half of the year or next year, the sentiment of farmers to eliminate production capacity is not strong enough. It is expected that the elimination data of sows in March may be lower than the market expectation, but it also further lowers the pig price expectation in the fourth quarter of 2022. Spot prices remained depressed and high pig prices in the second half of the year were hopeless. Under the continuous breeding losses and cash flow losses, the certainty of accelerating the deregulation of sow production capacity in the industry in the second quarter of this year is very strong, and the pig breeding group represented by Cr40 may have a significant elimination of sows one after another. We believe that the recent correction of pig breeding sector is mainly due to the excessive rise in March, and the rise in March is mainly affected by geopolitical factors and risk appetite, which is not supported by changes in industry fundamentals. In the second quarter, with the support of low pig price and accelerated capacity removal, the sector is expected to usher in the second wave of main rise.
[white feather broiler] the winner and loser of the chicken cycle is now, and the supply of the poultry chain is accelerating
The white feather chicken cycle is brewing and starting. Historically, white feather broilers have an average cycle of two years. Since 2020, the broiler industry has been at a loss for most of the time. At the beginning of 2020, China's broiler production capacity peaked and began to slowly reduce production capacity. This year, the loss of the industry was mainly in the fattening link, and the breeding and breeding link has been in a profitable State. In 2021, the loss of the industrial chain spread to the breeding link, and the breeding birds began to be forced to moult to prolong the breeding time of 25-30 weeks, but the production efficiency decreased. Since the beginning of this year, the price of feed raw materials has soared, the loss of poultry has increased, especially meat and poultry, and the cash flow pressure of farmers has increased, which is expected to accelerate the removal of upstream production capacity.
Avian influenza in the United States may increase the risk of introduction in China. Since the beginning of 2022, the outbreak of avian influenza in the United States has spread to 24 states and 92 counties in the United States, resulting in more than 27 million birds being slaughtered, and there is no obvious mitigation trend. At present, China's dependence on the import of white feather broiler sources is still high. 70% of white feather broilers were imported from abroad in 2021. The outbreak of avian influenza in the United States in 2015 led to a sharp decline in the introduction of Chinese white feather chickens for two consecutive years, which seriously impacted the healthy development of China's white feather chicken industry. China may stop importing breeding chickens from the United States in the event of another outbreak of bird flu in the United States. With the slowdown of introduction and the dual factors of forced moulting in 2021, China's poultry prices are expected to gradually rise from the current bear market.
[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? As of April 8, 2022, the average spot price of corn was 2841 yuan / ton, up 0.12% month on month; The average spot price of wheat was 3084 yuan / ton, down 3.60% month on month; The average spot price of soybean was 5505 yuan / ton, unchanged month on month; The average spot price of soybean meal was 450629 yuan / ton, down 1.82% month on month.
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. 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.
In addition, we are concerned that the current military struggle between the two countries has gradually cooled down, but the supply and demand pattern of global energy, food and agricultural materials has not changed greatly. Geopolitical conflicts and energy sanctions are still likely to continue. Global energy pricing such as oil and natural gas may remain high and fluctuate, which will push up the prices of agricultural materials such as pesticides and fertilizers downstream, or have a potential negative impact on medium and long-term food production outside China. In the context of food security, biological breeding technology can solve the problem of oil shortage in China from the perspective of productivity factors. It is expected that the commercialization process of genetically modified organisms breeding in China is expected to make a breakthrough. We may see the introduction of seed production pilot scheme in 2022, the charging method of genetically modified traits may be further implemented within the year, and seed enterprises with obvious technical and quality advantages may take the lead in benefiting.
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 losses for more than one year. The deep losses in the downstream inhibit the enthusiasm for column filling. The decline in the price of chicken seedlings affects the profits of the incubator, or forces the chicken farms to take the initiative to reduce production capacity. We may see a month on month contraction in the supply of chicken seedlings in the third quarter of 2022; The outbreak of avian influenza in the United States may affect the import of white feather chicken provenance and aggravate the risk of breeding chicken supply. The white feather chicken cycle may start in preparation. It is recommended that enterprises focusing on the layout of the whole industrial chain business and the elastic 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.
[planting chain] focus on the subject that directly benefits from the rise of grain prices; The rise of grain prices drives the prosperity of seed industry. It is recommended to pay attention to Beijing Dabeinong Technology Group Co.Ltd(002385) (rich reserves of genetically modified traits) and Yuan Longping High-Tech Agriculture Co.Ltd(000998) (the leader of corn and rice seeds).
Risk tips
Covid-19 epidemic spread risk, international situation change risk, policy implementation less than expected risk, etc.
