Staple grain planting: rice will rise through wheat
Spring sowing in Ukraine accounts for 50% of the annual sowing area. The current war affects the planting of corn and barley and the maintenance before the harvest of winter wheat; Russia's tightening of fertilizer exports has pushed up the global cost of grain cultivation, and the rise of fertilizer prices has greatly weakened the benefit experience brought by the current high food prices. In the end of 3, the US Department of agriculture lowered the planting area of American corn in 2022 to 89 million 490 thousand acres, down from 93 million 360 thousand acres last year, and raised wheat acreage to 47 million 350 thousand acres, up from 46 million 700 thousand acres last year.
The impact of the conflict has evolved from a short-term interruption of trade flow to a long-term interruption of production. The food crisis is not alarmist: first, the overall decline of global grain planting area in 2022. Secondly, Ukraine and Russia have increased the tension and distortion of Global trade flow due to war and export constraints, pushing up transportation costs. Thirdly, the unsealing of European and American countries has driven food consumption. Finally, hoarding demand has increased. We expect that in 2022, China will maintain 8-10% of corn and wheat and 70% of barley imports.
The periodic difference between supply and demand has changed the traditional price structure of staple grain, but it can not change its own consumption attribute and cost ladder. The structure of wheat corn rice makes the substitution demand rush to low-cost varieties, and the area adjustment will also be reflected in this year's planting season. The drivers of the three main grains in the future are different. Wheat comes from the contraction of supply, rice from the increase of alternative demand, and corn from both.
Under the policy of stable planting, q2-q3 pays attention to the planting area of rice, the impact of the epidemic on spring sowing in Jilin and the fixed yield of winter wheat. We expect that rice will relay wheat and become the main force of q2-q3 grain rise; The corn bull market continued and became the cornerstone of the rise in staple food.
Performance outlook of key companies: Jiangsu Provincial Agricultural Reclamation And Development Co.Ltd(601952) , Heilongjiang Agriculture Company Limited(600598)
Jiangsu Provincial Agricultural Reclamation And Development Co.Ltd(601952) : the company is an anti risk and anti inflation choice in the current downturn, and has the theme of transaction price fluctuation. We believe that the market evaluates the company's performance based on the current wheat and rice prices, and the factors that disturb the grain prices in the future may raise the company's valuation, such as the cold in the late spring or the continued rise of international wheat prices. Based on our prediction of grain prices this year and next, the company's performance still has room to rise slowly, More area needed and subsidies increased (with the expansion of soybean and corn planting, it is expected that the grain price will gradually fall from the high level in the second half of 2023. According to the quarterly data, Q1 is the seasonal performance low point, and considering the sales of rice and rice seeds, it is expected to increase by 10% year-on-year. Q2-3 is the time point for the listing and sales of wheat and rice seeds, and it is also the most important performance highlight of the company. At present, the wheat price has increased by 25% year-on-year, and we predict that there will be another 5-15% increase. The two quarterly reports are expected to increase by 20-30% year-on-year. The rice inventory (rice sales in 2021 decreased by 27%) to be increased. Combined with the price increase of rice seeds and the prediction of rice price increase, rice will become the next driver to guide the fluctuation of the company's share price.
Heilongjiang Agriculture Company Limited(600598) : Q1 is the low point of traditional revenue. In previous years, the agricultural branch signed only part of the agricultural production contract agreement, which confirmed that the contract fee income was less than that in the last three quarters. It is expected that the land contract fee will continue to increase this year, and the performance of Q2 will increase significantly month on month.
The seed industry has performed well in previous grain price increases
The Special Administrative Measures for foreign investment access in the pilot free trade zone (negative list) (2021 version) will be implemented from January 1, 2022: the Chinese share ratio in wheat and corn new variety breeding and seed production shall not be less than 34%; It is prohibited to invest in the research and development, breeding and planting of rare and unique precious and fine varieties in China and the production of relevant breeding materials; It is prohibited to invest in the breeding of genetically modified varieties of crops, breeding livestock and poultry and aquatic seedlings and the production of genetically modified seeds (seedlings).
The revised administrative measures for safety evaluation of agricultural genetically modified organisms will be implemented from January 21, 2022: units engaged in agricultural genetically modified organisms testing are encouraged to establish or share special test bases; The declaration of transgenic plants at each stage shall be carried out in the appropriate ecological area of the test plant; A declaration can only apply for one transformant of a transgenic plant.
The newly revised seed law will be implemented from March 1, 2022: expand the protection scope and links of new plant variety rights, and expand the protection links from production, reproduction and sales to production, reproduction and processing for reproduction, offering for sale, sale, import, export, storage, etc; In order to stimulate the original innovation of breeding, a substantial derivative variety system was established; Increase penalties for violations of the right to new plant varieties; The penalty amount for the production and management of fake and inferior seeds was increased.
