The upstream production capacity increased and the industry continued to be depressed. In recent years, the ancestral chicken link has achieved sustained profits, and the introduction of Chinese white feather broilers has remained at a high level since 2019. In 2021, with the restart of imports to the United States and the improvement of the self breeding ability of Chinese white feather meat breeders, the renewal of Chinese ancestors increased to a high level. According to the China Animal Husbandry Association, in 2021, China’s white feather broilers updated 1.246 million sets of ancestral breeding chickens, an increase of 24.3% year-on-year. On the whole, the upstream production capacity is relatively sufficient. Due to the large expansion of chicken seedlings in the first half of 2021, the price of chicken seedlings in the lower half of 2021 jumped by 267.72% year-on-year, which was the highest in the first half of 2021; The highest price of commercial substitute chicken seedlings rose to 5.18 yuan / piece, an increase of 2455% over the end of 2020.
The loss of the industry will push down the sales volume of parents’ generation, and the introduction of avian influenza in the United States may be reduced. However, due to abundant production capacity, and the chicken price did not rise as scheduled, the weakening of downstream prices finally transmitted upward, and the chicken seedling price collapsed. Since Q3 of 2021, the breeding profit of parental breeding chickens has been almost below the break even point. Up to now, it has lost more than three quarters. The average loss in 2022q1 has reached 1.5 yuan / feather, and the range and cycle of loss are at a historically high level. The continuous loss has driven the production capacity of the parent generation to begin to be eliminated. The total sales volume of parent generation chicken seedlings reached 16.72 million in 2021q2. The sales volume of parent generation chicken seedlings continued to decline in the next three quarters. Therefore, it is expected that the supply of commercial generation chicken seedlings will decline since 2022q2, and the short-term supply is expected to usher in marginal improvement. Meanwhile, since the beginning of 2022, the bird flu epidemic in North America has continued to spread. In the past 21 years, China’s introduction from the United States accounted for 57%. The introduction of white feather breeding chickens from January to February 2022 came from the United States. The United States has once again become China’s leading white feather breeding chicken introduction country. The potential risks brought by American imports to the supply of ancestral chickens deserve attention.
Outdoor consumption is under pressure in the short term and has great potential for long-term demand. At present, the consumption of white feather broilers in China is mainly through catering and group catering, accounting for 63% in total, and the proportion of household consumption and food processing is still small. The reduction of eating out, suspension of school and work stoppage caused by the epidemic will bring certain pressure on consumption. However, as a protein meat product with high cost performance and convenient cooking, white feather broiler is expected to gradually move from outdoor consumption to indoor consumption, and the consumption pressure caused by the epidemic is expected to be gradually relieved. Judging from the apparent consumption of white feather broilers in recent years, the apparent consumption of chicken has not declined annually due to the impact of the epidemic. We estimate that the apparent consumption of white feather chicken in 2020 and 2021 will be 10.92 million tons and 12.47 million tons respectively, with a year-on-year increase of 26.0% and 14.2% respectively. The consumption of chicken continues to rise, and there is still much room for China’s white chicken market.
Investment proposal and investment object
The white chicken market has been depressed for a long time, and the marginal improvement signal appears. We believe that the price will pick up with the supply pressure in the later stage; Meanwhile, the bird flu epidemic in North America is gradually fermenting, and the risk of seed supply in China is accumulating. Pay attention to Fujian Sunner Development Co.Ltd(002299) , which has the ability of independent breeding and the leading white chicken in the integration of the whole industrial chain; And Shandong Minhe Animal Husbandry Co.Ltd(002234) , Shandong Yisheng Livestock & Poultry Breeding Co.Ltd(002458) , which are upstream of the industrial chain.
Risk tips
The decline of consumer demand exceeded expectations, the risk of price fluctuation of raw materials, and the occurrence of chicken diseases.
