1. In the large-scale pig cycle since 2018, the pig price has reached the highest in history, and the vibration amplitude is the most intense in previous times.
① in terms of price indicators, the current pig cycle starts from June 2018, and the pig price rises to November 2019, with an increase of + 262%. The highest weekly average pig price reaches 40.9 yuan / kg, and then the pig price fluctuates at a high level for 13 months, with a decrease of 74% from January 2021 to October 2021, and the lowest weekly average price is 10.78 yuan / kg. The prices of piglets, sows and pigs maintain the same trend, But piglet prices fluctuate more. Different from the previous pig cycle, the current round of pig price was at a high level for 13 months after peaking, breaking the law of the previous upward cycle.
② in terms of stock index, affected by African swine fever, the stock of fertile sows rapidly decreased from 31.45 million in August 2018 to 19.68 million in August 2019. Stimulated by the profit of high pig price, the production capacity of Q2 fertile sows quickly recovered to the level before African swine fever in 2020, and the maximum stock of fertile sows reached 45.64 million in May 2021. From the observation of the past two cycles, in the pig cycle from 2009 to 2014, the stock of fertile sows decreased by 7.72% and 20.44% respectively from the high level to the two w bottoms of pig price; In 2014-2018, the number of fertile sows in the pig cycle decreased by 29.19% and 40.98% respectively from the high level to the two w bottoms of pig price. From the high level of 45.64 million pigs in June 2021 to the bottom of pig price for the first time in October 2021, the elimination rate of fertile sows was 4.73%. In November 2021, the number of sows was 42.96 million, and the elimination rate of production capacity was 5.9%, which was still at the bottom of the cycle.
③ from the perspective of profit indicators, the upward period of this round of pig cycle is rich in profits, the gross profit of piglets is much higher than that of previous times, and the self breeding model has stronger profitability and anti loss ability. At the beginning of 2021, the price of piglets was at a high level. When the price of pigs fell, the cost of farmers / farms of purchased piglets remained high, the two ends were squeezed, and the loss was further deepened, resulting in a large gap between the profit of purchased piglets in this round of pig cycle and that of self breeding. After November 2021, the pig price rebounded. After the industry continued to lose money, the supplementary column decreased, and the piglet price also fell. The profit of the outsourcing piglet breeding mode is gradually better than that of the self breeding mode.
2. African classical swine fever has caused a serious impact on the pig industry. In the post non plague era, it is difficult to significantly reduce the cost of classical swine fever prevention and control, and the industry concentration continues to increase. Non plague impacted the breeding system. After non plague, binary sows replaced ternary sows and became the mainstream of fertile sows. Ternary sows with low production efficiency were the first to be eliminated in this round of capacity reduction. Binary fertile sows accounted for 79% in December 2021, and ternary sows were continuously eliminated. Non plague prevention and control has permanently pushed up the breeding cost of the industry. The prevention and control cost of top listed companies is about 0.5 yuan / kg. With the obvious trend of non plague normalization, it is difficult to reduce the prevention and control cost in the future. Farms that cannot match the high-intensity epidemic prevention and control system are first impacted by non plague. Pig breeding has entered the era of large-scale breeding. From 2018 to 2021, the CR10 of the industry has increased from 6.22% to 19.37%, Cr20 increased from 7.91% to 22.72%, and the industry concentration increased continuously.
3. The bottom of pig price fluctuates. It is expected to hit the bottom twice in the second half of 2022. The downward cycle focuses on the pressure of enterprise capital flow. According to the division of the Ministry of agriculture and rural areas, by the end of November 2021, the number of sows in stock was 42.96 million, which has been reduced from the red excessive fluctuation area to the yellow area. The production capacity of sows has been continuously reduced, and the pig cycle is in the period of bottom turbulence. It is expected that the second bottom of pig price in the second half of 2022 will usher in the turning point of the cycle. Under the background of high cost and low pig price in the downward cycle, the financing of pig enterprises is relatively difficult, and the capital chain problem will be enlarged. Therefore, the cash flow problem of pig enterprises has attracted much attention. Retail investors in the industry have the characteristics of flexible production and exit. The capital pressure of some large and medium-sized markets will be more obvious, or they will withdraw from the market in the bottom of the downward cycle.
Recommended rating: at present, the pig price is in the process of the second bottom of the w bottom, and the downward space of the pig price is very limited. It is expected to usher in a cycle inflection point in the second half of 2022. At present, the valuation of the sector, especially the leader, is still at the bottom. With the continuous deregulation of production capacity, it is expected to usher in a cycle inflection point in the second half of 2022. At present, the valuation of the sector, especially the leader, is still at the bottom, which has a certain margin of safety and can be arranged appropriately. We give the pig breeding industry a “recommended” rating, focusing on the leaders Wens Foodstuff Group Co.Ltd(300498) and Muyuan Foods Co.Ltd(002714) , followed by the second tier pig enterprises New Hope Liuhe Co.Ltd(000876) , Fujian Aonong Biological Technology Group Incorporation Limited(603363) .
Risk tip: the risk of excessive fluctuation of pig price; The impact of classical swine fever exceeds the expected risk; Sample deviation in statistical data or risk of influencing conclusions; The risk that the high cost of raw materials such as corn and soybean meal will affect the prosperity of breeding; The risk that historical data cannot predict the future trend; Risk of future uncertainty of pig cycle, etc.
