“Pork prices have dropped by nearly half compared to the beginning of the year. Recently, more people are buying ribs.” A merchant in Vegetable Basket on Guangqu Road in Beijing told China Business News.

Pork is the most important meat product for Chinese residents, and its price fluctuations affect thousands of households. After the outbreak of African swine fever in 2018, pig production and the pork market have been affected as never before. The pig breeding industry, which made a lot of money six months ago, has now entered a”loss cycle.”

In order to alleviate the cyclical fluctuations of pork prices and avoid”high prices hurting the people and low prices hurting farmers”, and do a good job in the pork market to ensure supply and stable prices, recently the National Development and Reform Commission and the Ministry of Finance, Agriculture Ministry of Rural Affairs, Ministry of Commerce, State Administration of Market Supervision and other departments jointly issued the”Improving the Government’s Pork Reserve Regulation Mechanism and Promoting the Pork Market Work Plan for Guaranteeing Supply and Stabilizing Prices” (hereinafter referred to as”plan”).

Pig Cycle“When will it bottom

Data released by the National Bureau of Statistics on the 9th show that Chinese consumers in May Price Index(CPI)up 1.3 year-on-year%, of which pork prices fell by 23.8%, which was an increase of 2.4%from the previous month percentage points, which became a drag on the CPI increase The main factor.

Zheng Hou, director of the Institute of British University Securities, has analyzed the data of live pig inventoryThe stocks of breeding sows and sows have been restored to the level at the end of 2014, and the stocks of live pigs and breeding sows have reached new highs year-on-year, indicating that the average wholesale price of pork will still be in a weak state. It is expected that the pork CPI in June The year-on-year decline in the month was greater than that in May.

The continuous sharp drop in pork prices has affected pig companies. Recently, A-share leading pig companies have released May live pig sales briefings. On the whole, the leading pig companies’ putting slaughter continues to maintain high growth, driving incomeYear-on-year growth, subject to a sharp drop in pig prices, a single monthly income in MayMoM declined significantly; there are also some pig companiesquantity price All declines , and there is a phenomenon of monthly revenue declines both month-on-month and year-on-year.

According to institutional analysis, in the medium and long term, the”pig cycle” has entered the profit Downside and even loss stage. The so-called pig cycle is an economic phenomenon, and its circular trajectory is generally:high meat prices-a large increase in sow stocks-an increase in hog supply-a decrease in meat prices-a large number of sows are eliminated-a reduction in hog supply-an increase in meat prices.

From the point of view of research reports from many institutions, most of them believe that the”pig cycle” will hardly bottom out in the short term. China Post Securities pointed out that according to data from the Ministry of Agriculture and Rural Affairs, the country’s live pigs will be Productivity has been restored to more than 90%of the normal level. The recovery of live pig production capacity will bring down the price of live pigs. Although the price may rebound seasonally in the future, the price of live pigs is generally on a downward trend. It is expected that the live pig industry will reach the bottom in 2022 or 2023.

Improve the government’s pork reserve adjustment mechanism

In the face of falling pig prices, government pork The reserve adjustment mechanism is once again placed high hopes.

In 2009, with the approval of the State Council, the National Development and Reform Commission and relevant departments issued the”Prevention of excessive fall in live pig prices (interim)” to give full play to the government’s role in regulating pork reserves, and according to changes in the situation in 2012 Revised twice in 2015 and 2015, and formed the”Regulation Plan for Mitigating the Periodic Fluctuations of Live Pig Market Prices” The relevant plans have played a positive role in promoting the smooth operation of the live pig market, alleviating the cyclical fluctuations in prices, and ensuring the needs of residents’ pork consumption. It also plays a positive role in Agricultural products price control has accumulated experience.

In order to better adapt to the new situation and changes in the live pig market and meet the people’s new expectations for a better life, the National Development and Reform Commission and relevant departments have carefully studied the experience and practices in the current round of government pork reserve adjustment. Institutionalized, formulated and issued this”preplan”.

The relevant person in charge of the National Development and Reform Commission stated that the”Preplan” gives full play to the important role of the government’s pork reserve adjustment as a key starting point, and insists on both the “raising” and the “lowering” of the prices of live pigs and pork in order to stabilize the supply. Guarantee price stability and promote stable supply with price stability. When the price is too high, reserves will be put in to protect the consumption needs of residents, push the price to fall to a reasonable range, and avoid excessive expansion of live pig production; when the price is too low, the purchase and storage will be started to support the market, so as to provide”reassurance” for farmers. , To avoid excessive elimination of live pig production capacity.

The CBN reporter learned that compared with the 2015 plan, this “plan” has revised and improved core content such as early warning indicators and intervals, reserve classification and scale, and reserve adjustment mechanism.

The”Pig and Food Price Comparison” indicator is an important indicator that intuitively reflects the comparison of the cost and benefit of pig breeding. It has received widespread attention from the pig breeding industry. The”Preplan” continues to use this indicator.

At the same time, the”Preplan” has added two indicators:one is the”change rate of breeding sow stock”, which can significantly improve the forward-looking nature of risk warning and reserve adjustment; Added”36 large and medium-sized cities lean meat average retail price indicator, which is closer to consumption The readers feel that they can give early warning and respond in time when the price of pork increases excessively.

The”Preplan” distinguishes two situations of excessive fall and excessive rise in the price of live pigs, and has established a three-level early warning interval. Among them, according to the changes in breeding costs and benefits in recent years, the price of pig food corresponding to the break-even point is compared As a result, the previous 5.5:1~5.8:1 have been increased to 7:1. When the price of pig food is at 7:1~9:1, there will be no warning, leaving plenty of room for spontaneous market adjustment.

In addition, according to the different functional positioning of government pork reserves, the”Preplan” has established regular reserves and temporary reserves. Conventional reserves at the national level are mainly used to meet market regulation and emergency release needs. Temporary reserves are proposed based on the practice of this round of regulation and actively borrowing from other relevant experience in the construction of important commodity reserves, mainly to purchase and store when the price of live pigs drops excessively and production capacity drops sharply, in order to stabilize production expectations and achieve effective”supporting the market” and stabilizing production capacity . At the same time, the size of the reserve has been greatly increased compared with the past, and the regulation and control capabilities have been significantly enhanced.

The income of listed pig companies is differentiated

The second half of this round of pig cycle, the price of pigs The rate of decline and decline both surprised the market. At the beginning of January this year, the average price of live pigs was about 32 yuan/kg, and the average profit per head was close to 3,000 yuan. After March, the price of live pigs has barely risen and continued to fall.

The price of live pigs fell below 16 yuan/kg, which means that the breeding cost of the whole industry is facing a test. Statistics show that the profit of self-reproduction and self-raising of live pigs has shrunk to about 170 yuan/head, a drop of more than 90%from the highest point during the year. The outsourcing piglet fattening model has entered a loss phase.

The ability to control cost is the core competitiveness of large-scale pig raising enterprises to resist price fluctuations in the pig cycle. Judging from the May live pig sales briefs disclosed by major listed pig companies, the differentiation continues to intensify.

After the market on June 8, Zhengbang Technology (002157.SZ) released Pig briefing in May, the company sold 1,648,400 live pigs that month (including 256,700 piglets and 1,391,700 commercial pigs), a month-on-month increase of 39.17%and a year-on-year increase of 232.23%; achieving Sales revenue 3.65 billion yuan, an increase of 20.26%and 99.92%month-on-month and year-on-year respectively.

Tianbang shares (002124.SZ) sales are also relatively optimistic. In May, the company sold 227,300 commercial pigs, with a sales income of 484 million yuan, an increase of 12.07%and 4.89%respectively from the previous month.

Self-breeding and self-raising leading Muyuan shares (002714.SZ) May sales The number of live pigs was 3.097 million (including piglet sales of 338,000) and sales revenue was 6.78 billion yuan, a decrease of 14.44%from the previous month. The decline in revenue was mainly affected by two factors. On the one hand, the average sales price of commercial pigs fell by 16.39%month-on-month, and on the other hand, the sales of commercial pigs in May fell by about 50,000 heads from the previous month.

On the other hand, New Hope (000876.SZ) has seen a sales situation with both volume and price falling. According to the announcement, New Hope sold 693,300 pigs in May, a decrease of 17.26%from the previous month and a year-on-year increase of 40.60%; sales revenue was 1.396 billion yuan, a decrease of 26.56%from the previous month and a year-on-year decrease of 12.75%.

New Hope stated that the main reason for the large year-on-year increase in pig sales was the continued promotion of the pig raising strategy and the maintenance of a stronger piglet distribution than the previous year. The main reason for the large year-on-year decline in the average sales price of commercial pigs was the decline in pig prices.

“The decline in pig prices is a change in the objective industry environment. However, if the pig company’s single-month hog sales decline significantly from the previous month, it will be difficult to achieve’compensation by volume’. It’s even more sad. From the perspective of the recovery of pig production capacity across the country, the overall trend of slaughter increase and slaughter average weight increase. The superimposed seasonal consumption off-season has led to the recent decline in pig prices.” An agricultural industry analyst told CBN reporters. . –

When the cycle wave recedes, how should the listed pig companies be treated?

Pig prices fall The momentum continues, and the pig sector is also bearish by the market. Data show that since the second quarter, Tianbang shares have plummeted nearly 40%, leading the decline in the sector. New Hope and Aonong Biotech (603363.SH) fell more than 20%; another 8 individual stocks fell Over 10%.

“The performance differentiation of pig companies this year may be extreme. Judging from the adjustment range of the pig sector in the secondary market, the decline in cycle highs has long been the consensus expectation of the market. The expected decline in earnings caused by the sharp drop in pig prices is basically Reflected in the current valuation of pig companies, the performance of the second quarter is definitely inferior to that of the first quarter.” The analyst said.

As of June 8th closing, Tianbang shares reported 7.14 yuan and closed Rose 1.28%. In the past month, Tianbang shares have continued to decline, once falling to a new low since July 2020. New Hope the stock price performed even more bleak, the stock is 42.2 yuan from the historical high set in September 2020 , Has fallen by more than 60%, a record low in two years. As the vane of the pig sector, Muyuan shares have fallen by more than 18%since May, significantly underperforming the broader market.

In fact, from a longer time dimension, 2022~2023 will be the lowest price point in this round of pig cycle. Before the real winter comes, will the A-share pig sector, which has been in a downturn for several months, adjust to the end of the upward turning point, or will it continue to”fall down endlessly”?

“The pig cycle is in a downward process, and the annual memory seasonal changes. In the short term, the downward space of pig prices is limited. We expect pig prices to rebound from June to August. The decline in the number of piglets will increase the shortage of live pigs from June to August. Although the magnitude and sustainability of the rebound are relatively limited, it will still form a phased support for the trend of the sector and get out of the rebound.” The analyst said.

In his view, cost control is the key competitive point of the next stage of enterprises .”This round of pig cycle was triggered by African swine fever. Epidemic prevention costs and the certainty of slaughter growth have become the key points in the cost competition of pig companies. The cycle trough has not yet arrived, and sustained and stable cost control capabilities are related to whether pig companies have a true ironing cycle. The ability to fluctuate. In addition, the actual volume means the certainty of’compensation by volume’, and whether the volume can be lower than expected also requires long-term tracking.”

“From the perspective of the entire pig cycle, the A-share pig sector has not yet entered the sectoral left-side investment opportunities, and the long-term downward trend of pig prices has not changed. The industry structure will be further differentiated.” He said.

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