Shenwan Hongyuan Group Co., Ltd. released a research report stating that industry losses have intensified, and accelerated capacity reduction is gradually underway, recommending a focus on left-side opportunities in the hog farming sector. Hog prices are bottoming out, with losses continuing to widen (according to Yongyi data, losses for self-breeding farms of varying scales exceeded RMB 120 per head). Third-party agencies have released November sow inventory data, showing widespread capacity reduction. Combined with October data from the Ministry of Agriculture, the industry is undergoing accelerated capacity reduction, presenting left-side investment opportunities. Additionally, after a significant adjustment in the pet sector, Shenwan Hongyuan suggests focusing on year-end valuation shifts. Key views are as follows:
**Hog Farming**: Prices remain at the bottom with persistent losses, and capacity reduction is expected to accelerate. According to Yongyi Consulting, the national average hog price on December 14 was RMB 11.54/kg, up 2.9% week-on-week. Losses have deepened, with self-breeding farms of varying scales reporting losses of RMB 128.3–146.5 per head, while outsourced piglet fattening losses exceeded RMB 264 per head. Weak seasonal demand may further erode industry confidence, accelerating capacity reduction.
**Investment Recommendation**: Since Q4, hog prices have continued to decline, and weak peak-season demand may trigger the first wave of accelerated capacity reduction. Winter also brings higher disease risks, and reduced disease prevention spending amid losses could hasten capacity exits. Left-side opportunities are emerging; recommended stocks include Muyuan Foods, Wens Foodstuff Group, Dekon Agriculture and Animal Husbandry Group, and Tiankang Animal Husbandry.
**Pet Food**: Industry momentum remains strong, with October-November online GMV up 17% year-on-year. Due to the early "Double 11" promotions, November data alone is less meaningful; combined October-November figures show total GMV of RMB 7.02 billion across Tmall, JD, and Douyin, up 17% YoY. Key performers: - **Guangdong Alpha**: GMV +40% YoY (Myfoodie +25%, Freeze-dried +74%). - **Chongqing Zhongchong**: GMW +76% YoY (Wanpy +68%, Zeal +23%, Leading +104%). - **Pettie**: GMV +21% YoY (Jueyan +25%, Haoshijia -38%).
**Broiler Farming**: White-feathered broiler prices saw a slight rebound. According to Mysteel, average broiler chick prices rose 1.22% WoW to RMB 3.33 per chick, maintaining stable profits of ~RMB 0.5 per chick since September. Live broiler prices edged up 0.85% WoW to RMB 3.57/kg, while processed chicken prices rose 0.63% WoW to RMB 9,158.6/ton.
**Investment Recommendation**: Oversupply remains a theme for 2025–2026, but bottom-fishing opportunities exist for leading companies. Focus on demand-side improvements; recommended stock: Sunner Development.
**Beef Cattle**: Prices for feeder cattle and calves strengthened slightly, while beef prices dipped. National feeder cattle prices rose 0.08% WoW to RMB 25.56/kg, and calf prices edged up 0.09% WoW to RMB 32.12/kg. Wholesale beef prices fell 0.59% WoW to RMB 66.17/kg.
**Risks**: Prolonged low hog and broiler prices; weaker-than-expected pet food brand sales; disease outbreaks in farming.
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