Orient Securities released a research report stating that 2026 will be a turning point for the agriculture sector, with livestock and crop segments driving upward trends. In the hog farming sector, sustained profitability and rising dividend payouts from high-quality companies remain core drivers for long-term performance and valuation growth. For poultry, capacity growth is slowing, and prices are expected to remain stable with low volatility, though differences in breed-specific dynamics should be noted. The pet food industry is currently experiencing steady growth driven by volume expansion and price increases, with overseas markets contributing incremental demand. Key insights include:
**Livestock Chain** 1) **Hog Farming – Rebound Ahead**: Under policy and market forces, capacity reduction is highly certain. Since 2021, the industry has undergone four years of asset optimization, with utilization rates reaching high levels. As policies and market dynamics align, hog weights, piglet, and sow inventories are declining in tandem, setting the stage for rising hog prices in 2026.
2) **Poultry – Bottoming Out, Leaders Stand Out**: Parent stock capacity for white-feather and yellow-feather broilers remains elevated, suggesting subdued cyclical conditions in 2026. However, upstream grandparent stock has begun declining, with white-feather grandparent stock imports down nearly 20% YoY in the first nine months of 2025, signaling a potential recovery.
3) **Downstream Sectors – Recovery Expectations Strengthen**: As livestock cycles bottom sequentially, feed and animal health sectors are poised for profit recovery, entering a long-awaited rebound phase.
**Crop Chain – Bottom Confirmed, Upside Ahead** 1) **Natural Rubber – Long- and Short-Term Uptrend**: Major producers are entering a declining output cycle, with falling capacity and utilization rates supporting price growth. Short-term inventory drawdowns in 2025 lay the groundwork for a sustained rally in 2026–2027.
2) **Corn – Prices Have Bottomed**: Global and domestic supply increases in 2025/26 have pressured prices, but food security policies provide a floor. With potential acreage reductions in 2026, corn prices may trend upward steadily.
3) **Seeds – Awaiting Downstream Recovery, Varietal Upgrades Key**: High-yield, disease-resistant corn varieties are gaining traction. As corn prices stabilize, seed industry improvements are expected to materialize.
**Pet Food – Shift in Growth Drivers** The sector is transitioning from pet population growth to higher per-pet spending as the primary driver. Overseas demand is expanding, and domestic brands are gaining recognition, supporting sustained growth for industry leaders.
**Investment Recommendations**: - **Hog Farming**: Focus on companies with stable profits and rising dividends, such as Muyuan Foods, New Hope, Wens Group, Shennong Group, and JuXing Agriculture. - **Poultry**: Monitor breed-specific trends; white-feather broiler prices may rise due to import constraints. Key players include Sunner Development, Yisheng Livestock, and Lihua Animal Husbandry. - **Downstream Sectors**: Hog inventory recovery will boost feed and animal health demand. Consider Haid Group and Ringpu Bio. - **Crop Sector**: Favor companies like Jiangsu Agricultural Reclamation, Beidahuang, Hainan Rubber, Longping High-Tech, and Winall Hi-tech amid rising crop prices. - **Pet Food**: Bet on leaders like Guabi Pet, Zhongpet, and Petpal Pet Nutrition as industry growth solidifies.
**Risks**: Livestock price volatility, disease outbreaks, and raw material cost fluctuations.
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