CITIC SEC's research report indicates that in 2025, prices for livestock and poultry fluctuated downwards, putting financial performance under pressure for most companies in the sector, while the competitive advantages of leading firms continued to expand. Looking ahead to 2026, year-to-date hog prices have been bottoming out, awaiting an acceleration in capacity reduction, with a potential upturn in hog sector prosperity anticipated for 2027. The broiler industry's conditions are gradually improving, while overseas breeding stock introductions remain constrained. For the post-cycle segments, the report recommends companies with leading operational capabilities that can navigate through cycles, suggesting attention to firms with advanced layouts in non-plague/foot-and-mouth disease vaccines and those with stable performance. The mushroom industry is experiencing sustained catalysts from favorable conditions and new varieties, suggesting investment opportunities in leading companies. The pet sector awaits a fundamental inflection point, recommending accumulation on dips. The main views are as follows:
Hog Farming: Cycle Trough, Gearing Up. Hog prices fluctuated downward in 2025, falling below the cost line in September. According to Wind data, the industry incurred a loss of 150 yuan per head in Q4 2025, with marginal profits for the full year. The average hog price in Q1 2026 led to further deepening losses across the industry. Internal differentiation within the industry remains significant. Under sustained losses, industry-wide cash pressure has intensified further, with the asset-liability ratio increasing by 3-4 percentage points quarter-on-quarter in Q1 2026, and some companies' ratios exceeding 80%. Looking ahead to 2026, with high inventory levels and live weights, hog prices are expected to continue bottoming out. Persistent losses, coupled with supply-side reforms, are projected to lead to a gradual reduction in hog production capacity in 2026, with a potential prosperous period for hog prices in 2027.
Poultry Farming: Industry Conditions Improve, Monitor Impact of Overseas Avian Influenza. Affected by previously high production capacity and weak consumption, prices across the poultry industry chain have remained low and volatile since 2025. Conditions improved for the white-feather and yellow-feather broiler industries in Q4 2025 and Q1 2026. Current sales volumes for grandparent and parent stock chicks remain relatively high, which may suppress the extent of any price rebound in 2026. Overseas breeding stock introductions have not yet resumed; subsequent observation is needed on the impact of overseas avian influenza on breeding stock shortages and the pace of consumption recovery.
Post-Breeding Cycle: Conditions Weaken, Leaders Seek Growth Breakthroughs. Driven by the recovery of downstream livestock, poultry, and aquaculture inventories (pond stocks) and improved breeding profits, the animal feed and health sectors experienced favorable conditions in 2025, with most companies in the segment achieving high growth in annual performance. However, industry growth began to slow from Q3 2025, and the animal health sector came under significant pressure starting Q4 2025, especially vaccine companies affected by increased value-added tax, with many seeing declines in Q1 2026. Leading companies are seeking further breakthroughs through overseas expansion and new product/business layouts. Looking forward, domestic livestock and poultry growth is estimated to slow further in 2026, while aquaculture conditions remain acceptable.
Mushrooms: High Performance Delivery, Monitor Potential New Product Performance. As industry capacity gradually exited following earlier losses, prices for major edible mushroom varieties have risen continuously since Q3 2025. The edible mushroom segment delivered high growth in 2025 and Q1 2026, with favorable conditions expected to continue improving throughout the year. Furthermore, leading companies have made effective expansions in potential new products like cordyceps, deer antler mushrooms, and porcini mushrooms.
Pets: Pressure on Both Exports and Domestic Market, Await Inflection Point. Starting H2 2025, pet food exports came under pressure due to tariff increases, with industry export profits declining significantly, especially in Q4 2025 and Q1 2026 amid accelerated RMB appreciation. The domestic market also saw growth slow in H2 2025 alongside intensified competition, putting pressure on profit growth for leading companies in Q4 2025 and Q1 2026. However, if new overseas production capacity begins to be gradually released in H2 2026, export business is estimated to potentially reach an inflection point. The domestic market continues to be monitored for changes in competition and new products, suggesting accumulation on dips.
Risk Factors: Policy implementation strength or progress falling short of expectations; Livestock and poultry prices not meeting expectations; Large-scale outbreaks of animal diseases; Food safety issues; Natural disasters; Significant increases in raw material prices; Finished product prices not meeting expectations; Geopolitical and trade friction risks; Intensifying competition risks.
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