Gf Securities released a research report stating that both fattened pigs and piglet sales are currently in a loss-making state, indicating preliminary conditions for industry capacity reduction through losses. With persistent losses in farming and the backdrop of "anti-involution" policies, the firm expects accelerated capacity reduction in the sector, presenting a left-side investment window for pig farming. Additionally, attention should be paid to the impact of winter diseases on production capacity. Looking ahead to 2026, the bank predicts a potential upward turning point in hog prices by mid-2026. As competition intensifies, pig enterprises are shifting from single cost-based competition to comprehensive competitiveness across the entire industrial chain, with leading companies boasting cost advantages being the preferred choice.
Key views from Gf Securities include: - **Dairy**: Raw milk prices in 2025 are expected to remain low, with industry losses driving continued reduction in dairy cattle inventory. As earlier capacity cuts take effect, supply and demand for raw milk will gradually balance, leading to a noticeable decline in downstream dairy companies' milk powder production. By the second half of 2025, spot milk prices are projected to stabilize and rebound, marking the start of destocking for bulk milk powder. The bank identifies inflection points in raw milk supply and spot milk prices, maintaining optimism for an upward cycle in 2026–27. Meanwhile, beef cattle supply is entering a contraction phase, with beef prices likely to rise cyclically in 2026, enhancing earnings flexibility. Companies such as Youran Dairy and Modern Dairy are recommended for focus.
- **Feed**: The sector should focus on the second growth driver for leading firms. In aquatic feed, stable aquaculture output is expected in 2026, with narrowing profit margins likely to sustain trends in technological upgrades and structural adjustments. Livestock and poultry feed demand is anticipated to decline from peak levels. Structural changes in overseas feed markets present opportunities for Chinese companies to expand globally, leveraging cost and efficiency advantages to achieve high profitability and rapid growth in international markets.
- **Animal Health**: Intensified competition remains difficult to reverse, prompting business transformation for breakthroughs. In 2026, product prices may face downward pressure as farming shifts from profit to loss, posing challenges to industry revenue and profitability. Traditional vaccine products will see further gross margin declines, pushing animal health firms to diversify into pet-related businesses for new growth opportunities. Recommended stocks include Keqian Biology, Pulike, Ruipu Biology, and Biology Shares.
- **Pet Food**: The industry is showing early signs of consolidation, with leading brands such as those under Guabi Pet and Zhongchong Pet standing out. Long-term growth potential lies in market expansion and the rise of domestic brands. For exports, listed companies are mitigating trade friction impacts through global production layouts in regions like North America and by developing new clients in Eurasia. Key players include Guabi Pet, Zhongchong Pet, and Petty.
- **Planting**: Corn prices are expected to bottom out and recover in 2025, with a potential stronger performance in 2026. Currently, corn seeds face oversupply and destocking pressures, but industry sentiment may improve as inventory levels normalize and align with planting enthusiasm. The seed industry may see a turnaround, influenced by GMO advancements and consolidation. Recommended stocks include Suken Farm, Beidahuang, and Longping High-Tech.
**Risk warnings**: Fluctuations in agricultural prices, disease risks, policy uncertainties, and food safety concerns.
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