China Merchants Securities released a research report stating that in the first quarter of 2026, listed hog enterprises fell into comprehensive losses due to a sharp decline in hog prices, with the industry building momentum for an upward cycle. "Low-cost+" hog enterprises may see continued improvement in cash flow and enhanced intrinsic value. The inventory of parent stock for yellow-feathered broilers has dropped to a low level, and the firm remains optimistic about the continuation of favorable conditions. Leading feed companies continue to gain market share, while their overseas markets maintain high growth. With the industry accumulating strength at the cycle's bottom, it is advisable to focus on the intrinsic value enhancement of leading hog enterprises and the growth potential unlocked by leading feed companies' overseas expansion. The main views of China Merchants Securities are as follows:
Hog Farming: Hog Prices Probe the Bottom, Building Momentum for an Upward Cycle In the first quarter of 2026, due to the sharp decline in hog prices, listed hog enterprises fell into comprehensive losses. The 18 listed hog companies collectively incurred a loss of 7.15 billion yuan, turning from a profit year-on-year but showing a reduced loss quarter-on-quarter. However, the variance in industry costs remains significant, with the cost advantage of high-quality hog enterprises further expanding. The operating cash flow of listed hog enterprises turned negative quarter-on-quarter, capital expenditures remained at low levels, and the asset-liability ratio slightly increased from elevated levels. The dual impact of deep industry losses and intensified capacity regulation is expected to accelerate the reduction of sow capacity, potentially further raising the central price level for hogs in 2027. "Low-cost+" hog enterprises may see continued improvement in cash flow and enhanced intrinsic value.
Poultry Farming: Sector Significantly Improved in 2025; Poultry Companies Performed Well in the First Quarter of 2026 In 2025, the poultry farming sector's revenue increased by 8% year-on-year, with non-GAAP net losses narrowing. In the first quarter of 2026, sector revenue rose by 12% year-on-year, while non-GAAP net profit decreased by 8% year-on-year. 1) White-Feathered Broilers: Since the beginning of the year, the volume of updated imported breeding stock has generally been under pressure. It is expected that parent stock for white-feathered broilers will experience relatively high prosperity in 2026, which will subsequently affect the supply of commercial day-old chicks. The firm is optimistic about the prosperity at the breeding stock end. 2) Yellow-Feathered Broilers: The current inventory of parent stock for yellow-feathered broilers has fallen to historically low levels. Coupled with industry losses lasting over half a year in 2025, supply contraction lays the foundation for subsequent price increases. Since the fourth quarter of 2025, yellow-feathered broilers have entered an upward cycle with significantly improved prices. The firm is optimistic about the continuation of high prosperity for yellow-feathered broilers in 2026.
Post-Cycle: The Strong Get Stronger; Leading Companies Maintain High Overseas Growth In the feed sector, during the first quarter of 2026, the deep losses in hog farming dragged down the reported profits of feed companies due to the sharp decline in hog prices. Nine feed companies collectively incurred a loss of 980 million yuan, turning from a profit year-on-year but showing a reduced loss quarter-on-quarter. Looking ahead to the second quarter of 2026, the prosperity of aquatic feed may seasonally recover. Leading feed companies, leveraging their procurement and formulation advantages, are expected to achieve continued market share gains. Furthermore, the overseas expansion of leading feed companies may unlock growth potential. In the animal health sector, during the first quarter of 2026, industry competition pressure remained high. Additionally, affected by tax increases, six animal health companies achieved a profit of 410 million yuan, down 11% year-on-year. Animal health companies with strong product capabilities are expected to see a recovery in profits first.
Seeds: Optimistic About the Recovery of Corn Seed Industry Prosperity; Focus on Extreme Weather Catalysts The seed industry saw improved prosperity in 2025 but faced overall pressure in the first quarter of 2026. Domestic corn seed inventories remain high. It is expected that corn seed production area may decline in 2026. With corn seed destocking for three consecutive years, the supply-demand dynamics of the corn seed industry are anticipated to improve. Genetically modified corn and soybeans have entered the stage of nationwide routine cultivation, potentially accelerating industry concentration towards leading players. The rice seed industry has entered a destocking phase since 2024, with structural tightness in the supply of some high-quality varieties. Overall, the policy floor for the seed industry is solid, and the long-term positive direction of the industry is certain. The El Niño decay period is characterized by frequent regional disasters, increasing demand for stress-resistant varieties and opening space for premium pricing. The firm highlights recommending R&D-focused leading companies.
Investment Recommendations Hog prices are building upward momentum, and feed companies' expansion overseas unlocks growth potential. For hog farming, the dual impact of deep industry losses and intensified capacity regulation is expected to accelerate the reduction of sow capacity, potentially further raising the central price level for hogs in 2027. "Low-cost+" hog enterprises may see continued improvement in cash flow and enhanced intrinsic value. The firm primarily recommends Muyuan Foods Co., Ltd. and Wens Foodstuff Group Co., Ltd., and suggests attention on Shennong Group, Dekon Group,巨星农牧, Tecon Biology Co., Ltd., Dongrui Shares, and China COFCO Joycome Foods Ltd. For poultry farming, with the volume of updated imported breeding stock under pressure, the firm is optimistic about prosperity at the breeding stock end. The capacity of parent stock for yellow-feathered broilers has fallen to historically low levels, and the firm is optimistic about the continuation of high prosperity for yellow-feathered broilers. It primarily recommends Fujian Sunner Development Co., Ltd. and Lihua股份. For the post-cycle sector, leading feed companies continue to gain market share, and overseas expansion may unlock growth potential. The firm primarily recommends Guangdong Haid Group Co., Limited and Wuhan Keqian Biology Co., Ltd., and suggests attention on China Animal Husbandry Industry Co., Ltd. and Ringpu (Tianjin) Bio-Technology Co., Ltd.
Risk Warnings: Agricultural product price increases falling short of expectations; listed companies' sales volume/costs falling short of expectations; outbreaks of large-scale, uncontrollable diseases; major food safety incidents; policy disturbances.
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