Gf Securities Co.,Ltd. has released a research report stating that the impact of earlier deep losses in farming leading to excessive culling and low replenishment of laying hens is still ongoing. Combined with the aging trend of the layer flock affecting egg production efficiency, egg supply is expected to remain on a year-on-year decline in the second half of 2026. Furthermore, current egg inventories are at historically low levels. Supported by the peak demand season in the latter half of the year, a tight supply-demand balance is anticipated to persist throughout the year, with the layer farming sector likely to maintain high prosperity. Profits at the farming end will directly stimulate farmers' enthusiasm for restocking. It is expected that sales of layer chicks will continue to see both volume and price increases, directly benefiting upstream layer breeding stock companies from the high prosperity in the layer industry chain.
Key Points from the Report are as Follows:
Steady Growth in Domestic Layer Demand, High Concentration in Upstream Breeding Segment
In recent years, with rising income levels for urban and rural residents and continuous upgrades in consumer spending, domestic poultry egg consumption has maintained steady growth overall. According to data from the National Bureau of Statistics, China's per capita egg consumption increased to 14.1 kilograms in 2024, up 10.2% from 2020. In terms of consumption structure, fresh egg consumption still dominates the domestic egg market, while deep processing and exports of egg products are expected to provide new growth avenues. Concentration in the layer farming industry chain increases progressively from downstream to upstream. The layer breeding sector itself is highly concentrated, with three leading breeding enterprises dominating the industry's supply capacity, collectively holding a market share exceeding 70%. The transformation and development of the layer industry have accelerated in recent years. According to the Guangdong Provincial Society of Animal Husbandry and Veterinary Medicine, the capacity share of large-scale layer farms with inventories exceeding 100,000 birds has increased from 42% in 2024 to the current 45%.
Potential for Tight Supply-Demand Balance and Industry Recovery in Second Half
The core logic behind the cyclical fluctuations in egg prices still revolves around changes in supply and demand. Domestic egg supply primarily depends on fresh egg supply, ambient temperature turnover egg inventory, and cold storage egg inventory held by traders. The layer industry experienced continuous losses from 2025 through the first quarter of 2026. The state of high culling and low replenishment during this period has led to a month-on-month decline in the inventory of laying hens in production throughout 2026, revealing a supply gap. Without considering extended rearing or mortality rates, calculations indicate the inventory of laying hens in production could drop to 1.17 billion birds by August 2026. Assuming culling ages are extended to 540 days and 570 days respectively, the corresponding inventory in September 2026 is estimated to decrease by 7.8% and 6.2% year-on-year, indicating layer capacity remains at a relatively low level. Simultaneously, the rhythm of farmer replenishment and culling has shifted from the low-replenishment, high-culling pattern during the previous loss period to a high-replenishment, low-culling pattern in the current profitable phase. This suggests subsequent layer flocks may face an aging problem, partially offsetting overall egg production efficiency. According to Mysteel data, the proportion of laying hens aged over 450 days awaiting culling increased to 7.51% in May, up 0.59 percentage points from the beginning of the year. Regarding inventory, pressure is expected to ease significantly compared to 2025. Considering both supply and demand factors, along with support from peak demand in the second half, a continued tight balance in egg supply and demand is anticipated for the year, with the layer industry chain expected to maintain high prosperity.
High Farming Prosperity Fuels Restocking, Benefiting Upstream Breeders
Historically, profitability in layer farming directly determines farmers' willingness to restock. There is a clear positive correlation between the sales volume and price of layer chicks and farming profits. Since the second quarter of 2026, with the rapid recovery in egg prices leading to a phase of good profitability, high downstream farming prosperity has directly stimulated farmers' restocking enthusiasm. Since Q2 2026, both the volume of layer chick replenishment and sales prices have shown significant increases. According to Mysteel data, the price of layer chicks has risen rapidly from 3.3 yuan per bird in early March 2026 to the current 4.0 yuan per bird. Sales volume of layer chicks has shown continuous month-on-month growth since February, reflecting increased restocking enthusiasm at the downstream farming end. Considering that layer farming prosperity may continue in the second half of the year, sales in the upstream chick segment are expected to continue experiencing both volume and price increases.
Risk Factors
The report highlights risks including fluctuations in agricultural product prices, disease outbreaks, policy changes, and food safety issues.
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