Huafu Securities has reported that concentrated sales of large pigs from the breeding segment previously led to a decrease in large pig inventories, which widened the price gap for fat pigs and increased the motivation for second fatting entries. From October 11 to 20, the sales proportion of second fatting reached 2.09%, marking an increase of 1.07 percentage points week-over-week. In addition, the decrease in temperatures has stimulated a rebound in basic consumption, while low pig prices have triggered a reluctance to sell among producers, collectively driving pig prices higher.

In the long run, recent declines in pig prices and increased breeding losses, compounded by the implementation of production capacity control policies, are expected to enhance industry capacity reduction expectations and potentially lead to an upward shift in the long-term pig price equilibrium. The main viewpoints from Huafu Securities are as follows:

1. Pig Breeding: Price rebound driven by sentiment; monitoring the sustainability of second fatting entries. Last week's pig prices saw an increase. The concentrated sales of large pigs earlier led to a decrease in large pig inventories, which further widened the price gap for fat pigs and increased participation in second fatting.

As of October 24, the national average price of live pigs was 11.81 yuan/kg, a rise of 0.63 yuan/kg week-over-week. Last week, the average weight of pigs sold continued to decrease. During this time, the enthusiasm for second fatting increased, and group enterprises had smooth pig sales, while the average weight saw a slight decrease. Meanwhile, smallholders, facing a widening price gap, exhibited increased reluctance to sell leading to noticeable declines in average weights.

As of the week ending October 24, the average weight of pigs sold was 127.90 kg (down 0.35 kg week-over-week), with group average weights at 123.94 kg (down 0.14 kg) and smallholder average weights at 142.21 kg (down 0.57 kg). In the short term, it is anticipated that sample companies like Steel Union/Zhuochuang/Yongyi will see live pig sales grow significantly by 5.48%/7.32%/5.14% week-over-week, indicating a clear increase in supply. This short-term rise in pig prices is primarily driven by seasonal consumption recovery and the warming sentiment for second fatting.

However, rising prices will increase second fatting costs, so attention should be paid to the sustainability of these entries. From a long-term perspective, with recent downward adjustments in pig prices and deepening breeding losses alongside production capacity control policies, it is expected that industry capacity reduction expectations will intensify, potentially pushing the long-term pricing equilibrium higher. In September, the breeding stocks at Yongyi/Steel Union/Zhuochuang decreased by 0.84%/-0.33%/-1.05% month-over-month, while the previous month saw a slight increase of 0.07%/-0.80%/-1.11%. It's essential to monitor movements in breeding stocks.

In terms of specific stocks, attention is advised for Bangji Technology (603151.SH), Tiankang Biology (002100.SZ), Muyuan Foods (002714.SZ), Wens Foodstuff Group (300498.SZ), and Dekon Agr (02419).

In the beef sector, short-term prices have slightly declined, while the long-term beef cycle may be poised for an upturn. As of October 24, prices for calves and fattened bulls were 32.13/25.67 yuan/kg, reflecting weekly decreases of 0.19% and 0.23%, respectively, but cumulative increases of 33.26% and 9.05% since the beginning of the year.

Mid to long term, the impact of earlier losses has significantly cleared production capacity, and the reduction trend in breeding cows is expected to gradually transmit, potentially tightening beef supply in the medium to long term and entering an upward cycle by 2026-2027.

Regarding raw milk, prices are currently at the bottom of the cycle. As of October 17, the average industry price for raw milk stood at 3.04 yuan/kg, stable week-over-week and down 31% from the cyclical high. Losses in raw milk are anticipated to continue driving capacity reduction. As capacity decreases lead to a contraction in supply, the price cycle for raw milk is expected to stabilize and recover. Attention should be given to Youran Dairy (09858) and China Shengmu (01432).

In the poultry sector, white chicken prices are holding steady overall. Current market empty shed rates are high, and the breeding schedule from hatchery enterprises is tight, coupled with firm prices for broilers. As of October 24, the industry price for white feather broilers was 6.88 yuan/kg, up 0.01 yuan/kg week-over-week; meanwhile, the price for broiler chicks was 3.32 yuan/bird, rising by 0.03 yuan/bird week-over-week. The ongoing foreign avian influenza pandemic, despite the easing of import restrictions in France, continues to see limits in imports from the US and New Zealand, which may further restrict upstream capacity.

Investors should also keep an eye on Yisheng Bio (002458.SZ), Shengnong Development (002299.SZ), and Hefeng Co. (603609.SH). For egg chickens, egg prices are declining while chick prices remain stable. Last week's average egg price was 6.06 yuan/kg, a slight increase of 0.07 yuan/kg week-over-week, while egg chick prices held at 2.65 yuan/bird, up 0.05 yuan/bird week-over-week. The egg price drop is anticipated to lead to a recovery in poultry prices as production capacity declines.

Lastly, in the agricultural products sector, soybean meal prices are rebounding from the bottom, with ongoing attention to the outcomes of US-China negotiations influencing spot prices. Last week, spot prices initially fell before recovering; as of October 24, the spot price for soybean meal was 2984 yuan/ton, down 26 yuan/ton week-over-week. On the futures side, initial prices maintained a downward trend, with the main contract dipping to a low of 2852 yuan/ton, but subsequently rebounded due to support from import costs and declining soybean meal inventories. On October 24, the 2601 soybean meal contract closed at 2933 yuan/ton, an increase of 65 yuan/ton week-over-week.

With recent unfavorable crushing margins, the willingness to maintain prices has intensified, limiting downside potential for soybean meal. In the medium term, prices are expected to remain strong, supported by import costs. From October 24 to 27, US-China economic negotiations will be held in Malaysia, and ongoing monitoring of trade policy changes and planting weather in South America is advised.

Be mindful of potential risks including animal disease outbreaks, fluctuations in commodity prices, and natural disasters.