GF Securities Co.,Ltd. has released a research report stating that the current hog price level is significantly below the industry's cash cost, leading to a gradual accumulation of financial pressure within the sector. Furthermore, recent weakness in piglet prices has caused piglet sales to return to a state of loss. In May, the government continuously signaled positive measures to regulate hog production capacity, which may promote industry inventory adjustments and a move out of the bottom. The report advises close attention to the subsequent implementation of these policies. Deep industry losses, coupled with policy adjustments, are expected to gradually accelerate the reduction of sow capacity. The potential and sustainability of a new cycle are becoming more promising. According to Yongyi Consulting, the sow inventory in May decreased by 0.85% month-on-month, a significantly accelerated decline. The hog cycle is currently at a bottom range, with sector valuations at relatively low levels, gradually highlighting the value of bottom-fishing. It is recommended to prioritize leading companies with cost advantages. The main views of GF Securities Co.,Ltd. are as follows:

Tracking Listed Companies' Sales

The sales data for major listed pig farming companies in May have been mostly disclosed. According to the monthly operational data announcements from various companies, the overall sales volume of listed companies in May declined month-on-month, primarily due to the impact of the May Day holiday on sales. However, hog sales from January to May maintained year-on-year growth. Regarding sales weight, the overall average sales weight for listed companies declined month-on-month in May.

Sales Volume

In May, the total commercial hog sales volume of listed companies was 16.81 million heads, a decrease of 6.8% month-on-month but an increase of 7.7% year-on-year. Excluding Muyuan Food Co., Ltd., the total commercial hog sales volume of other listed companies was 9.92 million heads, down 8.9% month-on-month and up 7.9% year-on-year. From January to May, the cumulative commercial hog sales volume of listed companies was 83.73 million heads, representing a 13.9% year-on-year increase. Excluding Muyuan Food Co., Ltd., the cumulative commercial hog sales volume of other listed companies was 51.34 million heads, a 22.5% year-on-year increase.

Specifically, in May, Muyuan Food Co., Ltd. (excluding piglets), Wens Foodstuff Group Co.,Ltd. (excluding piglets), New Hope Liuhe Co., Ltd., and Dekon Agri (excluding piglets) sold 6.88 million, 2.65 million, 1.36 million, and 1.10 million commercial hogs, respectively. These figures represent month-on-month changes of -3.6%, -18.1%, -0.1%, and +5.0%, respectively. Year-on-year changes for Muyuan Food Co., Ltd. (excluding piglets), Wens Foodstuff Group Co.,Ltd. (excluding piglets), and New Hope Liuhe Co., Ltd. were +7.4%, -6.6%, and +2.0%, respectively. Cumulative hog sales from January to May were 32.39 million, 15.24 million, 6.84 million, and 4.88 million heads, respectively.

Regarding small and medium-sized farming enterprises, in May, Tangrenshen Group Co.,Ltd., Teco Animal Health Company Ltd, Shennong Group Co., Ltd., and Giant Agricultural Group Co.,Ltd. (excluding piglets) sold 0.40 million, 0.26 million, 0.31 million, and 0.34 million commercial hogs, respectively. These represent month-on-month changes of -28.6%, -8.2%, -2.4%, and -16.7%, and year-on-year changes of -18.2%, +14.6%, +33.8%, and +6.6%, respectively. Cumulative hog sales from January to May were 2.36 million, 1.45 million, 0.84 million, and 1.47 million heads, respectively.

Sales Price

In May, the calculated average sales price for listed companies (excluding Dongrui Farming Group Co.,Ltd.) was 9.65 yuan/kg, an increase of 5.1% month-on-month. However, factors such as sales region, quality rate, and proportion of piglet sales lead to certain price differences among companies.

Sales Weight

In May, the overall sales weight for listed companies increased month-on-month. The calculated average sales weight for 11 listed companies (excluding Tangrenshen Group Co.,Ltd. and Kingsino Group Co.,Ltd.) was approximately 120.7 kg/head, a slight decrease of 0.4% month-on-month.

Risk Factors

Risks include fluctuations in agricultural product prices, disease outbreaks, policy changes, and food safety issues.