Analysis from GTHT Securities indicates that the destocking of breeding sows accelerated in May. As piglets enter the off-season in June, the weakness in piglet prices is expected to further promote this destocking trend.
In the agricultural sector, the World Meteorological Organization has provided an update on El Niño developments, suggesting China may face a pattern of "southern floods and northern droughts." With the 618 shopping festival underway, the pet industry is advised to pay attention to new brand product launches.
The key viewpoints from GTHT Securities are as follows:
Pig Farming: Accelerated Destocking of Breeding Sows in May
Third-party data on breeding sow inventory for May is now available. Data from Yongyi shows a month-on-month decline of 0.85% in May (compared to -0.11% in April), while data from Shanghai Ganglian indicates a month-on-month decrease of 1.32% in May (compared to -0.89% in April). This data suggests that low pig prices and industry losses are accelerating the reduction in sow production capacity. As piglets enter the off-season in June, the continued weakness in piglet prices is expected to further drive this destocking process. Future focus should be on piglet price performance and the impact of capacity reduction policies on medium and large-scale pig farms.
Planting: WMO Updates on El Niño; China May See "Southern Floods, Northern Droughts"
On June 2nd, the World Meteorological Organization (WMO) reported an 80% likelihood of an El Niño event occurring between June and August. The probability of this event persisting at least until November is close to or exceeds 90%, and it is expected to be at least of moderate strength. This will influence global temperatures and rainfall patterns in the coming months, increasing the risk of extreme weather. Historically, during El Niño events, precipitation tends to increase in the middle and lower reaches of the Yangtze River and South China, potentially causing oxygen deficiency in rice roots, lodging, and reduced yields. Northern China, the Huang-Huai region, and southern parts of Northeast China need to guard against the risk of reduced corn yields due to persistent high temperatures and periodic droughts, optimizing the layout of drought-resistant varieties. The firm remains optimistic about the benefits for planting companies, high-quality seed companies (such as those with strong heat-tolerant corn varieties like Kangnong Seed Industry), and advantageous agricultural product processing companies from favorable grain price trends expected in 2026.
Pet Industry: 618 Shopping Festival Begins; Focus on New Brand Products
With the commencement of the 618 shopping festival, according to the Douyin Pet Rankings (May 15-31), brands like Jingu, Weishi, and Myfoodie (a brand under GuaiBao Pet) ranked in the top three during this period, while brands like Leading and Wanpi (both brands of Zhongchong Co., Ltd.) entered the top twenty. Some brands are promoting new functional products. For instance, Leading launched the "Zhuangzhuang" series, which adds proprietary probiotics, prebiotics, and intestinal repair nutrients aimed at reshaping gut microecological balance. GuaiBao Pet Food Group released the high-end clinical nutrition brand Kangfu, entering the prescription diet market. The firm sees potential for revenue growth in brands demonstrating strong performance in functional aspects.
Investment Recommendations
Pig farming recommended stocks: Muyuan Foods Co., Ltd., Wens Foodstuff Group Co., Ltd., Shennong Group, Tecan Biotechnology Co., Ltd., New Hope Liuhe Co., Ltd., Juxing Agriculture & Animal Husbandry.
Post-cycle recommended stocks: China Animal Husbandry Industry Co., Ltd., Haida Group Co., Ltd., Hefeng Co., Ltd..
Agricultural product industry chain recommended stocks: Chenguang Biotech Group Co., Ltd., Noposion Agrochemicals Co., Ltd., Longping High-Tech Co., Ltd., Kangnong Seed Industry.
Pet sector recommended stocks: GuaiBao Pet, Zhongchong Co., Ltd., Ringpu Bio-Technology Co., Ltd., Petpal Pet Nutrition Technology Co., Ltd..
Poultry sector recommended stocks: Fujian Sunner Development Co., Ltd., Shandong Yisheng Livestock & Poultry Breeding Co., Ltd..
Risk Warnings
Risks include fluctuations in bulk agricultural commodity prices, breeding epidemic risks, natural disaster risks, changes in tariff policies, and exchange rate volatility.