According to a research report from China Merchants Securities, white feather chicken supply decreased in August, coupled with distributors actively stocking up for the back-to-school season from mid-to-late month, providing strong support for live chicken prices and significantly improving profitability at the farming level. Additionally, as farmers ended their avoidance of high temperatures, their enthusiasm for restocking increased notably, driving up chick prices. Regarding yellow feather chickens, the top two companies have continuously increased their slaughter volumes since the beginning of the year. Currently, the supply of yellow feather live chickens remains relatively abundant. By mid-year, most farming entities in the industry had already experienced losses, and backward capacity is expected to accelerate its exit. With marginal improvements in supply and demand, yellow chicken prices rebounded in August, with quality capacity achieving a turnaround from losses to profits.
China Merchants Securities' main viewpoints are as follows:
White Feather Chickens: Chicken Prices Rebound from Bottom, Farmers Increase Restocking
In August, the average price of chicks in major production areas was 3.29 yuan per bird, down 4% year-on-year but up 133% month-on-month. The average price of live broiler chickens was 7.17 yuan per kilogram, down 6% year-on-year but up 9.9% month-on-month. The average price of chicken products was 8,728 yuan per ton, down 7.5% year-on-year but up 3.4% month-on-month. Live chicken farming achieved a profit of 0.86 yuan per bird. The reduction in chicken supply in August, combined with distributors actively preparing inventory for the back-to-school season from mid-to-late month, provided good support for live chicken prices and significantly improved farming profitability. On the other hand, as farmers ended their avoidance of high temperatures, their restocking enthusiasm increased significantly, driving up chick prices. Since the beginning of the year, overseas breeding stock imports have declined substantially year-on-year. It is expected that the supply of parent stock broiler chicks in China will be tight in the second half of 2025, which will subsequently affect the supply of commercial broiler chicks in 2026. The breeding stock sector outlook is promising.
Yellow Feather Chickens: Chicken Prices Welcome Prosperity Inflection Point, Quality Capacity Gradually Returns to Profitability
In August, the average price of fast-growing chickens was 5.11 yuan per jin, down 3.3% year-on-year but up 30% month-on-month. Snow Mountain grass chickens averaged 8.51 yuan per jin, down 3% year-on-year but up 32% month-on-month. Since the beginning of the year, the top two companies have continuously increased their slaughter volumes. Currently, the supply of yellow feather live chickens remains relatively abundant. By mid-year, most farming entities in the industry had already experienced losses, and backward capacity is expected to accelerate its exit. With marginal improvements in supply and demand, yellow chicken prices rebounded in August, with quality capacity achieving a turnaround to profitability. Leading companies' yellow feather broiler slaughter costs have fallen to low levels. In the first half of the year, Wens Group's yellow feather chicken slaughter costs had dropped to around 5.6 yuan per jin, while Lihua's yellow feather chicken slaughter costs may have fallen below 5.5 yuan per jin. With chicken price recovery, significant profit elasticity is expected to be released.
Optimistic About White Chicken Breeding Stock Prosperity, Yellow Chicken Price Recovery Expected During Peak Season
White Feather Chickens: Although grandparent stock imports increased year-on-year in 2024, they have not returned to normal annual import levels before breeding stock interruption. Demand for quality parent stock chicks is expected to be strong in 2025. Additionally, affected by the significant decline in overseas breeding stock imports, parent stock chick supply will be tighter in the second half of 2025, subsequently affecting commercial chick supply in 2026. The breeding stock sector outlook is promising, with key recommendation for integrated leading enterprise Shengnong Development (002299.SZ) which has achieved cost improvements.
Yellow Feather Chickens: Current parent stock inventory has fallen to historically low levels, and the industry has sustained losses for some time, with supply contraction laying the foundation for subsequent chicken price increases. Current yellow chicken farming costs have fallen to low levels, and significant profit elasticity is expected to be released after price recovery. In the long term, with changing consumption habits, implementation of live poultry sales bans, and economic recovery boosting consumption, the fresh yellow feather chicken market may still have considerable development potential. Key recommendations include Lihua Stock (300761.SZ) and DEKON AGR (02419).
Risk Warnings: Chicken price volatility exceeding expectations; listed company sales volume and cost performance falling short of expectations; sudden large-scale uncontrollable epidemics; feed raw material price volatility exceeding expectations; major food safety incidents.