Core Viewpoint - The report from Guotai Junan indicates that the beef and dairy industries are entering a phase of supply-demand balance due to reduced supply pressures and improved demand conditions in the second half of 2025 [1][2]. Beef Industry Insights - The beef price has begun to reverse from low levels, with a projected increase in 2025 driven by supply reduction and decreased import pressures. Since the beginning of 2025, beef and live cattle prices have risen approximately 10% and 20% respectively from previous lows [1][4]. - The supply of beef cattle is expected to decrease due to ongoing losses in ranching, with a reported 2.1% year-on-year decline in national cattle inventory as of Q2 2025, totaling 99.92 million heads [4]. - The reduction in imported beef, which saw a 9.5% year-on-year decline in the first half of 2025, is anticipated to further support domestic beef prices [4]. Dairy Industry Insights - The price of raw milk has continued to decline, but a supply-demand balance is expected in the second half of 2025, aided by reduced dairy cow restocking and a recovery in demand [2]. - The implementation of a fertility subsidy policy in July 2025 is expected to boost dairy product consumption, alongside the introduction of new national standards for UHT milk, which will limit the use of reconstituted milk [2]. - The dairy industry is projected to see a strong upward trend in prices in 2026 due to the fading effects of previous expansion and a reduction in lactating cow restocking [2]. Profitability and Market Dynamics - The cyclical nature of the meat and dairy industries is expected to enhance the profitability of leading agricultural companies. A hypothetical 10% to 20% increase in milk prices could improve the gross margin of leading dairy companies by 6 to 10 percentage points [5]. - The valuation of breeding cattle and income from culling are expected to increase with a 20% to 40% rise in cattle prices, potentially adding 200 to 400 million yuan to the total income of leading ranching companies [5]. - Companies involved in both beef and dairy sectors, such as Aoyuan Group and China Shengmu, are likely to benefit directly from the recovery in live cattle prices and the reversal of milk prices [5].
国泰海通:肉奶周期共振下 牧业企业盈利弹性较强