HUAXI Securities·2025-06-11 07:25Investment Rating - The report recommends a "Buy" rating for the agricultural sector, anticipating that the sector will outperform the Shanghai Composite Index by 15% or more within the next six months [61]. Core Insights - The report highlights that in an inflationary environment, the agricultural sector tends to yield excess returns, with historical data showing that periods of CPI exceeding 3% have led to significant gains in the agricultural sector [19]. - The report emphasizes the positive outlook for the agricultural sector due to recent monetary policy adjustments, including interest rate cuts and reserve requirement ratio reductions, which are expected to stimulate demand and support price recovery [19][7]. Summary by Sections 1. Inflation Expectations Rising - The central bank's monetary policy has shifted towards promoting a reasonable price recovery, with measures such as lowering the reserve requirement ratio from 10% in August 2024 to 9% in May 2025 and reducing the 7-day reverse repo rate from 1.8% to 1.4% [7][8]. - Despite a recent decline in CPI due to fluctuations in food and energy prices, core CPI has shown positive changes, indicating underlying inflationary pressures [10][13]. 2. Swine Farming: Weak Price Fluctuations, Profits for Cost-Effective Producers - Swine prices have shown a downward trend but are expected to stabilize with policy guidance suggesting a price recovery in the second half of the year [23][27]. - The report notes that self-breeding operations remain profitable, although profits have been shrinking recently, while external piglet purchases have led to losses [31][33]. - Major pig farming companies have improved their profitability due to cost reductions, with companies like Wen's Foodstuffs and Muyuan Foods showing significant profit recovery [38]. 3. Planting: Policy Expectations & Demand Improvement, Grain Prices Gradually Recovering - Corn prices have rebounded significantly due to increased demand from recovering pig farming and strong performance in the corn processing industry, with average prices rising from 2,197 CNY/ton in Q1 2025 to 2,322 CNY/ton in April and May [46]. - Wheat prices are also expected to rise due to increased procurement by state reserves and rising corn prices, with the average price for wheat in Q1 2025 at 2,410.83 CNY/ton [50]. - The report indicates that soybean prices have slightly decreased due to the arrival of imported soybeans, but the market is expected to stabilize as supply conditions improve [53].