Southwest Securities·2025-07-22 04:35Core Views - The breeding sector is experiencing improved supply-demand dynamics due to intensified policy regulation, with measures from the National Development and Reform Commission (NDRC) aimed at optimizing pig production capacity, which is expected to enhance CPI targets and stabilize pig prices [4][50] - The beef industry is undergoing significant supply reduction, with a deep cycle anticipated as the number of breeding cows declines sharply, leading to lower beef supply starting in the second half of 2025 [6][88] - Smart agriculture is benefiting from ongoing policy incentives and increased funding, with water conservancy investments projected to reach 1.4 trillion yuan in 2024, marking a 12.8% year-on-year increase [6][50] Breeding Sector - The breeding industry is seeing a favorable supply-demand balance, with policies aimed at controlling production capacity and improving profitability for leading companies such as Muyuan Foods and Wens Foodstuffs [4][50] - The profitability of self-breeding operations is stable, while external pig purchases show fluctuating profits, indicating a need for careful management of breeding strategies [20][25] - The average weight of pigs being slaughtered has decreased, which is expected to reduce supply pressure and potentially increase pig prices in the coming months [41][42] Beef Industry - The domestic beef supply is expected to decrease significantly due to a reduction in breeding cow numbers, with the industry mirroring the pre-2019 pig cycle in terms of supply adjustments [6][88] - The beef market is characterized by a long adjustment period from breeding to market, typically requiring 2-3 years, which complicates supply management [70] Smart Agriculture - The smart agriculture sector is poised for growth driven by government policies and funding, with a focus on modernizing irrigation systems and enhancing water management practices [6][50] - The market for smart agriculture is projected to expand significantly, with the government aiming to establish 13 million acres of efficient water-saving irrigation [6] Animal Health - The veterinary drug sector is experiencing a structural shift due to the implementation of new GMP standards, which are raising industry entry barriers and promoting consolidation among leading firms [51][66] - The veterinary raw material drug prices are entering a recovery phase after a prolonged downturn, with demand expected to rise as breeding profitability improves [53][66] Investment Recommendations - Key investment targets include Muyuan Foods, Wens Foodstuffs, and Jiusan Foods in the breeding sector, as well as Deyu Water Saving and Ruipu Biological in the smart agriculture and animal health sectors, respectively [4][66][67]