Core Insights - The article highlights the unexpected profitability of Sichuan pig farming companies despite a nationwide decline in pig prices, indicating a successful adaptation to market pressures [2][3][4]. Group 1: Industry Performance - Sichuan pig farming companies have maintained profitability for 12 consecutive months, even as the average national pig price fell by 0.8% to 15.50 yuan/kg in the first half of the year [2][3]. - The total pig output in Sichuan reached 30.8 million heads in the first half of the year, marking a 1.0% increase year-on-year [3]. - The profitability of Sichuan pig companies is attributed to stable production scales and declining costs, with a notable example being the projected net profit of New Hope at 680 to 780 million yuan for the first half of 2025, representing over a 150% increase from the previous year [3][4]. Group 2: Market Dynamics - The article notes that the overall pig meat import volume in the first five months of the year was at a low of 450,000 tons, contributing to price stability [5]. - Sichuan's pig farming companies have avoided "internal competition" in production capacity, focusing on stability rather than aggressive expansion, which has helped maintain profitability [6][7]. - The average cost of pig farming in Sichuan has decreased, with companies like Juxing Agriculture aiming for a cost target of 6.5 yuan/kg, significantly lower than the industry average [7]. Group 3: Future Outlook - The article suggests that despite a recent decline in pig prices due to lower consumption expectations, Sichuan pig companies are likely to maintain profitability in the second half of the year, supported by seasonal demand increases and government policies aimed at stabilizing production [10][12]. - The Sichuan government has introduced measures to promote high-quality development in the livestock industry, including financial incentives for exceeding production targets [12].

Summary of the Conference Call on the Swine Industry Industry Overview - The swine farming sector is undergoing a fundamental transformation, shifting focus from growth and cycles to sustainable free cash flow and supply constraints, indicating a more stable profit capacity and development outlook for the industry [1][2][8] - The government is raising pig prices to control CPI and curb deflation, leveraging the positive correlation between swine prices and CPI, and utilizing China's dual economic structure to achieve macroeconomic goals [1][4][5] Key Points and Arguments - The swine farming industry is facing medium-term supply constraints, with measures in place to limit financing and enforce environmental regulations to prevent large enterprises from blindly expanding [1][6][8] - The production capacity control aims to reduce the breeding sow stock to 39.5 million and decrease the average weight of pigs at slaughter to 120 kg, which is expected to be easily achievable. A 6% reduction in production capacity could lead to a 30% increase in pork prices, significantly enhancing industry profitability [1][10][12] - High-quality companies like Muyuan Foods and Dekang Agriculture are expected to achieve substantial profits, with projections of 47 billion yuan and 9 billion yuan, respectively, due to long-term supply constraints leading to sustained free cash flow growth [1][14] Important but Overlooked Content - The current phase of the swine farming industry is characterized by a shift from heavy asset, low turnover models to light asset, high turnover models, as demonstrated by Dekang Agriculture's efficient operations with a ROE of 38% [3][18][21] - The historical context of the swine farming sector indicates that it is not an over-saturated industry, and the current changes present a significant opportunity, regarded as the second historical opportunity since the African swine fever outbreak [2][15] - The competitive landscape is expected to optimize, with quality enterprises having opportunities despite production expansion limitations. Profitability per pig could potentially triple, reflecting the importance of profit certainty and sustainability [24] Future Outlook - The swine farming industry is anticipated to have a positive outlook for 2025, with favorable conditions such as price controls expected to significantly enhance key financial metrics for leading companies like Dekang Agriculture [25]

Group 1 - The overall growth of autumn grain crops is normal and favorable, with summer grain production achieving a stable harvest despite local drought conditions, resulting in a summer grain output of 2994.8 billion jin, the second highest in history [3] - The production of autumn grain, which accounts for 75% of the annual grain output, is crucial for meeting the target of approximately 1.4 trillion jin for this year, with expectations for increased planting area and high-yield crops like corn [3] - The Ministry of Agriculture and Rural Affairs is focused on improving yield per unit area and disaster prevention to ensure a good harvest for autumn grain [3] Group 2 - The pig farming industry has maintained profitability for 14 consecutive months, with pork production and consumption accounting for about 60% of total meat consumption in China [5] - Measures have been taken to manage production capacity and stabilize pig prices, with a 0.8% decrease in the number of pigs over five months old, indicating a reduction in the upcoming slaughter volume [5] - The Ministry of Agriculture and Rural Affairs plans to promote stable development in pig production by adjusting production capacity and ensuring effective disease control measures [5] Group 3 - The beef and dairy farming sectors have shown signs of recovery, with beef farming turning profitable after a series of supportive policies, and dairy farming also seeing positive results [6] - The price of live cattle has rebounded since the Spring Festival, and the dairy sector has experienced a 4.2% decrease in Holstein cow inventory and a 7.7% reduction in milk production costs [6]

Core Insights - The press conference held by the State Council Information Office on July 17 highlighted the agricultural and rural economic performance in the first half of 2025, indicating a stable production environment for livestock, particularly pigs, cattle, and sheep [1][4]. Livestock Production - National statistics show that the total meat production from pigs, cattle, sheep, and poultry reached 48.43 million tons in the first half of the year, marking a year-on-year increase of 2.8% [1]. - The milk production was recorded at 18.64 million tons, with a growth of 0.5% [1]. - The number of breeding sows stood at 40.43 million at the end of June, which is 370,000 less than the peak at the end of last year, indicating profitability in pig farming [1][4]. Market Stability Measures - The Ministry of Agriculture and Rural Affairs (MARA) is taking proactive measures to stabilize pig production in response to recent downward price pressures, including releasing market warning information and guiding leading enterprises to adjust production capacity [4][5]. - The monitoring data indicates a 0.8% decrease in the number of pigs over five months old in June, suggesting a reduction in pig output in July and August, which is expected to stabilize prices and maintain profitability [4]. Policy and Support Initiatives - MARA plans to focus on two main areas: adjusting production capacity and stabilizing policies to ensure steady development in pig production [5]. - Specific actions include accelerating the elimination of low-yield sows and weak piglets, optimizing production capacity, and implementing measures to prevent African swine fever [5][6]. - The ministry has also introduced various relief policies to support cattle and dairy farmers facing losses, resulting in a turnaround in beef production profitability and positive outcomes in the dairy sector [5]. Rural Employment and Income - The average disposable income for rural residents reached 11,936 yuan in the first half of the year, reflecting a real growth of 6.2%, which is higher than the income growth rate for urban residents [7]. - The Ministry of Agriculture and Rural Affairs is working to expand employment and income opportunities for farmers, focusing on promoting agricultural product sales and developing new industries such as rural tourism and e-commerce [7][8]. - Future initiatives will include enhancing agricultural product sales connections and improving the quality of employment and entrepreneurship training for rural labor [8].

Core Insights - China's pork production and consumption account for approximately 60% of total meat consumption, indicating that stability in pig farming is crucial for the overall livestock industry [1] - As of mid-2023, the number of pigs slaughtered reached 36.619 million, a year-on-year increase of 0.6%, while the pig inventory stood at 42.447 million, up 2.2% year-on-year [1] - The average price of pigs in the second week of July was 15.09 yuan per kilogram, reflecting a 0.9% increase from the previous week but an 18.5% decrease year-on-year [1] Industry Analysis - The Ministry of Agriculture and Rural Affairs has reported that pig farming has remained profitable for 14 consecutive months since May of the previous year, aided by timely warnings about excess production capacity and guidance for leading enterprises to adjust their output [1] - The current market conditions show a strong supply but weak demand for pigs, leading to downward pressure on prices [1] - Monitoring data indicates a 0.8% decrease in the inventory of pigs over five months old in June, suggesting a potential reduction in pig slaughtering in July and August, which may help stabilize prices and maintain farming profitability [2] - The inventory of breeding sows was recorded at 40.43 million, exceeding the normal holding capacity of 39 million by 3.7%, indicating that production capacity is still within a reasonable range [2] - Future efforts by the Ministry will focus on capacity adjustment and policy stabilization to promote steady development in pig production, including timely market warnings and the elimination of low-yield sows [2]

Core Viewpoint - The Ministry of Agriculture and Rural Affairs emphasizes the importance of stabilizing pig production and prices, implementing measures to optimize pig production capacity regulation in response to recent price pressures [1] Group 1: Production Capacity Regulation - The agricultural authorities have been releasing warnings about excess production capacity and guiding leading enterprises to orderly reduce production capacity since May of last year, resulting in 14 consecutive months of profitability in pig farming [1] - Future efforts will focus on two main areas: adjusting production capacity and stabilizing policies [1] Group 2: Policy Implementation - The Ministry will enhance the release of market warning information to guide orderly market exits, accelerate the elimination of low-yield sows and weak piglets, and adjust production capacity to promote supply-demand balance [1] - The Ministry will also ensure the implementation of local responsibilities for stabilizing pig production and prices, optimize production capacity regulation measures, and maintain routine prevention and control of African swine fever [1]

Investment Rating - The industry investment rating is "Outperform the Market" and is maintained [2][40]. Core Insights - The agricultural, forestry, animal husbandry, and fishery industry index increased by 1.09%, ranking 22nd among 31 primary industries in the Shenwan index [5][13]. - The report highlights a slight rebound in the market, particularly in the fruit and vegetable processing and breeding sectors, while the aquaculture sector experienced a decline [5][16]. - The report indicates that pig prices are experiencing narrow fluctuations, with a national average price of 14.52 yuan/kg as of July 13, 2025, a decrease of 0.21 yuan/kg from the previous week [6][19]. - The report anticipates seasonal fluctuations in pig prices, with a potential short-term increase during the peak consumption months of July and August, but significant pressure expected in the fourth quarter due to increased supply [7][22]. Summary by Sections Market Review - The agricultural, forestry, animal husbandry, and fishery industry index rose by 1.09%, while the CSI 300 and Shanghai Composite Index increased by 0.82% and 1.09%, respectively [13]. - The report notes that the market is rebounding, with previously underperforming sectors seeing some recovery [14]. Livestock Industry Chain Tracking Pigs - The average weight of pigs at market was 129.03 kg, an increase of 0.39 kg from the previous week [6][19]. - The report indicates that self-breeding and self-raising operations are still profitable, with average profits of 134 yuan per head, an increase of 14 yuan from the previous week [20][22]. - The report highlights a cautious approach to increasing production among breeding enterprises due to clear policy guidance [21][22]. Broilers - The price of white feather broiler chicks was 1.40 yuan/chick, a slight rebound of 0.3 yuan/chick from the previous week, with an average loss of 1.2 yuan per chick [32]. - The report notes that the demand for broilers is weak, leading to significant losses in the industry [32]. Planting Industry Chain Tracking - Sugar prices decreased slightly, with white sugar priced at 6100 yuan/ton, down 10 yuan/ton [34]. - The price of corn was 2399 yuan/ton, a slight decrease of 3 yuan/ton [34].

Core Viewpoint - The domestic pig farming industry is experiencing a weak price environment due to strong supply and weak demand, leading to a slow recovery in profitability for listed pig companies [3][4][9] Group 1: Sales Performance of Listed Pig Companies - In June, the average sales price of live pigs for listed companies generally declined year-on-year and month-on-month, with a drop of 15% to 20% [4][5] - Muyuan Foods (002714.SZ) achieved a record monthly sales volume of 7.019 million pigs in June, with a month-on-month increase of 9.57%, resulting in a sales revenue of 12.799 billion yuan, a year-on-year increase of 27.65% [5][6] - Wens Foodstuff Group (300498.SZ) maintained a sales volume of over 3 million pigs, selling 3.0073 million pigs in June, with a revenue of 4.92 billion yuan, reflecting a month-on-month price drop of 1.98% [6] - Smaller pig companies showed significant sales variation, with some doubling their sales while others saw a decrease of over 10% [4][5] Group 2: Market Trends and Price Movements - The pig price hit a 16-month low in June, dropping to 13.96 yuan/kg, but began to recover in July, reaching 15.31 yuan/kg, the highest since the Spring Festival [4][8] - The agricultural authorities are guiding the industry towards destocking and capacity reduction, indicating that the current pig cycle has moved past its bottom [3][9] - Analysts suggest that the "anti-involution" measures may help stabilize prices and improve profitability in the long term, as the industry shifts towards higher quality competition [9][10] Group 3: Future Outlook - The Ministry of Agriculture plans to reduce the breeding sow inventory by approximately 1 million heads to optimize production and improve quality [10] - The industry is expected to enter a new era of high-quality competition, with a focus on cost management and disease prevention becoming critical for large-scale farming enterprises [10] - The supply constraints in the pig industry may become a new normal, with limited expansion expected in the coming years, potentially leading to improved profitability for quality enterprises [10]

1. Report Industry Investment Rating No information provided. 2. Core View of the Report The demand side continues to be weak, and the supply - side pressure is expected to ease in July. There is a small upside potential for the spot and futures prices in the third quarter, but significant price increases lack support. The LH2509 contract is expected to trade with a slight upward bias in the short - term [105]. 3. Summary by Directory 3.1 First Part: Market Review - **External Market**: The price of the CME lean hog main contract dropped by 3.97% from June 26 to July 3, 2025, but was up 18.45% year - on - year. The total open interest of CME lean hog futures contracts decreased by 1.28% month - on - month but increased by 42.31% year - on - year. The net long positions of futures and options funds decreased by 621 month - on - month but increased by 144,848 year - on - year [7]. - **Domestic Futures and Spot**: The closing price of the Dalian Commodity Exchange's live hog main contract rose 2.14% from June 27 to July 4, 2025, but was down 19.84% year - on - year. The average ex - farm price of Henan's outer ternary live hogs increased by 1.68% month - on - month but decreased by 17.99% year - on - year. The basis in Henan weakened [12]. - **Contract Price and Spread**: Last week, the prices of all live hog contracts increased with similar magnitudes. The spread between LH09 and LH11 contracts first rose and then fell, showing an overall upward trend [19]. - **Warehouse Receipts, Volume, and Open Interest**: The number of registered warehouse receipts of COFCO Meat decreased by 375, while that of Dekang Agriculture increased by 75. The trading volume nearly doubled, and the open interest was stable [20]. 3.2 Second Part: Fundamental Analysis - **Inventory**: The live hog inventory increased slightly month - on - month and was higher year - on - year, with the proportion of standard hogs increasing [28]. - **Sow Prices**: The price of二元sows remained stable, while the price of culled sows increased slightly [33]. - **Sow Inventory**: The inventory of reproductive sows in sample farms was relatively high year - on - year, and the national inventory of reproductive sows was 103.56% of the normal level, in the green zone [36]. - **Sow Culling and Slaughter**: The culling volume of reproductive sows increased slightly month - on - month, while the slaughter volume of culled sows decreased [40]. - **Piglet Prices and Sales**: The prices of piglets stopped falling and stabilized. The number of piglet births and sales were at relatively high levels [45][48]. - **Pork Prices**: Pork prices strengthened, and the pig - grain ratio rebounded [53][57]. - **Farming Profits**: The profit of self - breeding and self - raising improved, while the profit of purchasing piglets for fattening was at the break - even point [60]. - **Slaughter and Sales**: The proportion of fat hogs at slaughter was high, and the slaughter volume increased both month - on - month and year - on - year [62][66]. - **Price Spreads and Weights**: The standard - fat price spread was almost zero, and the average slaughter weight was stable [71]. - **Second - Fattening**: The profit of second - fattening rebounded from a low level, and the proportion of second - fattening sales remained stable at a low level. The utilization rate of second - fattening pens increased significantly [76][79]. - **Slaughter and Sales**: The gross margin between live hogs and pork and the price of pork strengthened. The slaughter profit was negative, and the post - slaughter settlement price increased. The slaughter volume decreased due to low enthusiasm among slaughter enterprises [83][86][89]. - **Fresh and Frozen Sales**: The fresh sales volume decreased significantly, the fresh - frozen price spread widened slightly, and the frozen pork storage rate was at a low level [92][95][98]. 3.3 Third Part: Future Outlook - **Supply Side**: Under the "anti - involution" policy, the regulation of live hog production capacity may be tightened. The inventory of reproductive sows is in the green zone. The live hog inventory increased slightly month - on - month and was higher year - on - year. The number of piglet births increased month - on - month, and the price stopped falling. The slaughter volume in July may decrease slightly. The second - fattening profit rebounded from a low level, and the current replenishment enthusiasm is high but may weaken after price increases [105]. - **Demand Side**: The profit of slaughter enterprises is continuously negative, and the enthusiasm for slaughter is low. Affected by seasonality, the terminal sales of pork are poor, and the fresh sales volume has decreased significantly. The slaughter enterprises have a pessimistic outlook on the future, and the frozen pork storage rate is low [105]. - **Price Outlook**: The demand side is weak, and the supply - side pressure is expected to ease in July. There is a small upside potential for spot and futures prices in the third quarter, but significant price increases lack support. The LH2509 contract is expected to trade with a slight upward bias in the short - term [105].

Investment Rating - The report maintains a "Positive" investment rating for the agricultural products sector [11]. Core Insights - The pig farming industry has entered a clearing phase since 2021, with capital expenditure from large enterprises continuing to contract, leading to a recovery trend in industry ROE levels. Current industry capacity remains relatively excessive, and if policies are effectively implemented, it is expected to enhance profitability and stability in the sector. Attention should be paid to investment opportunities in leading enterprises [2][6][9]. Summary by Sections Industry Overview - The pig farming industry is in a mature stage, characterized by a significant increase in the scale of operations over the past 20 years. The proportion of large-scale farms (over 500 heads) has risen from 8.8% in 2000 to 70% in 2024, indicating a shift towards concentration and professionalization in the industry [7][16]. Policy Impact - Recent policies have emphasized capacity control and high-quality development. The current breeding sow inventory exceeds the normal level of 39 million heads, indicating an oversupply in the industry. The government has been proactive in promoting capacity control through various policy documents [30][31]. Trends and Investment Opportunities - The report identifies two major trends in the pig farming industry: 1. An expected increase in industry ROE levels with reduced volatility, highlighting the advantages of quality enterprises. The average ROE is projected to rise from -10% in 2021 to 21% in 2024 [9][45]. 2. An increase in free cash flow levels, leading to significant shareholder returns for quality enterprises. The industry is expected to generate a total free cash flow of 23 billion yuan in 2024, a 100% increase year-on-year [54][60]. Recommended Companies - The report specifically recommends investing in leading companies in the sector, including Muyuan Foods, Wens Foodstuff Group, Juxing Agriculture, and Shennong Group, as their valuations are currently at historical lows [2][9].