Investment Rating - The report maintains a positive outlook on the industry [10] Core Insights - After the Spring Festival, pig prices have declined significantly, leading to over five months of losses across the industry. The market-driven elimination of breeding capacity may officially begin. The report suggests that the reduction of breeding capacity will be a continuous process, with higher-cost breeding entities being the first to exit. During the downward cycle, the competitiveness of breeding costs will become the core strength of enterprises. This cycle may lead to a sustained improvement in the competitive landscape of the breeding industry, with companies that have cost advantages and strong cash flow expected to enjoy longer profit cycles. The report is optimistic about the breeding sector and recommends focusing on low-cost and cash flow-advantaged companies such as Wens Foodstuffs Group, Dekang Agriculture, and Shennong Group, while also suggesting attention to Juxing Agriculture, Lihua Agriculture, and Tiankang Biological [2][6][7] Summary by Sections Pig Breeding - As of February 26, 2026, the national average pig price is 10.91 yuan/kg, a year-on-year decrease of 26% and a month-on-month decrease of 7%. The price of 7 kg weaned piglets is 359 yuan/head, down 23% year-on-year and 2% month-on-month. The price of culling sows is 8.28 yuan/kg, down 25% year-on-year and 9% month-on-month. The industry is experiencing significant cash flow pressure, and the current supply of pigs is relatively loose, with prices likely to remain at the bottom during the traditional off-season from March to April [7][18] Beef Breeding - Since 2026, beef prices have been rising, with the price of fattened bulls at 25.74 yuan/kg, up 9% year-on-year, and calf prices at 33.81 yuan/kg, up 38% year-on-year. The report indicates that the current beef cycle may last over two years due to a combination of domestic breeding capacity reduction and tightening global beef supply. Despite the recovery in profitability, cash flow pressures may limit the industry's restocking enthusiasm, potentially leading to higher-than-expected cycle heights and sustainability [8][33][37] Poultry Breeding - As of February 13, 2026, the price of white feather chickens is 7.48 yuan/kg, up 21% year-on-year, while the price of meat chicken chicks is 2.40 yuan/chick, up 22% year-on-year. The report notes that the poultry industry is experiencing price increases, but the overall restocking enthusiasm is suppressed due to high breeding costs. The supply shortage of parent stock may lead to a recovery in the white feather chicken industry chain prices [9][50] Other Agricultural Products - As of February 23, 2026, corn prices are 2274 yuan/ton, up 8% year-on-year, while soybean meal prices are 3184 yuan/ton, down 14% year-on-year. Wheat prices are at 2531 yuan/ton, up 4% year-on-year, and japonica rice prices are at 2940 yuan/ton, also up 4% year-on-year. The report suggests that the rise in corn prices may lead to a systematic increase in breeding costs, accelerating the elimination of breeding capacity in the current cycle [59][61][63]