Investment Rating - The report maintains an "Overweight" rating for the food and beverage sector, specifically highlighting the potential of leading companies in the beef industry [7]. Core Insights - The global beef supply is experiencing a synchronized contraction, initiating a price upcycle. Major beef-producing countries have faced droughts, leading to a reduction in breeding stock and an increase in slaughter rates, which has created a supply gap expected to manifest in 2025 [2][13]. - The year 2026 is anticipated to be a period of accelerated price increases for Chinese beef, driven by biological asset cycles, global supply constraints, and rising import costs [2][3]. - The synergy between dairy and beef markets is expected to enhance profitability for upstream livestock companies, with specific focus on leading firms such as YouRan and Modern Farming [2][5]. Summary by Sections Consensus - Global beef supply is contracting, marking the start of a super cycle. Major beef-producing regions like the US, Brazil, Argentina, and Uruguay have faced droughts, leading to a reduction in breeding stock and increased slaughter rates [2][13]. - The year 2026 is projected to see a significant rise in Chinese beef prices due to supply shortages and increased import costs, with calf prices already rising in 2025 [2][3]. - The dairy-beef synergy is expected to drive profit recovery in the upstream livestock sector, with YouRan and Modern Farming identified as key beneficiaries [2][5]. Divergence - There are concerns regarding the actual impact of import protection policies on beef prices and supply. The structural mismatch in quotas may lead to a more significant supply contraction than anticipated [3]. - Market apprehensions exist about whether weak demand will limit the price ceiling for beef. The report suggests that while demand may recover moderately, it will not be the primary driver of the current cycle [4]. - The report evaluates three scenarios for beef prices in 2028, with a neutral scenario suggesting prices could return to the previous cycle's peak, while optimistic and pessimistic scenarios present varying degrees of price increases [4]. Investment Recommendations - YouRan and Modern Farming are highlighted as core investment targets in the beef cycle, with projected P/E ratios of 10.5x and 9.5x respectively for 2028, translating to target market values of HKD 249 billion to HKD 521 billion for YouRan and HKD 129 billion to HKD 302 billion for Modern Farming under different scenarios [5].