Core Viewpoint - The recent increase in pig prices is driven by emotional factors and seasonal consumption recovery, with a focus on the sustainability of secondary fattening entry [2][3] Pig Farming Sector - The concentration of large pig sales has led to a decrease in large pig inventory, widening the price gap and increasing the enthusiasm for secondary fattening, with a sales proportion of 2.09% from October 11-20, up by 1.07 percentage points [1][2] - The national average pig price on October 24 was 11.81 yuan/kg, an increase of 0.63 yuan/kg week-on-week [2] - The average weight of pigs sold continues to decline, with an average weight of 127.90 kg for the week of October 24, down by 0.35 kg week-on-week [2] - Long-term expectations indicate a downward shift in pig prices, with increasing losses in farming and enhanced expectations for capacity reduction policies, which may lead to a long-term upward shift in the price center [1][3] Cattle Sector - Short-term prices for beef cattle have slightly declined, while long-term trends suggest a potential upward cycle for beef prices due to previous long-term losses leading to capacity clearance [4] Dairy Sector - Raw milk prices are currently at a cyclical low, with a price of 3.04 yuan/kg as of October 17, remaining stable week-on-week but down 31% from the cyclical high [4] - The ongoing losses in raw milk are expected to drive continued capacity reduction, potentially stabilizing prices in the future [4] Poultry Sector - The price of white chickens remains stable, with a price of 6.88 yuan/kg as of October 24, reflecting a slight increase week-on-week [5] - Egg prices have decreased, with an average price of 6.06 yuan/kg, while chick prices remain stable [5] Agricultural Products - Soybean meal prices have rebounded from a low, with a current price of 2984 yuan/ton as of October 24, down by 26 yuan/ton week-on-week [7] - The futures market for soybean meal showed a recovery, with the main contract closing at 2933 yuan/ton, up by 65 yuan/ton week-on-week [7]

Investment Rating - Industry rating is maintained at "Outperform the Market" [5] Core Viewpoints - The short-term rebound in raw milk prices does not change the ongoing destocking trend, but a price turning point is anticipated [1] - After significant destocking, beef cattle prices are gradually recovering, with September average prices reaching 25.99 CNY/kg, up 10.7% from the beginning of the year [2] - The rise in beef cattle prices is positively impacting the prices of cull cows, which in September averaged 19.33 CNY/kg, up 19.2% year-to-date [3] Summary by Sections 1) Raw Milk Price Analysis - Despite a short-term price rebound due to holiday stocking and school milk demand, overall prices remain below cost levels, leading to continued industry losses and destocking [1] - The September cow inventory decreased by 0.18% month-on-month, with a cumulative reduction of approximately 8% [1] 2) Beef Cattle Price Analysis - The average price of beef cattle in September was 25.99 CNY/kg, reflecting a 10.7% increase since the start of the year and a 15.6% increase from previous lows [2] - The average price of calves rose to 32.42 CNY/kg, marking a 39% increase from the lowest point in 2024 [2] 3) Impact of Beef Prices on Dairy Companies - The increase in beef cattle prices has led to a rise in cull cow prices, which is expected to improve the financial performance of dairy companies [3] - The trend of narrowing losses from cull cows is likely to continue for an extended period due to the long replenishment cycle in the beef industry [3] 4) Investment Recommendations - The core logic of the sector remains unchanged, with expectations for a price turning point and attractive valuations [4] - Recommended stocks include: Yuran Dairy, China Shengmu, Aoyuan Group, Modern Dairy, and Tianrun Dairy for dairy; and China Shengmu, Guangming Meat, and Fucheng Co. for beef [4]

Summary of the Conference Call on the Beef Cattle Industry Industry Overview - The beef cattle industry is experiencing significant capacity reduction due to deep losses in 2024, leading to the culling of young and pregnant cows. The trend of capacity reduction is expected to continue into 2025, albeit at a slower pace. The southern regions have seen an 8% decline in cow inventory, with some areas experiencing reductions of up to 30% [1][2][3] - The supply of calves has noticeably decreased, with calf prices doubling at the beginning of 2025, indicating a future tightening of beef supply [1][2] Key Supporting Factors for the Beef Cattle Cycle 1. **Capacity Reduction**: The domestic beef cattle farming industry has faced supply shocks, leading to the culling of inefficient cows and the introduction of new breeding stock. The trend of culling continues into 2025, with calf supply significantly reduced [2][3] 2. **Global Price Transmission**: Major beef-producing countries like the US, Brazil, and Australia have also undergone capacity reductions. The CME live cattle futures price has doubled since 2020, and this global price increase is transmitted to the domestic market, supporting domestic beef prices [2][3] 3. **Policy Support**: The Chinese government is implementing measures to protect domestic farming, including an investigation into import safeguards that has affected import volumes, allowing the domestic market time to adjust [3] Market Conditions for 2025 and Beyond - In 2025, there will be a shortage of calves but an adequate supply of fattened cattle and finished meat. The impact of previous capacity reductions has not fully materialized, leading to a continued influx of cow meat into the market [4] - The price uptrend is expected to officially begin in 2026, with prices anticipated to rise significantly due to the effects of the severe capacity reduction in 2024, continuing through 2027 and possibly into 2028 [4] Characteristics of the Beef Cattle Industry Chain - The beef cattle industry chain includes upstream feed, midstream fattening and slaughter, and downstream consumption. Feed costs account for 50%-70% of farming costs, with a long growth cycle and low breeding efficiency [5] - The industry is characterized by low concentration, with the top 50 companies holding a small share of total inventory [5] Global and Domestic Meat Trade Dynamics - The top ten beef-producing countries account for 87% of global production, with the US being the largest producer at over 12 million tons. China produces around 8 million tons but still imports approximately 2.8 million tons, primarily from South America [6] - China's demand significantly influences global trade structures, with Brazil being the largest supplier, followed by Argentina and Australia [6] Cost Disparities in Beef Cattle Farming - Domestic beef cattle farming costs are significantly higher than in Brazil due to factors such as scarce pasture resources and high feed and labor costs. Domestic costs range from 10,000 to 20,000 yuan, while Brazilian costs are between 5,000 to 8,000 yuan [8] - The low level of industrialization and efficiency in domestic beef production contributes to these high costs [7][8] Historical Price Trends - Since 2000, domestic beef prices have generally trended upward, with a notable decline in 2023 due to increased supply and reduced consumption growth. This marked the first historical price drop, with inventory levels declining for two consecutive years [9] Current and Future Supply-Demand Situation - Domestic per capita beef consumption remains low compared to countries like Japan and South Korea, indicating significant growth potential. The consumption of high-quality beef is growing faster than that of regular beef, with premium varieties seeing growth rates of up to 30% [10] Investment Opportunities - The current phase represents a critical price turning point in the Chinese beef cattle market. Companies such as YouRan MuYe, China Shengmu, and Modern Farming are recommended for investment due to their ability to generate cash flow through the culling of dairy cows and their growth potential in the beef market [11][12]