Muyuan Foods (SZ:002714)2025-10-09 14:47Summary of the Conference Call on Swine Farming Industry Industry Overview - The swine farming industry is currently experiencing a significant decline in pig prices, primarily due to an increase in the number of breeding sows and a reduction in seasonal disease impacts, breaking the price stability observed earlier in the year at around 14 RMB per kilogram [1][2][3] - The efficiency cycle was crucial for maintaining stable prices from early 2025 to September, but as disease impacts lessen, supply pressures are becoming evident [1][2] Key Points and Arguments - Price Decline: The rapid decline in pig prices from over 14 RMB in early September to below 11 RMB in some provinces is attributed to increased supply pressures from rising breeding sow numbers and reduced seasonal disease impacts [2][3] - Impact of Breeding Sows: Although the Ministry of Agriculture reports limited growth in breeding sow numbers (2%-3%), companies like Muyuan Foods are showing much higher output growth, indicating significant improvements in production efficiency [5][8] - African Swine Fever (ASF) Effects: The decline of ASF has notably improved production efficiency, reducing discount effects and increasing market supply, which explains the limited price increase despite a reduction in breeding sows [6][7] - Supply Dynamics: The concept of "two育" (extending the breeding period to increase weight) has limited impact on market supply as it cannot indefinitely accumulate inventory [4] - Future Price Expectations: The baseline expectation for 2026 pig prices is relatively positive, but prices may not remain high due to ongoing supply pressures from improved production efficiency [5][9] - Market Cycle Changes: The industry is currently in a downward cycle, with prices expected to fall below 14 RMB, potentially reaching 12 RMB or lower, as the market adjusts to increased supply [9][10] - Capacity Reduction: The industry is expected to accelerate its capacity reduction process, with group enterprises starting to reduce capacity this year and individual farmers expected to follow after the Spring Festival [12][14] - Stock Market Opportunities: It is considered a good time to invest in the swine farming sector, particularly focusing on leading companies and those with growth potential, with an anticipated overall increase in stock prices of at least 30% [15][17] Additional Important Insights - Production Efficiency Trends: Despite a stable number of breeding sows, production efficiency has improved significantly, equating to an effective increase in supply by about 10% [8] - Future Industry Trends: The first half of next year is expected to see growth in output from most companies, with a focus on companies that are likely to increase breeding sow numbers again [16][17] - Investment Strategy: Investors are advised to focus on leading companies like Muyuan and Wen's Food Group, as well as those with growth potential, due to the anticipated long-term losses and significant capacity adjustment space in the market [15][17]