The third wave of opportunities in the livestock and poultry chain

Since the beginning of this year, we have paid attention to the analysis and recommendation of the investment rhythm and target of livestock and poultry chain, so that "1-13 of the series of reflections on investment opportunities in livestock and poultry industry chain" came into being, among which we mainly recommend clear and accurate opportunities such as leading in April, general increase in July and feed vaccine in August. After the current pig price has undergone a narrow adjustment in February, we emphasize that November will be the starting point for the pig price rise in the peak season before the Spring Festival. It is suggested to actively participate in the third wave of opportunities in the livestock chain in mid-to-late October.

First of all, as far as the industry is concerned, the pig price rise journey starts before the Spring Festival (expected in November), and the current pig price adjustment continues to clear the pig production capacity. In mid-August, we emphasized that pig prices would enter a high adjustment for more than 2-3 months (according to the stock structure, pig supply increased from September), so the strategy for the market at that time was to continue to hold heavy positions (medium-term trend upward, middle fluctuation can be done less), while light positions can feed vaccines and poultry stocks for core positions for phased strategic defense, fortunately, industry data and secondary market performance did fulfill our forward-looking judgment.

However, standing at the current time point, the negative column filling effect appears in the early stage. We judge that the pig price will stop falling and rise in November. Before the Spring Festival, the pig price is optimistic and is expected to reach more than 16 yuan/kg. Since the beginning of this year, we have used stock structure indicators to analyze the short-term pig price rise and fall prediction accuracy, for example, from September to November, the domestic pig price is facing adjustment. The latest industry data observed by us found that piglet replenishment has been negative since July to September, and the price of Sanyuan piglet has remained at 23-25 yuan/kg, down more than 20% year-on-year. Among them, the sales of small pigs in grass-roots research fixed-point farms decreased by 5.6% year-on-year, that is, the overall pig supply is expected to decrease synchronously after November; and the pig stock structure data at the end of September is also adjusted synchronously, among which the proportion of large pigs is 1 - 2 -13%(1- 2% higher than that in July), and the proportion of small and medium-sized pigs of about 80kg decreases instead (80--100kg drops to 9.7%, just around November).

The above-mentioned grass-roots data show that the continuous low real supplement of farmers from July to September will lead to the reduction of large pigs available for sale after November, while the demand in the fourth quarter is in the month-on-month recovery stage, so the supply and demand of live pigs in November (lagging April) will appear phased insufficient supply (this is a short-term perspective, pig prices are in the rising cycle in the medium term), and pig prices will also rise ahead of schedule. Therefore, this will lead to a significant difference between the Spring Festival in 2015 and 2014. The possibility of falling in peak season is very small. We are optimistic about the trend of pig price before the Spring Festival, which is expected to reach 16-17 yuan/kg or more.

For the medium-term pig price, our view also has some corrections, the current pig price adjustment is definitely conducive to further capacity reduction, so the medium-term upward positive enhancement.

Although the domestic sow price gradually began to improve in August (1300 yuan/head rose to 1600 yuan/head), the industry appeared a certain mild supplement, but the breeding cost was significantly high from July to September (corn spot price rose by 10%), resulting in no obvious improvement in industry profits, and the pig price was further adjusted by 1 yuan/kg at the same time. Therefore, sow elimination efforts in the industry are still relatively large (grass-roots data show that they are enlarged compared with August), which may show that the sow stock of the Ministry of Agriculture continues to hit a record low in September (and may decline in October). Therefore, the current decline in domestic sow stocks will lead to a reduction in pig supply pressure in 2015, an improvement in supply and demand patterns and a sharp rebound in prosperity.

Secondly, as far as investment opportunities are concerned, we suggest to actively participate in the third wave of opportunities in the livestock chain from mid-to-late October, and feed vaccine leaders can also be involved. For breeding stocks adjusted by 10%-15%, the current layout can be bought in advance, waiting for livestock prices to rise substantially before the Spring Festival; and the current is still the best time for the mid-cycle layout of feed stocks and vaccines.

(1) For livestock and poultry breeding stocks, in terms of industrial trend, the boom of livestock and poultry chain lasts at least until September-October of 15 years, so the breeding stocks are far from finished; at the same time, this round of livestock and poultry cycle is upward, and the production capacity of poultry chain is more thorough (the introduction quantity of ancestral chickens drops by 40% year-on-year), so we are more inclined to poultry chain simply looking at industrial elasticity in breeding. In the short term, pig prices will start rising again in November. After the general adjustment of breeding stocks by 10%-15%, we suggest that investors can actively arrange again and actively arrange the substantial surge in the price of livestock and poultry chain in the medium term (two waves of rising time: within 2 months before the Spring Festival in 15 years;2. Pig prices rose sharply from May to October to November in 15 years).

(2) For feed vaccine stocks, in terms of Qilu Agriculture's prediction of medium-term pig price and changes of livestock and poultry chain industry, the feed vaccine industry was in the bottom upward stage of the middle cycle from July to August 2014, which was similar to the breeding stocks in April at present, with month-on-month improvement but slightly weaker year-on-year, but the trend was upward.

In the second half of 2014, the pig price center will rise, and the boom recovery in 2015 will bring about a significant rebound in feed demand. It is said that the current is the bottom, because although the pig price in the first half of the year is the bottom, it has not crossed the cost line, and the demand for supplementary pens and downstream consumables is not strong at this time; However, the current pig price has gradually crossed the cost line, and with the active improvement of supplementary pens, the feed demand will also increase, that is, the third stage (stock + profit double rise) will benefit the most.

Moreover, even if pig prices may fluctuate after Q4 2014 and Spring Festival 2015, the impact on downstream consumables will not repeat the scene of the first half of 2014. Because the investment logic of feed vaccine stocks and breeding stocks is different, breeding stocks look at the upward slope of pig prices; However, the boom of feed vaccine industry depends on the pig price and stock to maintain a high point, more on the performance. Even if the pig price is adjusted back in the first half of the year in 15 years, it is unlikely to break the new low, so the performance of feed vaccine stocks may have positive growth (the base in 14 years is too low). Therefore, this is also the logic that we suggest to allocate feed vaccine stocks at present rather than wait until after the 15-year festival.

To sum up, since May-July proposed the second stage of the livestock chain general logic, we emphasize the mid-to-late October layout of the livestock chain the third wave of opportunities for the best time.