Zhixin Finance learned that GF Securities has released a research report stating that due to the previous period of capacity reduction and other factors, the June pig price has maintained a high level of volatility, with an average profit of more than 300 yuan per head for self-breeding. With the seasonal recovery of future demand, pig prices are expected to rise again in July. Benefiting from the previous period, the downward trend of raw material prices and the improvement of epidemic prevention efficiency, the output cost has entered a fast decline channel. Looking forward to the third quarter, pig breeding companies are expected to fully benefit from the expanding 'scissors gap' between rising pig prices and falling costs, and the overall profitability level is expected to exceed the market's expectations. In terms of aquatic materials, affected by the end of the peak planting season and relatively weak consumption, the average price of freshwater fish in June fell back, and the prices of special fish maintained a trend of improvement, among which the price of California perch rose to a high not seen since 2021, and the price of fresh fish rose above the cost line.

GF Securities' main points are as follows:

Livestock and poultry breeding: According to the Livestock Industry Information Network, the average national pig price in June 2024 was 18.31 yuan/kg, up 15.5% month-on-month and 27.7% year-on-year. Due to the previous period of capacity reduction and other factors, the June pig price has maintained a high level of volatility, with an average profit of more than 300 yuan per head for self-breeding. With the seasonal recovery of future demand, pig prices are expected to rise again in July. Benefiting from the previous period, the downward trend of raw material prices and the improvement of epidemic prevention efficiency, the output cost has entered a fast decline channel. Looking forward to the third quarter, pig breeding companies are expected to fully benefit from the expanding 'scissors gap' between rising pig prices and falling costs, and the overall profitability level is expected to exceed the market's expectations. The current sector valuation has fallen back to a relatively low level, and large-scale breeding companies are recommended such as Wens Foodstuff Group (300498.SZ), Muyuan Foods (002714.SZ), focusing on New Hope Liuhe, and small and medium-sized breeding companies such as Tangrenshen Group (002567.SZ), Tecon Biology Co.Ltd (002100.SZ), Zhejiang Huatong Meat Products (002840.SZ) and leading pig breeding companies in Sichuan and Chongqing.

As for white feather chicken, according to Wind, the prices of Yantai commodity unprocessed chickens and chicks fell by 6.5% and 18.8% respectively month-on-month in June, and the market is weak, which has led to a continuous adjustment in the inventory of breeder chickens; the quotation for parent chicken chicks has already rebounded first, and the industry may usher in a recovery in the future. Fujian Sunner Development (002299.SZ), Shandong Yisheng Livestock & Poultry Breeding (002458.SZ) and other companies will benefit. As for yellow feather chicken, the inventory of breeder chickens has been relatively low, high-quality companies have significant cost advantages, and we continue to recommend Jiangsu Lihua Animal Husbandry (300761.SZ).

Feed and animal protection: In June, according to Wind, corn prices rose slightly, soybean meal prices continued to fall, and feed prices were mainly volatile. The increase in pig prices in June drove the demand for pig feed to recover from the bottom, and the sales volume of pig feed is expected to reverse the downward trend in the later period. The profitability of egg and poultry breeding has improved, and the demand for poultry feed remains stable. As for aquatic materials, affected by the end of the peak planting season and relatively weak consumption, the average price of freshwater fish in June fell back, and the prices of special fish maintained a trend of improvement, among which the price of California perch rose to a high not seen since 2021, and the price of fresh fish rose above the cost line. The significant shortage of seedlings during the spring planting period this year is expected to expand the supply-demand gap, supporting the high prosperity of general freshwater fish prices throughout the year, and the price of special fish is expected to maintain a trend of upward growth. The shrimp price has bottomed out and rebounded, and the demand for aquatic materials is expected to continue to recover, which we are bullish on.

Under the accelerated trend of reshuffling in the domestic feed industry, the competitive advantages of leading enterprises with procurement and formulation research and development capabilities will be further highlighted. We are bullish on the continuous improvement of the share of Guangdong Haid Group (002311.SZ) and the opening up of overseas markets to further expand the company's performance growth space. As for animal protection, the recovery of breeding profitability is expected to push the prosperity of the animal protection industry to recover from the bottom. The current sector valuation is at a historical low level, and we recommend paying attention to Jinyu Bio-Technology (600201.SH), China Animal Husbandry Industry (600195.SH), Pulike Biological Engineering, Inc. (603566.SH) and others.

Planting industry: According to the NOAA June forecast, the probability of the La Niña phenomenon appearing in July-September is 65%, and crops such as corn and soybeans face the risk of reduced production. We focus on the weather speculation as the driving force for agricultural product markets, and recommend focusing on Yuan Longping High-Tech Agriculture (000998.SZ), Shandong Denghai Seeds (002041.SZ), and Beijing Dabeinong Technology Group (002385.SZ), among others. According to Wind, the average domestic price of white sugar fell by 0.41% month-on-month and 9.75% year-on-year in June. The Ministry of Agriculture estimated that the national sugar production in the 24/25 fiscal year was 11 million tons, a year-on-year increase of 10.4%. The domestic sugar supply is relatively abundant, and the sugar price is expected to be weak in the short term.

Pet food: According to Xingtu data, in 2024, the sales of pet food category on the 618 comprehensive e-commerce platform and live streaming platform were 5.5 billion yuan, a year-on-year increase of about 10%, achieving counter-trend growth. Pay attention to the overseas export growth and domestic market expansion of leading companies, and recommend paying attention to Guai Bao Pet (301498.SZ), Yantai China Pet Foods (002891.SZ), and Petpal Pet Nutrition Technology (300673.SZ).

Risk warning: Agricultural product price fluctuation risk, disease risk, policy risk, etc.