Financial Services Association, September 9 (Reporters Liu Jian and Wang Ping An) Pig farming profits are at their peak during the year. Recently, most A-share listed pig companies have successively released August sales reports. The volume and price of leading pig companies, Muyuan Shares (002714.SZ) and Wen's shares (300498.SZ), have risen sharply. Among them, “Pig Mao” Muyuan shares have an average daily profit of nearly 0.1 billion yuan, and the rest of the breeding companies have also picked up to varying degrees.

Looking ahead to the future market, CFC reporters learned in multiple interviews that as temperatures drop and holidays increase, pig prices may continue to operate at a high level, compounded by gradual decline in breeding costs, and breeding enterprises may continue to maintain a considerable profit trend during the year. In the longer term, due to the slow recovery of production capacity, the farming side is cautious about expanding production, and the profit period of farming is expected to lengthen.

Pig companies' monthly profit hit a new high during the year

According to the sales report of Muyuan Co., Ltd., the company sold 6.241 million pigs in August, up 1.35% from the previous month, up 10.03% year on year; sales revenue was 14.024 billion yuan, up 4.62% month on month, up 29.77% year on year. The average sales price of the company's commercial pigs in August was 19.71 yuan/kg, up 7.70% from July. Without considering other factors, the company achieved a farming profit of about 4.5 billion yuan in August, with an average daily profit of nearly 0.15 billion yuan, using the latest full cost of 13.7 yuan/kg announced by Muyuan Co., Ltd.

Another pig farming giant, Wen's Co., Ltd. also rose sharply in volume and price in August. The company sold 2.354 million heads of pork in August (including hairy pigs and fresh products), with an average sales price of 20.45 yuan/kg. The month-on-month changes were 1.32%, 9.73%, and 7.92%, respectively, and the year-on-year changes were 9.78%, 42.27%, and 21.44%, respectively.

Most second-line pig companies also showed varying degrees of recovery. ST Tianbang (002124.SZ), Jin Xinnong (002548.SZ), Zhengbang Technology (002157.SZ), Dabeinong (002385.SZ), and Shennong Group (605296.SH) all showed significant increases in sales revenue and average sales price in August.

Wang Hongyan, an analyst at the agricultural products division of the Shanghai Steel Union, said in an interview with a reporter from the Financial Federation, “On the one hand, with the gradual recovery of the pig market, consumer demand for pork may increase, which has led to a rise in pig prices. On the other hand, pig companies may also have made significant progress in improving breeding efficiency, optimizing product structures, and expanding sales channels, thereby increasing sales volume and sales prices.”

Another industry insider pointed out that the continuous reduction in production capacity in the early stages is reflected in the current trend of pig prices, compounded by seasonal factors, so the farming side is naturally showing a recovery trend.

In addition to factors that have picked up the market, pig companies' own cost reduction and efficiency has become another important guarantee for improving profits. As of July, the total breeding costs of first-tier Muyuan Co., Shennong Group, and Wen's shares had all dropped below 14 yuan/kg, to 13.8 yuan/kg, 13.7 yuan/kg, and 13.8 yuan/kg respectively. Other pig companies, such as ST Tianbang and Dabeinong, had also dropped to varying degrees in the first half of the year.

Reduced costs have made pig companies more able to bear the risk of falling pig prices. Some industry insiders believe that at present, breeding costs for both group farms and small to medium retail investors have changed, and the breeding costs for some individual farms are between 13-14 yuan/kg. “At this cost, the farm is still profitable even if the price falls.”

The aquaculture side is more cautious about expanding production, and the profit expectations of the industry are expected to be extended

Looking ahead to the future market, pig prices have gradually stopped falling and stabilized recently, and the high pig market is expected to continue in Q4 during the year.

Wang Hongyan told the Financial Federation reporter, “The third and fourth quarters are usually the peak season for meat consumption. In particular, as the temperature drops and the number of holidays increases, demand for pork may rise. Increased demand may further drive up pig prices. Coupled with falling breeding costs, this will create better profit conditions for pig companies.”

Makihara Co., Ltd. also stated in a recent investor relations event that due to the gradual impact of the decline in production capacity in the early stages, pig supply will still be tight in the second half of this year. Combined with support from the demand side of the traditional peak consumption season, there will be a certain gap between supply and demand in the pig market. The company is optimistic about subsequent pig market prices and is expected to maintain a good level.

In the longer term, due to the long period of losses, pressure and secondary education, and increased efforts by listed pig companies to repair their balance sheets, the recovery rate of pig production capacity this year was significantly weaker than in 2022. In July 2024, the number of sows that can be raised increased by only 0.1% month-on-month. Also, according to data monitoring by the Shanghai Steel Federation, the month-on-month increase in sow breeding data at the end of August was 0.32%, and the increase also narrowed.

In an interview with a reporter from the Financial Federation, an industry expert said, “This is the period when farming profits are the highest this year, but due to factors such as long-term losses and capital pressure, the expansion of production on the farming side is not very active now. We should still be able to achieve a small profit in the first half of next year, although the level of profit may not be as high as the second half of this year.”

Choice data shows that as of September 8, the average price of pigs nationwide was 19.92 yuan/kg, up 5.5 yuan/kg from the beginning of the year.

(2024 pig price chart source: Choice)