Cailian Press, September 29th (Reporters Liu Jian, Wang Ping'an): With the gradual recovery of the breeding market, the hog fodder industry, which was under pressure in the first half of this year, is seeing some improvement. "Compared to January this year, I sold around 100 tons more this month," a frontline salesperson for a fodder brand told Cailian Press journalists.

Cailian Press reporters recently interviewed multiple sources and learned that thanks to the improvement in the hog farming market since the second quarter, the demand for hog fodder is gradually recovering from the bottom, relieving the pressure on first-line fodder sales, but there is still a certain gap compared to the same period last year. Industry experts believe that "as the profit of hog farming gradually stabilizes, fodder demand may gradually stabilize, becoming a support point for the improvement in related companies' performance."

Recently, Mr. Li, a frontline salesperson for a fodder brand, told Cailian Press journalists, "The sales volume of fodder has been good in the past two months, mainly because pig prices are acceptable, leading to more feedings. This month, I sold around 250 tons, which is approximately 100 tons more than in early January this year." Another employee of a listed fodder company told Cailian Press journalists, "The entire industry has been improving in comparison, partly due to the seasonality of farming. Generally, the third quarter will see some improvement."

Furthermore, Cailian Press journalists consulted multiple pig feed retailers' current sales situation on online e-commerce platforms. Most retailers indicated that the situation is better now than before. Some retailers revealed, "The current sales situation is much better than in the first quarter, but actually, it was difficult for some small factories to survive before, while large factories were still doing fine."

According to an employee of a listed fodder company, "With the gradual increase in the number of piglets, the corresponding demand for piglet feed is gradually rising, but the demand for finishing feed is relatively stable. Since the second quarter, both the month-on-month sales volume and profit per ton of pig feed have been gradually increasing. Although pig feed sales have been recovering month-on-month, there is still a certain gap compared to the best time last year."

Looking at data from the Feed Industry Association, it can be confirmed that the national industrial feed production has been steadily increasing month-on-month in the past three months. In June, July, and August, it increased by 0.3%, 3.5%, and 5.0% respectively. The month-on-month growth trend is gradually widening, but the year-on-year comparison still shows a decrease, with -4.2%, -4.4%, and -5.7% respectively.

It is worth mentioning that while the warming breeding market has brought about an improvement in demand, downstream fodder prices are gradually declining, providing some boost to demand. The aforementioned salesperson, Mr. Li, revealed to Cailian Press journalists, "Now, pellet feeds are approximately 200 yuan/ton cheaper than at the beginning of the year. Because feed prices have decreased, coupled with the recent drop in piglet prices, there are still many pig farmers. Overall, pig fodder is quite sellable."

Looking ahead, since the beginning of this year, bulk commodities have shown a downward trend, with soybean meal plummeting to a near three-year low of around 3000 yuan/ton. As a result, the continued decline in raw materials will bring certain bullish effects on cost control for relevant fodder companies. Liu Li, soybean meal analyst at the Shanghai Ganglian E-commerce Holdings agricultural products division, told Caixin reporters, "It is expected that after the National Day holiday, there will still be downward risks for soybean meal prices. We will temporarily observe the level of support around the 3000 mark. Soybean meal, as one of the ingredients for fodder, accounts for 15-20% of pig feed. If soybean meal prices decline in the later part of the National Day period, it will have a positive impact on feed costs."

Industry experts have determined that "the improvement in demand for hog feed, combined with raw material costs remaining at low levels, may become the support point for the improvement in the performance of fodder companies in the second half of the year. However, the recovery situation on the demand side will still depend on whether the breeding market can stabilize in the future, or how long the profitability can be sustained."

According to the semi-annual report for 2024, leading fodder companies New Hope Liuhe (000876.SZ) sold 4.29 million tons of pig feed in the first half of the year, compared to 5.62 million tons in the same period last year; Guangdong Haid Group (002311.SZ) saw a 7% year-on-year decline in pig feed sales in the first half; Beijing Dabeinong Technology Group (002385.SZ) sold 2.0029 million tons of pig feed in the first half, a decrease of 10.01% compared to the previous year.