Hua Chuang Securities: August slaughter volume of listed pig enterprises increased year-on-year and month-on-month; average weight shifted from decline to increase.

Hua Chuang Securities released a research report stating that capacity is accelerating its depletion, and that forward-looking positioning at the bottom should prioritize efficiency over growth and quality over scale. According to data from the National Bureau of Statistics, as of the end of June, the national breeding sow inventory was 37.80 million head, a year-on-year decrease of 2.63 million head, or 6.5%, with the decline widening by 3.2 percentage points from the first quarter. In addition, data from third-party institutions such as Mysteel and Yongyi Consulting show that since the third quarter, baseline capacity has also been accelerating its depletion. Although, based on the industry's current supply-demand fundamentals, pig prices may still continue to fluctuate below the cost line for some time, this is also building momentum for the subsequent cycle reversal. Moreover, the longer the period of fluctuation and bottoming, the more thorough the capacity clearing, and the higher the certainty of a subsequent reversal. Referring to multi-dimensional data such as breeding sows and piglets, in terms of timing, the bank expects that the significant effect of supply contraction, or the profitability inflection point for pig prices, will most likely appear in 2027Q2, but the sector's current valuation is at a low level, and it is recommended to pay attention to allocation opportunities in the hog sector. The main views of Hua Chuang Securities are as follows: Slaughter volume: In August, the total slaughter volume of 18 sample pig enterprises increased by 7.43% year-on-year and by 4.98% month-on-month. In August, the total hog slaughter volume of 18 sample pig enterprises including Muyuan and others was 17.0884 million head (among them, Muyuan Foods Group, Wens Foodstuff Group, Leshan Giantstar Farming&Husbandry Corporation, Yunnan Shennong Agricultural Industry Group, Shenzhen Kingkey Smart Agriculture Times, Beijing Dabeinong Technology Group, Jiangsu Lihua Foods Group, and DEKON AGR are the 8 pig enterprises whose commercial hog slaughter volume is referred to; the same below), up 7.43% year-on-year and up 4.98% from July month-on-month. Among them, the top 5 by slaughter volume were Muyuan Foods Group, Wens Foodstuff Group, New Hope Liuhe, DEKON AGR, and Jiangxi Zhengbang Technology, with slaughter volumes of 7.03 million head, 2.9735 million head, 1.3322 million head, 935,000 head, and 867,900 head, respectively. The top 5 by year-on-year slaughter volume growth were Yunnan Shennong Agricultural Industry Group, Hunan New Wellful, Fujian Aonong Biological Technology Group Incorporation, Shenzhen Kingsino Technology, and Jiangxi Zhengbang Technology, with growth rates of 116.20%, 52.99%, 38.71%, 31.57%, and 29.60%, respectively. Average sales price: In August, the average sales price of commercial hogs for 16 sample pig enterprises was 10.84 yuan/kg, down 21.87% year-on-year and up 0.13% month-on-month. In August, the average selling price of commercial hogs for 16 sample pig enterprises including Muyuan and others was 10.84 yuan/kg, down 21.87% year-on-year and up 0.13% month-on-month. Among them, the top 5 pig enterprises by selling price were Dongrui Food Group, Shenzhen Kingsino Technology, Shenzhen Kingkey Smart Agriculture Times, Jiangxi Zhengbang Technology, and Jiangsu Lihua Foods Group, with selling prices of 12.16 yuan/kg, 11.64 yuan/kg, 11.50 yuan/kg, 11.14 yuan/kg, and 11.12 yuan/kg, respectively, while Tecon Biology Co.Ltd had the lowest selling price at 9.61 yuan/kg. Among the 16 sample pig enterprises, a total of 9 had selling prices above the average price (Wens Foodstuff Group, Leshan Giantstar Farming&Husbandry Corporation, Jiangxi Zhengbang Technology, Dongrui Food Group, Shenzhen Kingkey Smart Agriculture Times, Shenzhen Kingsino Technology, Beijing Dabeinong Technology Group, Jiangsu Lihua Foods Group, and DEKON AGR), and a total of 7 had selling prices below the average price (Muyuan Foods Group, Yunnan Shennong Agricultural Industry Group, Hunan New Wellful, New Hope Liuhe, Tech-Bank Food, Zhejiang Huatong Meat Products, and Tecon Biology Co.Ltd). Average slaughter weight: In August, the average slaughter weight of commercial hogs for 8 sample pig enterprises was 126.13 kg. In August, the average weight of commercial hogs for 8 sample pig enterprises including Muyuan and others was 126.13 kg (if data comparability is taken into account, the average weight of commercial hogs for these 5 pig enterprises including Muyuan Foods Group, Yunnan Shennong Agricultural Industry Group, New Hope Liuhe, Beijing Dabeinong Technology Group, and Jiangsu Lihua Foods Group was 124.78 kg, down 0.05% year-on-year and up 1.08% month-on-month). Among them, Leshan Giantstar Farming&Husbandry Corporation had the highest average sales weight at 131.23 kg, up 1.40% month-on-month, followed by Yunnan Shennong Agricultural Industry Group, with an average weight of 131.00 kg, up 1.18% month-on-month. In addition, pig enterprises with weights above the average also included DEKON AGR (129.58 kg, up 0.41% month-on-month) and Muyuan Foods Group (127.80 kg, up 1.81% month-on-month). A total of 4 pig enterprises had weights below the average. Among them, Wens Foodstuff Group weighed 124.36 kg, up 0.57% month-on-month; New Hope Liuhe weighed 119.29 kg, up 1.23% month-on-month; Beijing Dabeinong Technology Group weighed 122.64 kg, up 1.40% month-on-month; and Jiangsu Lihua Foods Group weighed 123.14 kg, down 0.20% month-on-month. In August, after four consecutive months of weight reduction, the slaughter weight of most enterprises shifted to varying degrees of increase. Hog industry: The entire industry chain continued to be in a state of comprehensive losses, and the degree of losses intensified again. According to the National Bureau of Statistics, as of September 20, the national average selling price of commercial hogs was 10.70 yuan/kg, down 2.7% month-on-month and down 17.7% year-on-year. According to Yongyi Consulting, as of September 22, the selling price of weaned piglets was 130 yuan/head, down 9.7% month-on-month and down 44.9% year-on-year. In addition, as of the third week of September, according to Yongyi Consulting monitoring, the profit from selling commercial hogs for self-breeding and self-raising enterprises was -193.23 yuan/head, having been in loss for 32 consecutive weeks, and the profit per head from selling piglets was -150 yuan/head, having been in loss for 27 consecutive weeks. In terms of weight, as of September 24, according to Yongyi Consulting, the industry's average slaughter weight was 128.82 kg/head, slightly down from a high level and at the highest level for the same period since 2018. In addition, according to the China Agricultural Information Network, as of September 18, the national average post-slaughter weight in 16 provinces was 88.69 kg, showing a volatile upward trend since late August. Furthermore, as of mid-September, the national utilization rate of secondary fattening pens was 36.27%, down 9.1 pct month-on-month and down 3.9 pct year-on-year. As of September 24, the frozen product inventory rate was 25.49%, showing a slow destocking trend since mid-June, but the frozen product storage capacity utilization rate is still at a relatively high level for the same period in history. Risk warnings: fluctuations in hog prices, sudden large-scale uncontrollable epidemics, major food safety incidents, systemic macroeconomic risks, and trade frictions leading to sharp fluctuations in grain prices.