Home » The two major indicators indicate that the price of pigs is building a bottom. How to accurately layout the pig cycle? |Pig_Sina Finance_Sina.com

The two major indicators indicate that the price of pigs is building a bottom. How to accurately layout the pig cycle? |Pig_Sina Finance_Sina.com

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The two major indicators indicate that the price of pigs is building a bottom. How to accurately layout the pig cycle? |Pig_Sina Finance_Sina.com




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  21st Century Business Herald trainee reporter Tang Jing reports from Beijing

When A-shares continue to pull back and mainstream commodities turn their heads downward, the hog sector is quietly coming out of its trough.

On May 9, 2209, the main contract of live pig futures on the Dalian Commodity Exchange, rose by 4%, standing above the 19,000 yuan/ton mark, the first time in 10 months. Since the low point on April 15 this year, the hog futures 2209 contract has rebounded by more than 14.3%. The market is paying close attention to whether the current pig cycle has reached the bottom and completely ushered in a reversal. In terms of spot, the price data of the Ministry of Agriculture and Rural Affairs in the first week of May showed that the national average price of pork was 24.51 yuan/kg, an increase of 2.3% over the previous week and a year-on-year decrease of 32.1%, which has been rising for three consecutive weeks.

The so-called pig cycle refers to the cyclical curse that is difficult to escape from the pig industry in my country. When the price of pigs rises to a high level, farmers will increase the breeding volume of sows out of profit-seeking psychology, and then the supply of live pigs exceeds the market demand, and the price of pigs begins to fall. At this time, farmers began to cull sows again, and the shortage of supply caused the price of meat to rise, and farmers turned to flock in again. The cycle repeats itself, creating what is known as the “pig cycle.” From the perspective of cycle length, since live pigs have their own growth cycles, the duration of each “pig cycle” is about 4 years, with an average price increase of 20 months and an average price decrease of 27 months. Although the logic of the pig cycle is clear and easy to understand, in actual operation, not only the retail investors in the pig industry cannot escape the pig cycle, but also the leading listed companies with the concept of pork.

Wang Na, director of agricultural product research at Everbright Futures, bluntly said that the characteristics of the pig cycle are well known to the industry, but if the scale is excessively reduced during the loss-making stage of the pig cycle, due to the lag in the growth of live pigs, the company will not have time to expand its profits when the profit cycle comes. . Therefore, it is difficult for even large-scale pig enterprises to get rid of the pig cycle.

The first quarterly reports of large listed pig enterprises in 2022 show that my country’s leading pig enterprises have fallen into comprehensive losses. Muyuan shares, known as “pig grass”, achieved a net profit of -5.180 billion yuan attributable to shareholders of listed companies in the first quarter, a year-on-year decrease of 174%; Wen’s shares realized a net profit of -3.763 billion yuan attributable to listed companies in the first quarter, a year-on-year decrease 792.39%; Tianbang shares realized a net profit of -673 million yuan attributable to shareholders of listed companies, a year-on-year decrease of 444.78%; Zhengbang Technology realized a net profit of -2.433 billion yuan attributable to listed companies, a year-on-year decrease of 1249.73%; New Hope achieved attribution in the first quarter The net profit for shareholders of listed companies was -2.879 billion yuan, a year-on-year decrease of 2204.50%.

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Two major indicators indicate that pig prices are bottoming

It is understood that the comparison of pig grain prices and the number of breeding sows are two key indicators for judging the future trend of live pig prices.

Pig grain comparison refers to the average price of live pigs in the country and the second-class price of major wholesale markets in the country.cornThe ratio of the average wholesale price, that is, “pig-grain ratio = price of live pigs/wholesale price of corn”. The price of live pigs and the wholesale price of corn are monitored, summarized and calculated by the Price Monitoring Center of the National Development and Reform Commission on a weekly basis. Since corn accounts for as high as 60%-70% in pig feed, and the feed cost of live pigs accounts for more than 70% of the cost of slaughtering, the price ratio of live pigs and corn can be used to measure the profit level of pig farming. The enthusiasm for replenishment has an important impact.

On May 5, the National Development and Reform Commission stated that the ratio of pig grains has exited the first-level warning range of excessive decline: as of April 27, the price of pig grains was 5.25, up 7.36% from April 20, and it had entered an excessive decline for nine consecutive weeks. level warning range.

“The number of fertile sows is equivalent to the production capacity. When the number of fertile sows decreases, the pork production capacity will decrease accordingly in the future. The fertile sows can indicate the production capacity of 10 months or more than a year.” The largest breeding farm in China Liang Xing, fund manager of the ETF – Cathay China Securities Animal Husbandry ETF, said.

“It takes about 10 months to go from breeding sows to slaughtering piglets, usually 4 months pregnant with piglets, and 6 months old piglets can be raised and slaughtered. If the number of fertile sows peaked in June last year , plus 10 months, almost April this year is the bottom range of pig prices.” Liang Xing also pointed out that considering the impact of the epidemic on demand factors, the bottom reversal of the pig cycle may also come in the second and third quarters.

The National Development and Reform Commission’s “Plan for Improving the Government’s Pork Reserve Adjustment Mechanism to Ensure Sustaining Supply and Stable Prices in the Pork Market” (2021) pointed out that according to the calculation of production cost data in recent years, the price ratio of pig grain corresponding to the break-even point of live pig production is about 7:1. The “Plan” requires that when the price ratio of pigs and grains is lower than 6:1, the National Development and Reform Commission will issue a three-level warning; When the monthly year-on-year decline reaches 5%, or the cumulative decline in the number of reproductive sows for 3 consecutive months is 5%-10%, a secondary warning is issued; A first-level warning is issued when the year-on-year decline in a single month reaches 10%, or the cumulative decline in the number of reproductive sows exceeds 10% for three consecutive months. The National Development and Reform Commission stated that when live pigs were sold in a panic on a large scale and the prices of live pigs and pork fell sharply, temporary reserve purchases and storage were implemented to effectively “support the market”.

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On April 29, the sixth batch of frozen pork from the central reserve was officially launched, and the industry is expected to be the last in this pig cycle. In 2022, a total of six batches of frozen pork from the central reserve will be launched, and the pig-grain ratio will continue to rise.

How to accurately lay out the pig cycle?

While the market is largely unanimous about the current hog price hovering in the bottom zone, there is still disagreement about when the hog cycle will actually reverse.

Zhou Zhiqin, a senior agricultural product analyst at Hengtai Futures, said that the current inflection point of live pig inventory has come. As of the end of the first quarter of this year, the stock of commercial pigs and fertile sows both dropped, among which the fertile sows decreased by 8.3% compared with June last year, and the stock of commercial pigs decreased by 5.94% compared with the end of last year. In the short term, pig prices have stabilized and rebounded from the bottom, but the short-term sharp rise is insufficient; in the long run, pig farming has entered a cycle of de-capacity, and pig prices will gradually increase in the future. He also pointed out that the recent intensive start of domestic pork purchase and storage has brought good news to the market. At the same time, the epidemic prevention and control measures have been superimposed, and the transportation of live pigs in many places has been restricted, and the terminal price has continued to rise. Zhou Zhiqin once accurately predicted that the hog futures would plummet on the day of listing.

Lv Pin, a pig analyst at Everbright Futures, said that it is still too early for the current rebound in pig prices to be regarded as a turning point in the cycle. Whether the rebound in this round of pig prices is sustainable depends on whether the supply and demand structure of the pig market has fundamentally changed. The stock of breeding sows has dropped by more than 9% from the highest point in June last year, but it is still 2% higher than the normal stock. Under the disturbance of the new crown pneumonia epidemic, the social demand for pork has been greatly affected, and the diet structure of residents has gradually changed. In this context, the upside of pig prices may be limited to a certain extent. After the supply side returns to normal levels, the performance of the demand side will determine the operation center of pig prices in the second half of the year.

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Liang Xing pointed out that the top ten heavyweight stocks of breeding ETFs are basically pig stocks that everyone is familiar with. About 50% of the constituent stocks are in the hog farming sector, with the rest being feed and vaccines. About 40% of the pig feed is in the feed, and 3/4 of the pig vaccine is contained in the vaccine. In this way, about 70% of the constituent stocks are pig-related stocks. Therefore, this fund closely tracks the changes in the pig cycle, and in most cases, it follows the pig cycle.

Liang Xing also suggested that investors should make a layout on the left side of the bottom of the fundamentals. According to historical laws, it is relatively safe and has a certain space. Because there are always people in the market who rush ahead, it will not wait until the pig cycle really reverses before starting the layout, but it will be too late. In such a case, the left-side layout of the fundamentals is relatively safe. After the right side starts to rise, there may be a situation where it does not move or adjust. Of course, the bottoming of the pig cycle is not achieved overnight, and the performance of the secondary market is also ups and downs. Investors are advised to do a good job of expectation management.

Zhou Zhiqin said that the current secondary market is generally weak, and the superimposed aquaculture industry has not yet stepped out of the loss-making stage. It is expected that the short-term shocks from May to June will be treated weakly. After July, the middle line will pay attention to potential bargain-hunting opportunities. It is recommended to pay attention to those companies with excellent control of breeding costs, good cash flow, smooth financing channels and the ability to span cycles.

(Coordinator: Ma Chunyuan)

(Author: Tang Jing)

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