Recently, the national pig price rebounded to about 15 yuan/kg. As farmers were about to turn losses into profits, there were more debates in the market about the turning point of this cycle. Actually it is not necessary. Just like the A/H shares at this point, there is a lot of gold. Good companies buy as long as they want, and there is no need to worry about it.
First look at several views circulating in the market:
The first view: The bottom or reversal of the pig cycle has arrived, and it has even almost ended, and the price has just turned like this, and the secondary market has no chance. people who rushed forward predicted your prediction, and they ate all the meat they should eat and left.
The second view: The bottom of the pig cycle has already come out in April and May. Looking back at the price trend, the lowest point last year was 10.7 yuan/kg on October 1, and then rebounded and the price reached more than 14 yuan/kg. After the rebound, it couldn't hold on and then continued to rebound. The price was about 12 yuan/kg, and then it started to rebound upward. This view believes that the position of 12 yuan/kg is the bottom of this pig cycle. The current market estimate of production capacity sales in is seriously insufficient, and there is an expected difference between . The data for the sales of the Bureau of Statistics is 8.3% (from the high in June 2021 to March 2022), and the data for the Ministry of Agriculture and Rural Affairs is 9.2%, but the data given by the market consulting agency is about 17%. Data statistics from the Feed Industry Association also show that in April 2022, the national pig feed was 9.63 million tons, a year-on-year decrease of 15.2% and a month-on-month decrease of 4.7%. The tripartite institutions estimated that the year-on-year decrease of piglet feed and sow feed was about 22-23%. A pig company also quoted this data when judging cycles during its research. The view of
believes that the market is still a better layout opportunity now, because most people in the market did not expect that the degree of sales will be so much higher than they actually are.
The third view: According to the official data, the sales amplitude is indeed not as strong as the previous rounds. The sales amplitude of the previous rounds are almost at 15-20%. Now the sales level is not as high as before, so there will be incomplete sales. Now the pig price rebounds to around 15 yuan/kg. How much can it be bounced up? Because the entire inventory is not very strong, a very tight situation cannot be reached between supply and demand, so it is very likely that the price of around 15 yuan/kg will continue to fall. Although the price of pork is going up recently and the price of piglets is going up, it means that some people have begun to make arrangements and believe that the reversal of fundamentals has begun (for farmers, not secondary markets), if the sales range is not thorough enough, the room for price increases is relatively small.
People who hold this view recommend waiting until August to September to make plans based on the degree of sales. Pessimistic expectations cannot be ruled out to cause a substantial reversal by the middle of next year.
Our view:
The total number of live pigs in the market will enter a decreasing channel from now on, and it is a fact that there are fewer pigs in the market.
This is determined by the gradual decline in production capacity since July last year. No matter how much subsidies the government subsidizes farmers, it will not be able to make up for the pig inventory gap in the next few months.
Therefore, if is not sold properly, it will not affect the future upward trend of pig prices, but only affect the slope of the upward curve.
As for the increase, don’t expect too much.
Of course, consumption is weak now. According to the country's will to restore the economy, construction will be boosted and consumption will increase. Coupled with the traditional peak consumption season in the second half of the year, meat prices may rise above expectations. This expectation is very beautiful because there is uncertainty and needs to be dealt with at a discount.
Assuming that the overall increase is not large, at the current price of 15-16 yuan, medium-sized breeding companies are still not profitable. If the market continues, given the high feed price and the pressure of their own cash flow, the situation of passive capacity reduction still exists. But for , which is less expensive, has begun to make profits and create positive cash flow , isn’t it a good thing?
Now retail investors are holding the stockpile, butchers are stocking up on meat. These will still be released after a period of time. Releasing them will suppress the price of meat. If pig grain continues to sink than , it will affect the rhythm of replenishing the stockpile, which will benefit the future market.
Next, whether it is passive capacity reduction or the weak meat price will be positive for the stock prices of pig companies.
And in history, the biggest rise in stock prices of pig companies has followed the price of meat.
We believe that the current cycle is in the area where the bottoming of the fourth pig cycle since 2006 is the safest and most comfortable moment in this cycle.
So, there is nothing to worry about now, just don’t be too greedy.
specific targets are not convenient here, but you can focus on companies with abundant cash flow, cost advantages, and epidemic prevention and control advantages.
When you stare at the abyss, the abyss is also staring at you.
I don’t know what Nietzsche’s abyss is, but I know that when I stared at the pigpen, the second senior brother was also staring at me, and when I stared at the sun, the sun was also shining on me.
(Discover value, prompt risks, the global stock market valuation chart is updated weekly, welcome to correct it.)
Note: Compared with the data in 2020, the highest point in the above chart is our highest point in 15 years, so the high point of some indexes and the median will change compared with previous periods.
Global stock market price-earnings ratio valuation comparison On May 19,
Shanghai Composite Index rose 0.1;
S&P 500 rose 0.2;
UK FTSE 100 rose 0.1;
Russia RTS rose 0.2;
ChiNext Index fell 0.7;
Nikkei fell 0.1;
French CAC40 fell 0.1;
Hang Seng China Enterprise Index fell 0.4;
Hong Kong Hang Seng Index fell 0.2.
Special reminder: This article is a sharing of investment logic and does not constitute investment advice.
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