Corn Futures Rose To A Five-Year High, Listed Pig Enterprises Cost Side Pressure

After the corn price market-oriented operation, and after the sharp decline of inventory in 2018 and 2019, the supply-demand relationship has gradually moved from balance to shortage this year.

Under the above background, domestic corn futures prices continued to rise. By the end of September 16, the settlement price of the main contract of corn futures in Dalian Mercantile Exchange had risen to 2406 yuan / ton, which was 1915 yuan / ton at the beginning of the year. Just two days ago, corn futures once reached a five-year high of 2450 yuan / ton.

Meanwhile, due to the downstream demand, temperature and other factors, the prices of soybean industry chain commodities have risen synchronously, and the main contract of soybean meal futures has also risen to the level near November 2018 this week.

It is pointed out that the rise in the prices of the above two kinds of raw materials will certainly bring impact on the domestic pig breeding industry.

Feed raw materials continue to rise

Corn is mainly used for two purposes, one is deep processing, the other is used for pig and poultry feed.

From this year's price performance, corn has become one of the most obvious agricultural products. According to statistics, the average price of the main contract of corn futures in 2019 was 1892 yuan / ton, while it reached 2450 yuan / ton on September 14 this year.

For the outstanding performance of its price side in the year, industry insiders generally believe that it is the change of supply-demand relationship.

"This round of rising cycle started from the cancellation of domestic temporary storage policy in 2016. Through promoting the policy of price compensation separation, corn prices have turned into market-oriented operation." On the other hand, the state has also taken a series of measures such as adjusting the structure and de stocking, said Liu sikui, an agricultural product analyst of Zhongyuan futures.

In terms of structural adjustment, in the Northeast sickle Bay area, corn planting area was reduced, and soybean price subsidies were increased. In some areas, corn was replaced by soybean. "There is no market support for the market, and soybean subsidies are significantly higher than corn." Liu sikui said.

The second is de stocking. Before the above reform, the state would sell corn inventory to the market through the way of throwing and storing each year during the period from April to September.

However, since 2016, after three consecutive years of storage, domestic corn inventory has declined rapidly. In 2016, the state-owned corn inventory once exceeded 200 million tons. If the auction volume of this year's state-owned corn was included, the corn inventory would drop sharply to more than 10 million tons.

"In this process, the domestic corn supply and demand relationship has gradually evolved from the loose situation before 2016 to the balance in 2018 and 2019, and then to the tense pattern this year." Liu sikui said.

On the other hand, occasional incidents also provide assists.

In August this year, three typhoons, such as Bawei and meisak, passed through northeast China, which had a significant impact on the corn in the critical growth period. The yield of high-quality corn production areas in Southern Jilin Province was significantly reduced, which further triggered the market's concern about the future supply reduction.

On the demand side, after the African swine fever in 2018, the domestic pig production capacity decreased significantly. However, after the swine plague situation was effectively controlled in the second half of 2019, the domestic production capacity began to gradually recover, and the superimposed poultry breeding was in a high inventory state, which made the domestic feed demand significantly recovered and increased, which also brought strong support to the corn price.

As another source of feed, soybean meal has similar price rising logic, and the benefits brought by the recovery of aquaculture demand are also applicable.

The difference is that in recent years, North America, one of the main production areas, has significantly reduced soybean planting area due to trade friction and other factors. In addition to the local weather disaster factors this year, the excellent rate of American beans decreased significantly, which caused the market to worry about the decline of its per unit area yield.

"The reduction of global overall supply and the gradual recovery of domestic demand demand will eventually push the focus of commodity price operation of the whole soybean industry chain upward." Liu sikui said.

Another factor that can not be ignored is that in order to cope with the impact of the new crown pneumonia epidemic, countries around the world have abundant liquidity, which inevitably leads to the revaluation of asset prices including agricultural products.

High gross profit "conceals" rising cost

More important than the short-term rise in feed costs is the potential rise of corn and soybean meal prices in the future.

"Even if the corn in the new season comes down, the pattern of tight supply and demand has been formed. It is estimated that the domestic gap this year will be about 30 million tons, so we can only increase the intensity of import in the future." Liu sikui said.

Soybean is facing the test of soybean planting situation and weather in South America in November and December.

Previously, the price of imported soybeans rose sharply due to the rainy weather in South America harvest season and the drought weather in the main production areas of the northern hemisphere.

The same logic applies to this year, and the possibility of a sharp rise in prices due to weather factors cannot be ruled out in the follow-up. This is not good news for the domestic pig breeding industry, but it is covered by the ultra-high gross profit rate of the whole industry in the short term.

Take muyuan shares (002714. SZ), which has the highest business concentration, as an example. In the past few years, the cost of main raw materials such as wheat, corn, inferior flour and soybean meal accounted for about 60% of the company's operating costs.

In contrast, integrated breeding enterprises with a longer industrial chain and feed business may have more advantages in cost control, such as Zhengbang Technology (002157. SZ), which nearly half of its income comes from feed business.

It should be pointed out that although the prices of corn and soybean meal have risen significantly in the year, and this trend may continue, as the pig breeding industry is still in the "profiteering" stage, such enterprises will not be too sensitive to the rise of cost side in the short term.

According to the data, in July and August this year, the average selling price of Zhengbang technology pig exceeded 36 yuan / kg, the highest level since the sharp rise of domestic pig prices in June 2019.

Based on the survey data of the third-party industry research institutions and some listed companies, the current domestic pig breeding cost is about 15 yuan / kg, including the cost of feed, labor and epidemic prevention.

In front of the gross profit of nearly 20 yuan / kg, the cost side effect brought by the price rise of corn and soybean meal will not be very obvious.

In other words, the current pig breeding industry is "big family and big business". These "small money" is not the main contradiction, but it is only limited to the short term, because there are still at least two uncertain factors to be faced with.

First of all, with the return of pig production capacity, it is not certain that pig production will return to normal. When the domestic pig market volume increased significantly, it was also the day when pig prices accelerated to fall.

Secondly, if the price of corn futures breaks through the peak of 2572 yuan / ton, how much room will there be in the future? How much will the comprehensive breeding cost of 15 yuan / kg increase?

When life is good, these problems can be ignored, because the profit of breeding enterprises depends on high gross profit, and when the economic downturn, it is bound to increase the control of the cost side. Although it is not so, the change trend has been established.

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