China Merchants Securities: 2026 agriculture, forestry, animal husbandry and fishery investment will focus on the two dimensions of cycle and growth

The Zhitong Finance App learned that China Merchants Securities released a research report saying that looking ahead to 2026, investment opportunities in the agriculture, forestry, animal husbandry and fishing sector may focus mainly on the two dimensions of cycle and growth: 1) cycle. Due to a combination of anti-domestic pig sales and industry losses, sow production capacity has been restarted. It is expected that 26H2 pig prices may gradually pick up. The introduction of chicken from the ancestral generation declined year on year, and I am optimistic about the poultry breeding market. 2) Growth. Hengqiang, a leading domestic breeding company, is expected to replicate the mature domestic competition paradigm to overseas markets and open up room for growth. The industrialization of biological breeding is being actively promoted, and the market share of leading breeding companies with core breed advantages is expected to increase at an accelerated pace.

The main views of China Merchants Securities are as follows:

Core ideas

Anti-domestic revenue and industry losses go hand in hand, and sow production capacity has been restarted. It is expected that 26H2 pig prices may gradually pick up. High-quality pig companies are expected to use cost advantages to continue to repair their balance sheets and enhance intrinsic value. Leading domestic feeders are becoming stronger, and their value attributes are gradually becoming prominent, and going overseas is expected to open up new growth space. The industrialization of biological breeding is being actively promoted, and the market share of leading breeding companies with core breed advantages is expected to increase at an accelerated pace.

Pig breeding: production capacity has been restarted and eliminated, 26H2 pig prices may gradually pick up

Affected by a slight recovery in sow production capacity in '24, pig prices generally maintained a downward trend in '25, but there may still be slight advantages throughout the year. Anti-domestic pressure forced the industry to passively remove production capacity & pig prices fall below cash costs, driving the industry to take the two-pronged approach of removing production capacity. Sow production capacity was restarted in July and entered an accelerated removal channel in October. It is expected that 26H2 pig prices may gradually pick up. However, there is still a large variance in breeding costs in the industry, and the cost advantage of high-quality pig companies continues to expand. Cash flow is expected to continue to improve, balance sheets will continue to be repaired, and intrinsic value will be enhanced.

Post-cycle: Leaders bucked the trend and increased their share, focusing on the popularity of segmented varieties

In terms of feed, the domestic feed industry has entered a stage of accelerated integration, and the competitive pattern of strong players is becoming more and more clear. The peak domestic capital expenditure period for leading feed companies has passed, and the increase in feed sales may have led to a marked improvement in depreciation per ton, driving profit release and prominent value attributes. At the same time, leading feeders are expected to replicate the mature domestic competition paradigm to overseas markets and open up room for growth. In terms of animal insurance, the overall demand for animal insurance is showing a recovery trend, but competition in the industry is still fierce, and the profit margins of animal insurance companies with product strength advantages will recover first.

Poultry farming: White chicken breeding can be expected to prosper. Yellow chickens may be profitable in 2026

1) White feather chicken: Affected by the sharp decline in overseas breeding and the decline in breeding performance, the supply of high-quality parent chicken seedlings is expected to be tight in 2026, which will also affect the supply of commercial chicken seedlings in the future. I am optimistic about the poultry breeding market. 2) Yellow feather chicken: Currently, the parent's breeding stock has dropped to a historically low level. In addition, the industry lost more than half a year in 2025, and supply contraction laid the foundation for subsequent increases in chicken prices. Yellow chicken breeding costs have fallen back to a low level, and it is expected that profit elasticity will be greatly released after chicken prices recover.

Seed industry: The corn seed industry continues to remove stocks and places importance on food security

Against the backdrop of frequent global climate extremes, ongoing international trade frictions, and regional and structural imbalances in the supply and demand of agricultural products, the national food security strategy has risen to an unprecedented level, and we are optimistic about the growing side and seed industry. 1) Rice seed industry: In 2025, the domestic supply of hybrid rice seeds is sufficient, and there is a shortage of high-quality varieties. 2) Corn seed industry: Corn prices are expected to rise, and farmers' enthusiasm for growing will not decrease; the area of hybrid corn production has declined for two consecutive years, stocks have continued to be removed, and high-quality varieties are more in demand; the industrialization of genetically-modified corn is accelerating, which may drive the scale expansion and pattern reshaping of the seed industry, and leading R&D breeding companies are expected to benefit.

Risk warning: Price fluctuations of agricultural products exceeded expectations, sales/costs of listed companies fell short of expectations, commercialization of genetic/non-plague vaccines fell short of expectations, sudden uncontrolled outbreaks, major food safety incidents, etc.