Will the Super Chicken cycle return?

2022-05-14 0 By

In 2019, the poultry industry ushered in the coveted “super Chicken cycle”, with big chicken farmers making a lot of money.Soon, however, those chicken companies that have taken advantage of the coronavirus pandemic to expand will find themselves hit by a new coronavirus pandemic, a new outbreak of avian flu and soaring feed prices.The poultry industry, which has endured a long winter, is eager for spring again…In 2019, the broiler breeding industry experienced the “super chicken cycle”, the price of chicken products reached 17 yuan/kg in November, and the profit of parents’ chickens was even as high as 10 yuan/feather.China’s chicken production reached 1,485 tons by 2020, the highest in nearly two decades, as companies set out to expand poultry breeding.However, for poultry farming such a highly cyclical industry, the overall expansion of capacity often means a decline in profits.In October 2019, the price of white-feathered broilers in the main producing areas exceeded 13 YUAN /kg. However, in 2021, the price of white-feathered broilers fell by about 50% from the peak, accompanied by the decline of pig price.The spread of the Novel Coronavirus virus first led to the closure of live poultry trading markets, with more than 130 prefecture-level cities having banned live poultry trading since the early days of the epidemic, when hubei, Henan and Shandong provinces suspended live poultry trading as a precaution.The general transportation of live chickens between provinces was once discouraged during highway inspections, which also affected the transportation of many young chickens.The price of yellow-feathered chicken, China’s two largest broiler breeds, has been in the red for 23 consecutive months since November 2019.Meanwhile, white-feathered chicken also encountered low demand at the peak of supply, and the price was slow to rebound to the historical average level. In some areas, slaughterhouses showed the inverted scene of high chicken price and low chicken price.Briefly fly on the branches of the chicken to find themselves not a phoenix.When to return to high prosperity experienced the ups and downs of the poultry industry, is experiencing the re-adjustment of supply and demand, the industry to reduce capacity trend is obvious.It takes about 2 years for the change of production capacity to be transmitted from ancestral breeding chickens to commercial broilers.Now, it has passed the 23-month period of industry loss, and the production capacity of yellow-feathered chickens has contracted to the lowest level in three years. It is expected that the market size of yellow chickens will be about 4.1 billion in 2021, and the supply of yellow chickens will hit a 5-year low in 2022. The pressure on the upstream supply side of commercial chickens will be reduced.As for white-feathered chickens, it is predicted that the number of commercial white-feathered broilers may decrease by June 2022, and it will take some time to adjust the supply and demand.The good news is that In 2021, China will usher in the first three new varieties of white-feathered broiler chickens independently bred, breaking the monopoly of foreign provenance and greatly enhancing China’s autonomy in upstream regulation of white-feathered chicken market.In addition, in the past two years, corporate profits have been dragged down by the continuous decline in chicken prices, and new registrations of broiler enterprises have decreased.By December 24, 2021, the number of newly registered broiler enterprises in the year dropped to 1725, compared with 5331 in 2020, with a year-on-year decline of more than 65.00%.However, the recession of the industry has stimulated the head enterprises to look for new profit points through the way of extending down the industrial chain.Some enterprises began to step up the development of fine segmentation products, deep processing products, and even started to build their own central kitchen project, with chicken deep processing to extend the industrial chain of the enterprise.By providing processed products to fresh electricity suppliers, fast food enterprises and snack manufacturers on demand, the market can be opened from the B end to seek stable supply relationship and smooth the price impact.Broiler companies are actually able to move downstream because the demand side is changing.In recent years, the annual per capita consumption of pork has been decreasing, while the consumption of poultry meat has been rising steadily.The characteristics of low fat and high protein chicken is more popular in China under the increasingly prosperous fitness and light eating trend.At present, whether it is Kentucky, McDonald’s, local foreign fast food such as chicken, or youform, shark fete and other light food to reduce fat, chicken is all in favor of add.According to meituan’s order volume data across the platform, five of the TOP10 snack brands are chicken fast food brands.As a cheap and easily available protein source, with the continuous adjustment of production capacity, the broiler industry is still expected to come to a new round of strong cycle in the near future by exploring higher commodity added value and brand premium.Eat chicken decisive circle needs to focus on broiler at present two aspects of the trend: one, the industry downturn period let small and medium-sized enterprises complain, but become the best opportunity for the head of the enterprise to seize the market.In the past two years, the real head of the broiler industry, in fact, not only did not follow the tide of overcapacity, but are choosing to expand against the trend.Whoever chooses not to cut production in 2020 and 2021 is more likely to have perfected their chain and identified big customers with whom they can forge long-term relationships, backed by superior cash flow.Second, clear policy guidelines, including live poultry bans, independent breeding, self-sufficiency of poultry meat and environmental protection, will surely reward those who respond fastest.The other side of the live poultry trade suspension is that the chilled chicken market will be stronger, requiring enterprises to timely adjust the product structure, upgrade the research and development system, and improve the level of logistics service.At the same time, the development goal of poultry meat self-sufficiency also urges enterprises to attach importance to the establishment of a complete industrial chain integrating breeding chicken, feed production, commercial yellow-feathered broiler breeding and slaughtering and processing, so as to establish cost advantages from the beginning of breeding.From these two perspectives, the broiler poultry industry can be found very potential enterprises.First of all, it is the absolute leader of the whole industrial chain of white feather broiler — The development of shengnong.Sunnong is China’s largest self-breeding, self-raising, self-slaughtering integrated broiler breeding and processing enterprise, the breeding scale ranks the third in the world, the first in Asia.In 2021, Shengnong sold 370 million broilers, with sales revenue of 9.573 billion yuan, and took the lead in realizing self-sufficiency of seed source.In the downturn of the industry, Sunnong did not simply rely on orders from big customers, but actively expand the industry chain downstream, and focus on the C end.Another aquaculture leader, The Wen Group, is also worth watching.Data show that in 2021, Wen’s stock broiler sales hit a new high, with a total sales volume of 1.101 billion chickens and a total revenue of 28.753 billion yuan.Despite the continued pressure from lower chicken prices over the past two years, Wen’s group has expanded its chicken business in 2021, with sales up 4.5 percent year on year and 50 million more broilers sold than in the previous year.With the improvement of the market, wen’s group’s single quarter sales of broiler chickens in the fourth quarter of 2021 have approached 10 billion mark.Other poultry enterprises with great potential are: Fengxiang Food, Lihua Stock, Xiangjia Animal Husbandry, Spring Snow Food, Yuku, etc. Under the rule of pig and chicken cycle resonance, broiler enterprises are waiting for a big rebound in market demand.Source: Market cap Watch