Shenwan Hongyuan has released a research report stating that, looking ahead to the second half of the year, agricultural product prices are expected to continue their upward trajectory, while pressures within the hog cycle are accumulating.

The firm outlines three key investment themes: 1. With the upward shift in oil price trends combined with the impact of abnormal weather, a faster reversal in bulk agricultural commodity prices is anticipated, favoring varieties affected by El Niño; 2. The darkest period for the hog cycle has passed, yet pressures from losses and capacity reduction continue to build, with the certainty and potential magnitude of an inflection point increasing; 3. Supply-demand imbalances in the broiler chicken farming sector are easing, leading to a moderate recovery in profitability. Companies with integrated operations are seeing improved earnings and dividend certainty, making them a defensive, high-dividend option with an embedded call on domestic demand recovery.

The main viewpoints from Shenwan Hongyuan are summarized below.

Review of the First Half of 2026

During the first half of the year, prices for major grains saw a modest recovery, with wheat and corn posting mid-single-digit percentage gains. Meat prices diverged: hog prices accelerated their decline to a cyclical bottom, hitting a twenty-year low at one stage, while broiler chicken prices remained relatively stable. Prices for beef, mutton, and aquatic products continued their upward trend. The sector lacked significant supply-demand catalysts, and the market abandoned the narrative of a hog cycle reversal. Consequently, the agriculture, forestry, animal husbandry, and fishery sector underperformed, falling 17% over the first five months and ranking near the bottom among all primary industries.

Agricultural Products: Accelerated Price Reversal Expected

Following three years of decline, prices of key agricultural products have stabilized and begun to rebound. High oil prices are pushing up costs and substitution demand, which could accelerate this reversal. El Niño is highly likely to arrive this summer, potentially leading to reduced output for several agricultural commodities.

Hog Farming: Turning Point in Sight

While the most severe phase for hog farming is over, supply-side pressures are still accumulating, making an acceleration in capacity reduction highly probable. Hog prices found a bottom in the first half of 2026 and rebounded slightly but remain at levels causing deep losses. The supply base remains elevated, inventory pressure is at multi-year highs, and the pressures from losses and capacity reduction are expected to persist. As these supply-side contradictions build, expectations and the potential scale of a market reversal are being solidified.

Poultry Farming: Moderate Recovery Underway

As the broiler chicken industry moves towards a supply-demand rebalancing, profitability is gradually returning to reasonable levels, indicating a mild recovery in sector conditions. Seasonal upturns warrant attention and strategic positioning. Furthermore, heightened expectations for dividend payouts are likely to gradually provide valuation support for some companies within the sector.

Pet Food: Export Inflection Point Emerges

An inflection point for pet food exports may have already been reached. The focus now shifts to the pace of domestic sales and marketing expenditure, with net profit margins expected to stabilize gradually. The underlying industry logic and favorable conditions remain intact, suggesting potential opportunities following any market pullbacks.

Key Listed Companies to Monitor

Agricultural Products: Hainan Rubber Industry Group Co., Ltd., Shenzhen Noposion Agrochemicals Co.,Ltd., Longping High-Tech Agriculture Co.,Ltd., COFCO Sugar Holding Co., Ltd.

Hog Farming: Muyuan Foods Co., Ltd., Dekon Food and Agriculture Group, Wens Foodstuff Group Co.,Ltd., Shennong Group Co., Ltd., Tecan Group Co., Ltd.

Poultry Farming: Fujian Sunner Development Co., Ltd., Jiangsu Lihua Animal Husbandry Co.,Ltd., Shandong Yisheng Livestock & Poultry Breeding Co.,Ltd., Shandong Xiantan Co.,Ltd.

Pet Food: Guangzhou Alpha Pet Products Co., Ltd., Petpal Pet Nutrition Technology Co., Ltd., Pettee Pet Products Co., Ltd.

Risk Warnings

The intensity of the potential El Niño event remains uncertain. Hog industry capacity reduction may fall short of expectations, leading to persistently low pork prices. Self-brand promotion and sales by pet food companies may not meet expectations.