At the end of the year, I have observed and thought about the pig industry for another year, and I have a lot of feelings. I really want to chat with the operators of the pig industry (not targeting the capital market) and share my feelings.
Last night, Muyuan made 41 announcements. The summary is to optimize the debt structure, broaden financing channels, and improve corporate governance.
Whether so many actions have a profound impact on the future of the industry.
Let’s do the math. At the end of the third quarter, the company’s book cash was 15 billion. The major shareholder recently completed an additional issuance of 6 billion. There are only a few days left in the fourth quarter. In the fourth quarter, the company can obtain nearly 20 billion cash flow after adding various depreciation and profits. The futures price is calculated based on the more accurate pig price. In the first half of next year, it will still receive as much as 20 billion in cash. It is relatively certain that the company will obtain about 12 billion in overseas financing. Under the premise of not reducing the existing debt scale, the company’s debt ratio will return to a healthy and reasonable level, and even the safest low debt ratio in the company’s history.
In the breeding industry next year, there will be a company with 70 billion cash in hand, 80 million production capacity, highly competitive breeding costs, high-efficiency and low-cost breeding system, gradual matching of slaughtering scale, yesterday’s announcement that 90 billion credits, etc. What does the future pattern mean? I really want to discuss various possibilities with industry operators.
Muyuan’s high-speed expansion period has passed, and the various amortization reductions brought about by its expansion, management problems caused by excessive expansion, and various running-in problems will be gradually digested. Costs will drop further. As a production capacity with a market share of 20% next year (personal verification experience, the annual output of the industry is about 400 million head, not 700 million head), the cost of Muyuan is expected to drop below 15% under the current feed cost price.
Industrial cost has always been a blind box. There are different opinions and no unified answer. I want to try to analyze it.
If we group industries, it will be clearer to analyze by group. The groups are as follows: production capacity of Muyuan, production capacity of listed enterprises other than Muyuan, medium-scale production capacity, and small-scale farmer production capacity.
The production capacity of Muyuan is the average result of various costs of production capacity of more than 1,000 scale sites, and the comprehensive complete cost under the cost dispersion does not need to be explained.
Except for Muyuan, the cost of listed scale pig enterprises is relatively transparent, and it is more objective to observe from two perspectives. Large enterprises such as Wenxin are mainly raised by farmers, and the group size is relatively large. It can basically be regarded as the average level of the industry, which is reflected in the final cost of the company. Most of them are above 19, but the group will be even higher. If you add the horrible high cost of Zhengbang, and companies with operating problems, the group cost will not be less than 20 yuan. It was even higher in the past few years. Plague disturbances cannot be used as normal cost research.
Except for Muyuan, the top 20 enterprises in the industry (the total scale of breeding is not as good as Muyuan, and the average level of debt is higher than Muyuan). Combining various operating stages, debt levels, credit crisis and other factors, the cost has no advantage, and the room for decline is not optimistic. . (Three years ago, it was believed that large-scale enterprises could reduce costs, but it is basically difficult to verify after three years)
The medium-scale and small-scale calculations are basically the same. The general industry only sees the cost of smooth slaughter, or the batch cost. There is no statistics on the comprehensive cost of the group under the dispersion between breeding units, nor the cost of different batch efficiency in the same unit. , not to mention the cost under the annual financial turnover rate. Therefore, combining the eliminated production capacity with the existing production capacity that is still in operation, the average cost of sample breeding in this group is also very high, and it will not be lower than that of large-scale groups other than Muyuan.
No matter what the cost level of the group sample is, the overall cost is connected to the consumer price, and the inflow and outflow of industrial cash flow under the contradiction between supply and demand, and the cash flow affects the fluctuation of production capacity.
Hypothesis one
After the first half of next year, the price of pigs will be at the cost line of Muyuan. Muyuan will not make a profit throughout the year, and the production capacity of Muyuan will not decrease. However, the production capacity of industries other than Muyuan is based on the cost of standard pigs of 120 kilograms. The industry loses an average of 600 yuan per pig. If the total supply of the industry is 320 million pigs other than Muyuan, the industry will have a net loss of 200 billion yuan. In the case of a reduction, the debt ratio will soar, and the industry will lose credit. I am afraid that the debt side will recover a lot of credit, and the undercalculation will cost 100 billion. A total of 300 billion will flow out of the industry. Correspondingly, more than 100 million pigs have no money to raise, and production capacity is withdrawn. Of course, this is the general ledger of the industry, and individual circumstances vary greatly.
Hypothesis two
With a cash reserve of 70 billion yuan, Muyuan loses 20 billion yuan a year, which is equivalent to a loss of 300 yuan per pig in a year. The corresponding pig price is around 13 yuan. Except for Muyuan, a pig loses more than 800 yuan a year. The industry loses cash assets in a year. Over 400 billion levels. The production capacity is even more terrifying.
Of course, these are extreme assumptions, just to show the final result. In this situation, whether the process is two years or three to five years, the final conclusion is the same.
The industry will not be wiped out, the outflow of capital will inflow, the withdrawal of production capacity will lead to a supply gap, and the high price of pigs will replenish the cash flow of the industry. The remaining ones get cash flow, and enterprises with obvious cost advantages get more cash flow. This is the periodic nature.
The pig industry is a very fragile industry with a very high elimination rate. The weak will be eliminated under the cycle, the strong will survive, and the anti-fragile will become stronger after the industry is vulnerable. The anti-fragiles burn money, the vulnerable are out, and the weak lose cash flow to the anti-fragiles.
The company once said: the good industry is good for Muyuan, and the bad industry is still good for Muyuan (the biggest industry negative ASF has made Muyuan’s rapid expansion) a typical anti-fragile.
Muyuan is likely to have a 20% market share of production capacity and a 50% market share of industrial profits. Strong players in the industry dare not expand in the face of Muyuan’s huge cash flow, and strong players outside the industry dare not enter rashly.
Compared with the previous few years, the industrial structure has undergone earth-shaking changes. There have been industry leaders with the right to speak, the king of pig price pricing power, and the growth of Muyuan. The impact on industrial operators has to be considered.
The way to survive in the industry, where is the outlet for production capacity?
The breeding efficiency of Muyuan is too high. Theoretically, 30% of the piglets that land on the ground every month can be selected as future breeding sows. In a year, 20 million breeding sows can be supplied to the industry, and the cost is extremely low. The cost ratio of piglets represented Now the cost of industrial piglets is more than 30% lower.
In the future not only the company 
Farmer-scale enterprises are difficult to survive, and the self-propagation and self-supporting model is difficult to survive. The result of no cost advantage in breeding is that the cost of breeding has no room for survival.
Self-propagation and self-support will gradually withdraw from the main market in the future. Breeding and self-propagation have technical requirements, management requirements, and consume energy and cash. If Muyuan takes advantage of these advantages to control the price of piglets and to sell them under the cost of the industry, then the self-reproduction capacity will be forced to transform, and the professional breeding capacity will also withdraw. Since the beginning of this year, although the fattening production capacity has been profitable, the production capacity mainly focused on breeding and piglet sales has not been profitable. Self-breeding and self-raising are also thankless. Even many secondary fattening production capacity rhythms are well grasped, and the profits are very rich.
The production capacity of the breeding end continues to withdraw, and the Muyuan breeding end gradually occupies the market: the future is likely to form a Muyuan Combining the highest quality fattening production capacity in the industry, Muyuan has the ability to provide the industry with a production capacity of more than 100 million piglets. Perhaps the sales are reserve, fertile, pregnant sows, or piglets, and piglets for secondary fattening.
In addition to its own fattening capacity of 100 million heads, Muyuan also has a supply industry equivalent to 100 million piglets, providing industry-related supporting services, technical guidance, financial insurance services, equipment supply, feed sales, and perhaps slaughtering, logistics and distribution, etc. Wait. Forming a complete Muyuan industrial ecosystem, Muyuan started an asset-light business model.
Recently, it is difficult for many farmers to sell pigs, and the channel has become the focus. I am afraid that after raising pigs in many areas in the near future, the channels for selling pigs will become narrower and narrower. No channel, no good price.
When Muyuan is equipped with 100 million slaughtering heads, how can it operate if it does not join the Muyuan system? It is in a weak position, so how can we talk about operating efficiency.
The development scale of the pig industry has always been two models in parallel. The company Farmer model, pastoral self-propagation Monolithic scale.
Muyuan binary backcross is the best efficient allocation in single ultra-large-scale pig farms, the company Farmer mode, because the fattening capacity is in the farmer, it is difficult to coordinate backcross breeding, the best way is the ternary system. Compared with Muyuan, it is more stable under the operating flexibility when dealing with the cycle. The profit margin guides the operation and sales. If the piglet price is high and the sales are good, the piglets are sold. Due to the performance constraints of the farmer model, the operating flexibility is very small, and they are forced to gamble on the market. Often, there are no good prices when there are many pigs, and there are many pigs when the price is low. It is money for breeding. Self-breeding piglets are the main profit base. Muyuan’s ultra-low-cost breeding system allows the company The peasant household model fundamentally has no basis for survival. Instead, it breeds pastures Industrial fattening provides the basis for development.
The ups and downs need a process. In the future, no matter what type of production capacity or production capacity of any link in the industrial chain, there will be a situation of withdrawal and Muyuan’s advancement.
After the first half of next year, everyone will probably feel the pressure of Muyuan holding tens of billions of dollars, the pressure of various powerful resources accumulated by Muyuan over the past few decades, the pressure of Muyuan’s complete system efficiency, and the pressure of Muyuan’s integration of the entire industry. In particular, the high investment in new technologies and the high efficiency of modern management will make industrial operators incomprehensible.
The industry has changed. The next two to three years will be the stage of industrial integration led by Muyuan, and the thinking of speculative pig farming will be abandoned. Overturn the old understanding of the laws of the industry, plan early and turn to early adaptation, betting on the cycle may be unpredictable, and the scale may be difficult to be economical. Either arrange a proper exit or join an efficient ecosystem.
Observation from the perspective of the balance sheet of the pig raising scale industry: (you can calculate the balance sheet of the self-examination announcement)
Since the SARS outbreak in 2018, Muyuan raised an extra pig this year with a debt of 2,000 yuan. Since the third quarter of 2018, the debt has increased by 100 billion, and the slaughter has increased by 50 million.
Calculated in the same period, New Hope used nearly 8,000 yuan in debt and financing to slaughter an extra pig this year.
Wen Bi has tens of billions more in debt than in 2018. This year’s production capacity has not recovered to 22 million heads in 2018, so he has not raised more pigs, and has raised 4 million fewer heads.
Tianbang and A New Hope are basically similar.
Zhengbang has more than 30 billion more debts from the same period to now, and its net assets are negative. Can it still raise pigs in the future?
Since 2018, the operating efficiency of Wen Zhengtian Xinmu at that time has been like this. After three or four years of quarreling, it has been verified that the industry is so cruel.
The threshold of the pig raising industry is getting higher and higher, the period of accelerated elimination is coming, and the period of industrial integration has been in progress.
Whoever masters the efficiency is the one who integrates the industry.
How did Muyuan achieve such scale and competitiveness? Perhaps all the answers to the future of the industry lie in the answer to this question.
This article is purely about the industry, welcome corrections from industry operators
Rough writing, investors in the secondary market can ignore it.
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