Chicken seedling prices have risen by over 165% in 11 days. Probiotics Co., Ltd. announced that orders have been scheduled until late February

The chicken seedling prices, which fell continuously in the fourth quarter of last year, have recently experienced a rapid increase. According to Mysteel's agricultural product data statistics, the actual transaction price of white feather chicken seedlings has risen from 1.01 yuan/feather on January 6, 2024 to 2.68 yuan/feather on January 17, with a staggering increase of 165.35%.

Regarding the recent rapid rise in chicken seedling prices, Li Ling, a representative of Yisheng Securities, a leading player in the domestic white feathered chicken industry, told Securities Daily reporters that on the one hand, after the "incubation period" in late December last year, the supply of chicken seedlings in the market decreased; On the other hand, with the rise in the price of free range chickens, farmers are actively replenishing their pens, and the market demand for chicken seedlings has increased. The decrease in supply and increase in demand have led to a rapid rise in chicken seedling prices in recent times.

Changes in supply and demand drive up prices

Due to the Spring Festival holiday of downstream slaughter enterprises, incubation enterprises will stop incubating at the end of each year according to the plan to avoid the slaughter of live chickens during the Spring Festival period. This is the 'suspension period' of the white feathered chicken industry. Starting from mid December 2023, chicken fry companies will gradually enter a "shutdown period". As the "incubation period" ends, the price of chicken chicks enters a "rising rising rising" mode.

According to the quotation of Yisheng Shares, on January 7, 2024, the price of chicken seedlings was 2.20 yuan/feather, and on January 17, the price rose to 3.50 yuan/feather. In just a few days, the price of chicken seedlings increased by nearly 60%, and the market transaction price of chicken seedlings increased by 1.6 times.

The price increase this time is mainly driven by the contradiction between supply and demand, "said Cheng Jing, a chicken industry analyst at Shanghai Steel Union Agricultural Products Division, in an interview with Securities Daily.

From the supply side, the current market is in a period of gradual recovery of seedlings, with a small number of seedlings being produced. Large factories are arranging seedlings according to plan, while small factories have suffered more losses in the early stage and have poor enthusiasm for hatching, resulting in a shortage of chicken seedlings supply. In addition, there was a continuous elimination of chickens by poultry breeding enterprises from November to December 2023, which led to a decrease in supply in the short term.

According to a research report by Haitong Securities, the decline in introduction volume in 2023 will gradually spread downstream, and the number of newly added parent chickens may be at a low level. At the same time, in production parent chickens will enter a peak of elimination. With the gradual decrease in the number of parent chickens in production, the supply of chicken seedlings is becoming tight, and the price of chicken seedlings may enter an upward channel.

From the perspective of demand, the recent continuous rise in raw chicken prices and the decline in feed prices have brought profits to the breeding end and stimulated their enthusiasm for restocking. Cheng Jing said that we are currently in the period of restocking chickens for the New Year, with a high market vacancy rate and strong intention to restock. The shortage of chicken seedlings has led to a continuous increase in chicken seedling prices.

Li Ling also told a reporter from Securities Daily, "There has been a strong demand for chicken chicks in the market recently, and the company's orders have been scheduled until late February

Has the price turning point arrived?

Does the significant fluctuation in chicken seedling prices, from continuous decline to rapid rise, indicate the arrival of a turning point in industry prices?

In 2022, due to factors such as avian influenza in the United States, the total number of updates of ancestral white feathered broiler chickens in China reached 963400 sets, a year-on-year decrease of 24.51%. This data is far below the industry's consensus of an equilibrium of 1.1 million to 1.2 million sets. According to the law of intergenerational transmission, insufficient introduction of ancestral chickens can lead to a decrease in the supply of parent chickens and commodity chickens in the future, and trigger supply-demand contradictions, resulting in a "chicken cycle". However, due to the high self breeding volume of ancestral chickens in China, the industry had expected the "chicken cycle" to break through in the second half of 2023.

However, the inventory of breeding chickens has shown a month on month decline. At the end of December 2023, the total inventory of Baiyu ancestral chickens in the industry was 1.8352 million sets, a decrease of 2.3% compared to the previous period. The total inventory of parents' substitute chickens was 38.503 million sets, a decrease of 0.1% compared to the previous period. The sales volume of commodity substitute chicken chicks has also declined. In December 2023, the sales volume of domestic commodity substitute white feather chicken chicks was 325 million feathers, a decrease of 68 million feathers compared to the previous month.

Open Source Securities believes that as the total inventory of ancestral chicken breeds begins to decrease, it is expected that the supply of parental chicken chicks will gradually shrink in the first quarter of 2024. Meanwhile, due to the low supply of parental replacement chicken seedlings from April to October 2023, it is expected that the supply of commercial replacement chicken seedlings will continue to be tight from January to July 2024. The current peak demand season for white feathered broiler chickens, coupled with the supply gap from ancestral generations, has been transmitted to the commodity broiler chicken market. The supply-demand dual drive pattern has been formed, and the prosperity of the white feathered broiler chicken industry has risen, with a turning point in prices.

Yisheng Group stated that "due to the low introduction of ancestral meat chickens, high-quality parental meat chickens are relatively scarce in China. The company expects that the price of parental meat chicken seedlings will be better in 2024. In addition, the reduction in the introduction of ancestral meat chickens will have an impact on the supply of commercial chicken seedlings in 2024. The company expects that the price of commercial chicken seedlings in 2024 will be better than last year.