Goldman Sachs: Optimistic about a rebound in profits for hog and fertilizer industries in the second half of the year.

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On May 1st, Goldman Sachs released an annual report overview of China’s agriculture sector (covering 13 stocks across four main areas: live pigs, seeds, feed and additives, and fertilizers). The core judgment is: results for 2025 and Q1 2026 are generally weaker than expected, but the profit outlook for live pigs, fertilizers, and some feed additives will improve significantly in the second half of the year.

Live Pigs: Bottom Clearance Accelerates, Awaiting Upturn in the Second Half

In the first quarter, the domestic benchmark price for live pigs fell to 11.5 yuan/kg. At its earnings meeting, Wen’s management bluntly stated, “At current prices, almost all producers are in a cash loss,” and capacity withdrawal is accelerating.

Capacity reduction in breeding sows is already reflected in the data: by the end of the first quarter, Muyuan’s numbers were down 9% compared with June 2025, and Wen’s were down 8%. At the policy level, the Ministry of Agriculture and Rural Affairs listed disciplined control of pig production capacity as a key priority for 2026 at a recent meeting, applicable to all industry producers. The logic of supply contraction is being realized.

On cost reduction, leading enterprises have clear targets. Muyuan plans to reduce its all-in cost to 11.5 yuan/kg based on the current Q1 figure of 11.9 yuan/kg, even after factoring in an approximate 0.2 yuan/kg increase in feed costs (corresponding to an annual rise of about 150 yuan/ton in corn procurement prices). Measures include disease prevention, breeding optimization, and the application of AI technology. Wen’s full-year target is 11.8 yuan/kg, while New Hope’s range is set at 11.3–11.8 yuan/kg.

Although Goldman Sachs has substantially lowered its profit expectations for the first half of the year, it remains optimistic about the second half: as the effects of capacity reduction become evident and the industry enters an upward cycle, pig prices are expected to rebound and the live pig sector is set to return to profitability.

Fertilizers: Repricing Logic Amid Sulfur Shock

The core variable in the fertilizer sector is sulfur. Due to the Middle East conflict causing disruptions in shipments through the Strait of Hormuz, domestic spot sulfur prices have surged to 6,200 yuan/ton, and non-integrated phosphate fertilizer companies are already in a loss position.

Goldman Sachs estimates that the domestic DAP benchmark price needs to rise by at least 1,000 yuan/ton to 5,500 yuan/ton (tax included) in the second half of the year for marginal producers to achieve sustainable operations. For leading integrated company Yuntianhua, thanks to the government allocation of a small amount of low-priced sulfur (2,000–3,000 yuan/ton), exploring recovery of sulfuric acid from phosphogypsum, and sourcing metallurgical sulfuric acid from local smelters in Yunnan as alternatives, its gross profit per ton of phosphate fertilizer is expected to improve from 1,160 yuan/ton in the first half of the year to 1,463 yuan/ton in the second half. Moreover, after the spring sowing season, part of the phosphate fertilizer export quotas may be relaxed, boosting prices further.

For urea, Xinlianxin’s rating was upgraded for three reasons: First, tight supply and demand will drive the average domestic urea price up to 1,848 yuan/ton (up 4% year-on-year); second, new capacity in Jiangxi and Henan coming online will boost production by 27% by 2026 to 5 million tons, further amplified by the company’s cost advantage—10% below the industry average; third, spot prices for its coal chemical business (methanol, melamine) have risen 27%–100% since February, and full-capacity operation will contribute incremental profits.

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The above content is from Chasing Wind Trading Desk.

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