CITIC Securities’ Investment Strategy for the Second Half of the Year: The agricultural products cycle is gaining upward momentum; pay attention to changes in prosperity across segmented sectors

Background

The strategy note frames 2026 as a transition year for agriculture rather than a fully realized boom. The central idea is that several parts of the sector are sitting at or near cyclical lows, while external shocks and structural constraints are creating conditions for future price and earnings improvement.

Two macro drivers shape the report’s outlook:

• International conflict
• Climate disruption

These factors are presented not merely as temporary noise, but as forces that can lift planting-chain commodities first and make food security a more important investment logic.

Key Points

1. Agricultural commodities are expected to bottom and move upward

The report’s strongest top-down call is that major agricultural product prices are in a bottoming phase and beginning to build upside momentum in 2026. Within that view, the planting chain is expected to lead.

• Corn and soybeans are singled out as likely early movers.
• Their rise is tied to both supply-side disturbance and strategic demand relevance.
• The emphasis on grain security suggests the investment case is not just cyclical, but also policy- and national-priority-driven.

This is significant because the report is not saying all agriculture will rally uniformly. It identifies crop-linked segments as the earliest beneficiaries, implying a sequencing inside the broader agriculture complex.

2. Hog farming is still painful, but that pain is the setup

The hog sector is described as being in a deep loss phase. Rather than seeing that as a reason to avoid the sector, the report treats it as a precondition for eventual recovery.

The logic is:

1. Producers are suffering sustained losses.
2. Policy measures are also pushing capacity reduction.
3. A tighter supply base could support cycle prosperity in 2027.

This is a classic cyclical argument: the worse the current economics, the stronger the future rebound may become, provided capacity is actually removed. The report’s recommendation to “position on the left side” of a hog-cycle reversal means entering before the recovery is obvious in earnings or prices.

3. Poultry and meat are recovering, but only weakly

Compared with the hog call, the meat poultry chain is treated more cautiously.

• The report focuses on marginal changes in:
  • Overseas breeding stock imports
  • Consumption
• The current state is labeled a weak recovery

This wording matters. It suggests there is some improvement, but not enough to justify an aggressive sector-wide bullish stance yet. The industry’s trajectory depends on whether supply conditions and end demand continue to improve.

4. Post-cycle animal health and feed show divergence

The report distinguishes between adjacent downstream industries rather than grouping them together.

• Animal health in the later cycle is “slightly under pressure”
• Leading feed companies continue to outperform and are increasing overseas expansion

This contrast implies that not all post-livestock-cycle names should be treated equally. Animal health may be constrained by current sector weakness, while feed leaders benefit from scale, resilience, and internationalization. The phrase “the strong get stronger” is important here: it points to market share concentration and competitive advantages, not just cyclical beta.

5. Consumer-linked niches are improving selectively

Outside the core farming and livestock chains, the report highlights several niche subsectors with distinct demand and product drivers.

Pets

• The operating low point for pet businesses may already have passed
• Investors should watch:
  • Export sales recovery
  • Domestic market improvement

This suggests a stabilization thesis rather than a full recovery call. The sector needs confirmation from both external and internal demand.

Sugar substitutes

• The sector remains at a high prosperity level
• Allulose is highlighted as a major product moving into commercialization

This indicates a structurally strong niche where growth is supported by product rollout, not just cycle recovery.

Mushrooms

• The mushroom segment is also at a high prosperity level
• Attention should go to capacity expansion through major products

Unlike hogs or crops, this is not a bottom-recovery story. It is a high-level continuation story, where the main question is whether leading products can broaden the market further.

Significance

A five-line investment framework

The report translates its sector view into five explicit positioning directions:

1. Left-side positioning for a hog-cycle reversal
2. Companies with steady operations that can survive across cycles
3. Upcycle in agricultural products and food security themes
4. Pet industry chain
5. Selective niches: mushrooms and sugar substitutes

This framework blends cyclical recovery trades with defensive quality holdings and structural growth niches. That combination is one of the report’s most important features.

What stands out analytically

Three deeper signals emerge from the note:

• Timing matters: 2026 is framed as the beginning of accumulation and turning points, while some payoff—especially in hogs—may come more clearly in 2027.
• Subsector differentiation is essential: crops, hogs, poultry, feed, animal health, pets, mushrooms, and sugar substitutes are at different points in their cycle.
• Food security has become an investment lens: crop price upside is linked not only to market fundamentals but also to strategic importance under conflict and climate stress.

Bottom line

The report is effectively arguing for a barbell approach inside agriculture: buy into deeply depressed cyclical areas before recovery is visible, while also owning segments already showing resilience or structural prosperity. Its most bullish cyclical setup is hogs for a later recovery and planting-chain commodities for earlier price strength, while pets, mushrooms, and sugar substitutes offer more specialized opportunities outside the core livestock cycle.