March 31, 2008

China's Zhongpin sees pork prices to remain strong

China's pork processor, Zhongpin Inc., forecasts domestic pork prices to stay strong in 2008, helping the company attain this year's revenue target, an executive said Friday.

Pig diseases created a shortage of pork in 2007 which have also sent pork prices to rise to record highs and drove the nationwide annual consumer inflation to a near 12-year high in February.

China's domestic supply is expected to tighten anew this summer as millions of piglets were killed in the latest winter, the country's chief veterinarian said.

Meanwhile, the price spike has been advantageous to pork processing companies, which are able to pass on the higher costs to consumers.

Nasdaq-listed Zhongpin, the country's sixth pork processor, this week forecast full-year 2008 sales of up to US$520 million, well above previous forecasts, helping to send its shares up 8 percent. The company doubled revenue in the fourth quarter.

Baoke Ben, Zhongpin's executive vice president, said pork prices are seen maintaining highs this year on rising raw material costs.

Zhongpin and rivals Yurun Food Group are vying for a significant share in the booming market in China, the world's largest producer and consumer of pork where about 4 million tonnes of the meat are consumed every month.

The company is poised to expand capacity by building new facilities and pursuing acquisitions, capturing a larger share of the market.

Ben said Zhongpin will expand chilled and frozen meat capacity to take advantage of climbing pork prices, anticipating little change in the country's traditional preference for pork.

Zhongpin is based in the country's second-largest pig breeding province of Henan. It said it would slaughter 2.8 million pigs annually by the end of the year, with chilled and frozen pork output at half a million tonnes when new capacity comes onstream.