May 18, 2017
Falling pork prices prompt Guangdong Wen to step into meat processing
Guangdong Wen's Foodstuff Group, a major pig farming company in China, will venture into meat processing, an effort that will expand its operations and mitigate impact from intensifying competition and declining pork prices in the country, Reuters reported.
As suppliers swiftly cashed in on 2016's record prices for pork, hog and pork markets are observed to have tumbled in the past months. The development prompt Wen's to diversify its interests into livestock slaughtering and meat processing, according to the company's vice president Luo Xufang.
"Large-scale companies are increasing, so Wen's has to consider the issue of competition," Luo said. "In the second-half of this year, we will push ahead into the slaughter and processing industry."
Luo added that the fall of hog prices benefits slaughterhouse and processors as it bolsters the need for further integration.
However, the move to the processing sector is not without risks; overcapacity ensued after WH Group Ltd increased investment in processing in recent years.
In the meantime, Wen's would also be building more than 5,000 retail outlets in southern China to sell Wen's-branded food products, a move that fulfils a government policy to prioritise consumption over production, Luo said. It is unclear how many outlets are already operating and what the time frame for the setting up of future shops will be.
At present, live hog prices, around CNY15 ($US2.18) per kg, are expected to fall further after dropping from a record CNY22 per kg last June.
Wen's, which produced 17 million pigs last year to rival US company Smithfield, is seeking to raise output to 27.5 million hogs in two years.
This comes as China's meat industry grapples with stagnating demand-growth and changing tastes, with a younger demography willing to splurge on Western-style meats like bacon and burgers.
Still, the outlook on local pork consumption remains uncertain.
"We haven't done a very detailed study, but from our sales situation, we get the impression that consumption (of pork) has dropped," Luo said, referring to volumes sold to slaughterhouses.