May 27, 2011

Sen Yu International Holdings Inc, a commercial hog breeder and supplier in China's Heilongjiang, said Thursday (May 26) it expects rising hog prices to help increase breeders' profits and expects solid long-term demand for its commercial breeding hogs based on rising consumption by Chinese consumers.

High hog prices are underpinning rising US pork exports to China and a swift expansion of domestic hog herds this year, with Chinese piglet prices rising 50% so far to three-year highs, according to USDA.

China's retail pork prices are at their highest levels since summer 2008, the USDA's Beijing-based Foreign Agriculture Service (FAS) said. Weak domestic prices in the first half of 2010 and diseases reduced Chinese herds sharply, prompting a pork shortage in the country that is likely more severe than officially acknowledged, according to the FAS.

The increases in nationwide pork prices accelerated last month when some farms in China's Henan were reported to have fed pigs with an illegal drug to promote production of lean meat. Subsequently, farms and processing facilities affected by the lean-meat producing drugs were shut down. This helped worsen the supply shortage and pushed prices higher.

According to a recent report, rising feed and labour costs, along with supplies that fall short of market demands, are likely to keep pig and pork prices at higher levels during the second quarter of this year, and even reach a new high later in 2011.

Zhenyu Shang, chairman and CEO of Sen Yu International Holdings Inc, said: "In our most recent fiscal third quarter, we experienced higher revenue and gross profit and very significant increases in gross margins due to strong increases in average market prices for commercial hogs. As a result, gross margin in the fiscal third quarter increased 27.2% versus 17.9% for the same period last year, and net margin rose to 19.3% versus 9.7% a year ago.

"While prices may fluctuate over time, we believe that strong demand from Chinese consumers for high quality pork coupled with rising domestic incomes and economic expansion will stimulate even greater demand for our breeding and commercial hogs."

Sen Yu International Holdings Inc, through its subsidiaries, is the largest commercial hog breeder and supplier in Heilongjiang province. Founded in 2004 and based in Jiamusi city, the company owns and operates two farms in Heilongjiang province with an aggregate annual capacity of over 11,000 breeding hogs. The company also conducts genetic and breeding research to improve pork production capabilities.