August 14, 2019
WH Group looks for markets outside US to source pork as US-China trade war continues
The continuing US-China trade war has impacted the way China's WH Group sources its pork - as such, the world's biggest pork company is now on the lookout for new markets to supply the meat, Nikkei Asian Review reported.
The challenge faced by WH Group is made more complicated by African swine fever outbreaks in China. These events have impacted hog populations and the availability of raw meat at the company's facilities.
Furthermore, increasing the import of pork from WH Group's US unit, Smithfield Foods, would be hampered by the tariffs the United States and China had imposed on each other. The company, which imports around 100,000 tonnes of pork a year into China from the US, is now seeking to buy the meat from potential markets outside the US, namely, Europe, South America and Canada. The meat will be processed in China as WH Group hopes to benefit from rising market prices due to a curtailed hog population, company officials said on August 13.
The company also wants to reduce costs and improve its product mix to bolster profitability.
"We are trying to increase the pork imports into China," WH Group's chairman and chief executive Wan Long said in Hong Kong. "We are under some impact from the trade war, but now we have come up with measures to control the impact, as well as the impact brought by African swine fever."
So far, the disease has led to the culling of more than million pigs in China since the first outbreak in China's Liaoning Province in August 2018. As a result, the country's overall pork production dropped 5.5% in the first half, according to WH Group.
The increased price of raw meat and supply shortage have squeezed WH Group's profit margins. The company also revealed a 16.9% drop in first-half net profit to $463 million as costs increased while revenue fell marginally to $11.13 billion. Operating profit from the company's packaged meats segment, which accounted for 52.9% of the group's revenue, dropped 3.4% on rising raw material costs in China.
WH Group has itself increased the prices of finished product by a total of around 10% in the first half of 2019. Further increases in the second half will be carefully considered, its officials commented.
"The price hikes we implemented and existing cost control measures should be above to cover any increase in costs," said Ma Xiangjie, president of WH Group's China operations. "My judgment is that pork prices are not likely to increase in the second half to the extent that we need to further raise prices of packaged meats."
- Nikkei Asian Review