July 16, 2021
Leading Chinese swine producers report H1 losses
In recent days, leading Chinese producers New Hope Group and Zhengbang Technology reported expected H1 losses, while major producer Muyuan Foods reported an expected profit decline.
All three producers attributed falling swine prices as the main cause for the downtrend.
New Hope additionally cited that rising feed raw material prices and African swine fever-related issues had raised the company's production costs. It had also made an inventory write down amounting to about RMB1 billion (~US$0.15 billion). The write down is said to be in line with accounting standards set forth by the China Securities Regulatory Commission.
Muyuan said that fluctuating swine prices is a systemic risk in the swine industry which cannot be internally controlled by individual companies. The company said that there was a substantial increase in its release volume of market hogs compared to the same period last year. However, it said that if swine prices continue to fall, its business performance would be impacted further.
In its H1 report, Zhengbang specifically cited an improvement in production costs in the second quarter, attributed to the efficiency of its breeding herd and precision farm management.
Overall, Zhengbang reported a loss of RMB1.2-1.45 billion (~US$0.19-0.22 billion) for H1 2021, compared to a profit of RMB2.42 billion (~US$0.37 billion) in the same period in 2020. New Hope reported a loss of RMB2.95-3.45 billion (~US$0.46-0.53 billion), compared to a profit of RMB3.16 billion (~US$0.49 billion) last year. Meanwhile, Muyuan reported a profit decline of 5.42-12.8% to RMB9.4-10.2 billion (US$1.45-1.58 billion).
Swine prices in China have been on a downtrend since the Spring Festival in February this year, with prices dipping below RMB10 (~US$1.50) per kilogram in some localities.