August 31, 2017

New Hope expands hog herd despite pork supply glut, weak prices



New Hope Liuhe Co Ltd has announced it increased the size of its hog herd this year, in the face of excessive supplies and prices down at two-year lows, Reuters reported.

In addition, the company revealed a 20.9% decline of first-half profit to CNY1.1 billion (US$166.8 million) as concerns about bird flu impacted business.

Nevertheless, New Hope will get more hog production to go operational in the next two years, with activities occurring in the provinces of Sichuan, Shandong and Jiangsu, the company said, keeping mum on further details about its strategy. These will likely materialise after New Hope boosted its hog numbers by more than 2.6 million in the first half of 2017, according to a filing.

For that period, the company succeeded in maintaining profits from hog products around 2016's level - the outcome was a result of herd expansions, which made up for dropping pork prices.

Still, the interim net profit of New Hope dropped as a H7N9 outbreak curtailed production and thus affected profit from poultry products. In response, the company turned its attention to processed and fresh meat in the first half.

According to Reuters, Chinese pork belly prices have been bottoming at two-year lows of about CNY27/kg (US$4.09/kg) since June as suppliers quickly cashed in on 2016's record prices for the meat, which is a key source of protein for Chinese cuisine.

But demand for the meat have since slowed as the Chinese middle class consume more beef and fish.

- Reuters