December 11, 2019


Investors in China still looking to swine even as supplies steadily recover


Pork prices are expected to go up with increased demand for the upcoming Chinese New Year celebrations, even as prices have eased from record highs in recent weeks, reported Bloomberg.


Even as swine numbers are recovering, China continues to report new African swine fever (ASF) cases popping up with no vaccine available for the disease.


Large swine farms have been entrusted by the government to replenish swine supplies, leaving smallholders unable to survive. This has resulted in big gains for large swine breeders such as Muyuan Foodstuff – the company reported tripled gains in 2019 and is expected to further profit.


Other companies who have benefitted include meat processing company New Hope Liuhe, which has gained 180% in 2019 alone, as well as Wens Foodstuff Group, China's biggest swine producer which has gained around a third.


Dai Ming, fund manager with Hengsheng Asset Management, Shanghai said swine stock prices will increase further until March 2020 because of heightened demand for the meat domestically.


According to China's farm ministry, swine population in the country has steadily recovered after months of decline due to ASF, with a senior official citing numbers increasing from November.


Prices for pork have gone down as China imported meat overseas to supplement dwindling supplies. The Chinese government aims to boost domestic supply of pork to 80% of normal levels prior to the ASF outbreak by end 2020. This will be done by restocking bigger farms.


However, Xiong Qi, portfolio manager with Windsor Capital Managemen, Beijing said swine stocks are overpriced, and he's removed Muyuan from his watchlist. He believes interest in the sector is declining among investors as an oversupply of swine is expected to reverse the industry's upward trend.


Lin Guofa, senior analyst with Beijing-based consultant Bric Agriculture Group said increased swine supplies doesn't mean more pork supplies. Actual pork supplies may take more than one year to recover. Plus, the expansion of bigger swine producers thanks to the government's policy means these producers are expected to gain a bigger market share.


Muyuan projects to breed more than 1.3 million sows by end 2019, significantly higher than its current 900,000 herd.


TF Securities said in a note in early December 2019 that the swine industry will be generating profits until 2023 as swine numbers steadily recover.


-     Bloomberg