Pig companies are stepping up their investments—Is a supercycle in hog farming on the horizon?
Release time： 2019-03-22
【Summary Description】
Since August 2018, as the epidemic has continued to spread, the number of breeding sows and live pigs in stock has been steadily declining. Industry insiders are unanimously optimistic about future pork market conditions. According to data released by the Ministry of Agriculture and Rural Affairs in February, showing information on live pig stocks from 400 monitored counties, the live pig inventory fell by 4.5% month-on-month and by 16.6% year-on-year. The number of breeding sows in stock declined by 5% month-on-month and by 19.1% year-on-year. With a sharp drop in pig production capacity, industry experts are uniformly bullish about the future outlook for the hog market. Meanwhile, major livestock enterprises have begun to ramp up investment in new pig farming projects.
1. Wenshi Shares: The Yilong Liuya Pig Farm, with an investment of 150 million yuan, has officially begun construction.
According to a report by the Nanchong Daily on March 1, Guangdong Wenshi Group is investing 150 million yuan to build a modern breeding pig farm in Hua’eba Village, Liuya Town, capable of housing 4,000 purebred breeding pigs and producing 80,000 piglets annually. Once completed, the farm will help address the shortage of piglet supplies for the 70 Wenshi cooperative households and farms across the county. It is reported that Guangdong Wenshi entered Yilong County in 2012 to develop an integrated hog production project with an annual capacity of 300,000 pigs. To date, the company has built two piglet breeding farms—Shuangsheng and Fulin—each with an annual output of 100,000 piglets, as well as a feed mill with an annual capacity of 150,000 tons. Currently, Wenshi has developed 302 cooperative farming households, which annually produce 200,000 high-quality market hogs, driving rapid growth in the county’s hog industry.
2. Muyuan Shares: Plans to invest 500 million yuan in a pig slaughtering and food processing project, expanding downstream.
On the evening of March 1, Muyuan Shares announced that the company plans to sign a letter of intent for investment with the Zhengyang County Government of Zhumadian City, Henan Province, to invest 500 million yuan locally in a project for the slaughter of 2 million pigs and food processing. Muyuan Shares also announced its intention to establish a wholly-owned subsidiary named Muyuan Meat Foods in Neixiang County, Nanyang City, Henan Province, with a proposed registered capital of 300 million yuan. The subsidiary will primarily engage in pig slaughtering and meat product processing. In addition, Muyuan Shares plans to establish two wholly-owned subsidiaries—Xinyi Muyuan in Xinyi City, Jiangsu Province, and Pingyuan Muyuan in Pingyuan County, Dezhou City, Shandong Province—each with an initial investment of 20 million yuan. Both subsidiaries will focus on poultry and livestock breeding, feed processing, livestock product processing, and swine manure treatment.
3. New Hope Liuhe Co., Ltd.
The 1-million-pig project of New Hope Liuhe in Kangping County has officially been launched. In 2018, New Hope Liuhe signed a framework agreement with the Kangping County government for a modern agricultural industrialization project involving 1 million pigs, with a total investment of approximately 2 billion yuan. On February 25, 2019, the land transfer signing ceremony for the New Hope Liuhe 1-million-pig project in Kangping County was held at the Binhu Comprehensive Building. This land transfer signing ceremony marks the official launch of the project.
The 950-million-yuan pig farming poverty alleviation project invested by New Hope Liuhe has been established in Jingyuan County, Baiyin City, Gansu Province. The People's Government of Baiyin City, Gansu Province, and Zhou Duanyang, President of the New Six Pig Raising Division of New Hope Group’s Liuhe Co., Ltd., signed a framework cooperation agreement for a 200,000-pig farming poverty alleviation project as well as an investment intention agreement for an integrated ecological industrial park project with an annual output of 300,000 pigs. The 300,000-pig integrated farming industrial park, to be built exclusively with 500 million yuan of enterprise funding, will be complemented by a 200,000-pig poverty alleviation project financed through a joint effort involving the enterprise, the government, and banks, totaling 450 million yuan. More than 500 impoverished households will be able to participate in the construction of the breeding community by contributing capital and sharing profits; meanwhile, 5,000 impoverished people will increase their income through employment at the base and through decentralized pig farming.
4. Oriental Hope: A 2-billion-yuan pig farming project with a capacity of 1 million pigs has been launched in Henan Province.
On March 7, 2019, Oriental Hope Group signed an investment agreement with the People's Government of Nanzhao County, Nanyang City, Henan Province. Under the agreement, Oriental Hope Group will invest 2 billion RMB to build a circular agricultural industrial base in Nanzhao County, capable of annually producing and selling 1 million pigs. It is understood that this project integrates crop cultivation, feed processing, livestock breeding, pig slaughtering, deep processing of meat products, and cold-chain logistics, adopting a fully traceable, end-to-end industrial chain model to ensure the supply of high-quality, affordable meat products to the market.
5. Tangren Shen will use the funds raised to invest in and build projects related to pig breeding, feed production, and slaughtering.
On January 14, 2019, Tangrenshen publicly announced a preliminary plan for convertible bonds. The company will issue convertible bonds to raise RMB 870 million, of which up to RMB 570 million—accounting for 65.51%—will be allocated to swine breeding projects. The allocation of the raised funds is as follows: RMB 570 million will be earmarked for four projects: a lean-meat piglet breeding project in Huayuan County, Hunan Province, with an annual output of 300,000 piglets; a Xiangxi black piglet breeding project in Huayuan County, with an annual output of 100,000 piglets; a superior breed piglet breeding project in Nanle County, Henan Province, with an annual output of 300,000 piglets; a commercial fattening pig breeding project in Nanle County, Henan Province, with an annual output of 180,000 pigs; and a core breeding farm project in Tianshui City, Gansu Province, housing 3,600 foundation sows. Additionally, RMB 200 million will support a feed production project in Nanle County, Henan Province, with an annual capacity of 300,000 tons, designed to complement the swine production capacity in Hebei and Henan provinces. Another RMB 100 million will fund a pig slaughtering project in Dameng County, Hebei Province, with an annual capacity of 1 million pigs, also aimed at supporting the swine production capacity in Hebei and Henan provinces. The remaining RMB 200 million will be used to replenish the company’s working capital, while RMB 100 million will be used for the repurchase of the company’s shares.
6. Aonong Bio: Investing 500 million yuan in Jingyan to build an ecological farming project.
On March 15, Fujian Aonong Biotechnology Group Co., Ltd. signed the “Investment Agreement for the Aonong Breeding Project in Jingyan County, Leshan City” with the Agriculture Bureau of Jingyan County, Leshan City, Sichuan Province. The agreement involves investing in and constructing an ecological breeding project through Leshan Aoxin Breeding Co., Ltd., thereby promoting a transformation of the pig farming model in Jingyan County, Leshan City, and accelerating the pace of building this county into a demonstration zone for modern agriculture. The main construction contents and scale of the project are as follows: The total estimated investment for the project is approximately RMB 500 million. Within the designated suitable breeding areas in Jingyan County, RMB 250 million will be invested to build one grandparent stock farm with a capacity of 2,400 pigs and two second-generation sow farms, each with a capacity of 5,000 pigs. Another RMB 250 million will be allocated to implement a business model that combines corporate operations with family farms, enabling the annual output of 250,000 market-ready fattening pigs and fostering more than 100 family farms.
Recently, the three giants of the hog industry—Zhengbang, Muyuan, and Wens—also stated in a report on CCTV’s Finance Channel that they have high expectations for the future of the hog market. They believe the turning point of the “hog cycle” will come earlier than previously anticipated and that this cycle will last until 2021, marking an unprecedented super-cycle!
Lin Yin-sun, Chairman of Zhengbang, believes that pig prices will remain at high levels at least until 2021. This is because, currently, there is no vaccine available for African swine fever; the only solution is to enhance prevention capabilities—and this requires significant investment, including in fixed assets. As a result, both prevention costs and feed costs will rise. Under these circumstances, it’s inevitable that we’ll have to maintain a prolonged transitional period; without at least three years, recovery is simply out of the question.
Wen’s Secretary of the Board, Mei Jinfang, believes that if capacity reduction continues, coupled with the impact of certain diseases, it’s highly likely that prices will enter a new upward trend—particularly in the second quarter, when prices are expected to start rising.
Qin Jun, the secretary of the board at Muyuan, believes that the decline in the sow population has exceeded the level seen over the past 14 years. From this perspective, he thinks that the duration and magnitude of this pig cycle’s rise will surpass those of the previous cycle.
Similarly, sources from Tangrenshen indicated that African swine fever is unlikely to subside in the next three to five years. It is expected that national policies will become even stricter, gradually banning the inter-provincial and inter-regional transport of live pigs and encouraging the use of chilled pork shipments instead. Moreover, policies will promote the development of modern cold-chain distribution systems for fresh meat products. These policy trends will favor large-scale livestock farming groups that control the entire industry chain.
So, what will the future trend of hog prices actually be? Let’s just wait and see.
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