The stock prices of Chinese meat companies have risen to record highs in recent months. Investors expect pig prices to pick up soon, especially as the country with the most pigs in the world is ravaged by African swine fever.
When African swine fever appeared in China in mid-October, stock prices in Hong Kong and Beijing fell sharply. About 1 month later, sentiment turned and prices started to rise. The stock market value of Muyuan Foods, one of the largest pork companies in China, has even doubled in value in the past six months to a record high of 54 Chinese renminbi per share.
Other stock exchange funds related to pig production have also risen sharply. The part of WH Group, owner of Smithfields Food, among others, also enjoys interest from investors and rose by almost 50% to 7,89 Hong Kong dollars per share.
Integrations benefit from shortages
China is by far the largest pig country in the world. The past year has been almost over in the country 700 million pigs sex. In contrast, the number slaughtered by listed meat companies is relatively small. Yet analysts and investors expect that these companies will benefit if pig prices in China pick up.
The (listed) integrations apply high standards regarding biosafety. This reduces the chance of diseases being introduced. Until now, the animal disease has mainly occurred in so-called 'backyard farms', which often organize production on a small-scale and primitive basis.
Turnaround on the pig market?
The Chinese pork price has fallen significantly in recent months; At the end of February, the pig price was 12,68 Chinese renminbi per kilo (live weight). Not often has the pig price been at such a low level at this time of year. Only in 2015 was the price even lower, but that was the starting point for record high pig prices in June 2016.
An analyst from COFCO International expects a rapid price recovery on the Chinese market in the short term. He bases this on a production decline of at least 20%, and perhaps as much as 30%. That is why the Chinese government is motivating major companies to increase production to combat a possible shortage of pork.
Great confidence in pork price
Yet it is striking that stock prices have already anticipated the market turnaround. This is because meat companies saw profits plummet in 2018, due to the outbreak of African swine fever and subsequent low pig prices. Only one thing can be read from this: confidence in higher Chinese pork prices is apparently immeasurably high.
If the decline in production in China is as great as analysts expect, European pig exports could also prepare for additional Chinese buying interest.