Chinese real estate giants active in pig market

China has been plagued by ASF outbreaks since 2018. Between 2018 and 2020, more than half of China's pig herd was lost to the virus. This results in increasing pork imports and higher prices for Chinese consumers.

Several Chinese players in the market expect the country's pig population to recover by 2021. New Hope Group, one of the largest Chinese pig breeders, expects pig production to recover next year. Competitor Muyuan Foods also expects pig production to increase again. The company invests in the construction of new slaughterhouses and thus contributes to the government's desire for increasing pig production.

Newcomers in pig farming
The rumors of a recovery of the pig herd are partly based on newcomers to pig farming. There is a trend of large companies, including real estate giants and internet companies, entering the agricultural sector. “These companies usually invest a lot of money. This can quickly stimulate the development of pig farming,” said New Hope Group chairman Liu Yonghao.

There are rumors that real estate developer China Vanke Co will also breed pigs. “It could be Vanke's strategy to expand its business activities at a time when its main business, real estate development, is at a standstill in development,” said agricultural expert Jiao Shanwei.

Real estate giants Country Garden and Evergrande were already ahead of China Vanke Co in establishing pig farms. In addition to real estate giants, large e-commerce companies such as Alibaba and NetEase have also made the move towards pig farming.

Not guaranteed profitable
According to Jiao, such a switch will not immediately lead to a profitable business, as many expect. “Although some companies made a lot of money raising pigs when the price of pork skyrocketed last year, that trend may not last because pig farming is a cyclical industry.”

Although the current supply of pork still cannot meet Chinese demand and prices remain high for the time being, pig farming can also entail economic losses. This is because more and more Chinese are changing their eating habits and finding alternatives to pork.

Prices are going to drop
Liu Yonhao says that at New Hope Group they expect the pig herd to recover. But they also expect prices to drop as a result of the newcomers in pig farming.

“Prices for pork, China's favorite meat, will remain relatively high this year, but in coming years prices may fall below the cost of production as new players, including real estate and internet companies, turn to agriculture,” Yonhao said .