China may face overcapacity in pig farming industry amid surging profits
Published: Sep 07, 2020 11:51 PM

Pigs are seen at pig farmer Chang Xianyun's pigsty in Neixiang County, central China's Henan Province, Nov. 27, 2019. (Xinhua/Lu Yun)

China's pig farming capacity (including capacity under construction) could reach 2 billion heads per year, in contrast with pig consumption of 650 million heads per year, meaning that the hog industry would face overcapacity or "a disaster," Tao Yishan, chairman of pig farming and meat processing firm Tangrenshen Group, told recently.

Tao's comments came as domestic pig farming companies are seeing seductive profits and accelerating live pig capacities amid surging prices following the catering industry's gradual recovery as COVID-19 restriction measures are eased. 

For instance, New Hope Group, a food company specializing in farming and animal products, saw its net profit (attributable to owners of its parent company) rise by 102.57 percent year-on-year to 3.164 billion yuan ($463.06 million) in the first half of the year, according to its financial report.

As of the end of June 2020, New Hope's pig farming capacity reached 18 million heads, and will further increase by 12 million heads to a total of 30 million heads by the end of September, according to media reports. It also said that live pig supply will remain tight in the second half of the year with seasonal rebounds in demand set to boost prices again.

The number of pigs imported from overseas has increased significantly this year. As of September, imported purebred pigs hit a five-year high of 10,637 heads, more than 110 in the whole of 2017, market information provider SCI99 told the Global Times on Monday.

"Although the industry is seeing high profits due to surging pig prices, China's pig farming capacity will fully recover in 2021, by which time the price of live pigs may drop with the increase of supply," said Wang Lingyun, an analyst at SCI99.

Some analysts think that market consolidation for the pig farming sector will be more obvious in China, because large enterprises have financial strength, lower breeding costs, and more qualified operations. 

According to financial data provider Tonghuashun, as of August 31, 86 listed agricultural companies hit a total net profit of about 33.3 billion yuan. The three majors - New Hope Group, Muyuan Foods Co and Wens Foodstuff Group - accounted for 54 percent of the figure.

Global Times