Pigs fly: China pork producers surge as swine disease cuts supply
Shares in China’s leading pig producers have soared to record levels despite one of the worst disease outbreaks in years, as investors bet on tightening pork supplies and strong government support for leading producers.
China is battling the world’s fastest spreading outbreak of African swine fever, an incurable pig disease that has been confirmed in 28 of its provinces and regions.
Livestock shares initially slid on the early outbreaks in August and September. But they have climbed since November, even as outbreaks continued and as transport curbs on infected provinces hit prices and hurt profits at most producers.
Shares in Muyuan Foods Co Ltd, the No.2 producer, have doubled in the past six months. No. 4 producer Jiangxi Zhengbang Technology Co has surged more than 200pc, while rapidly growing Tech-bank Food Co Ltd is up 143pc.
While listed companies still account for only a modest proportion of China’s annual production of 700m pigs, they are growing quickly as Beijing promotes modern farm techniques. Muyuan produced 11m pigs last year.
The share price gains come even as most companies have forecast a plunge in earnings for last year. In a preliminary report, Muyuan said its 2018 net profit slid 78pc to 520.2 million yuan ($77.7 million), after prices fell partly because of African swine fever.
But analysts say prices for live pigs have bottomed and could rise from 12 yuan per kilogram currently to as much as 20 yuan in the second half, as supplies plunge and farmers face challenges in restocking farms.
“Prices could rise quite high, quite quickly,” said Xiong Kuan, analyst at Cofco Futures, who expects a 20pc drop in supplies. Others say it could be as much as 30pc.