Pork prices hover at low levels for 9 consecutive weeks, large-scale breeding enterprises fall into losses
Although the arrival of avian influenza has boosted sales of fresh products, the prices of live pigs and pork continue to hover at low levels, and some large-scale live pig breeding enterprises have entered the verge of losses.
The National Development and Reform Commission announced yesterday that between April 24 and May 1, the ex-farm price of live pigs in large and medium-sized cities across the country rose slightly by 0.3%, and the pork-to-grain ratio that week was 5.27, staying below the generally recognized break-even point of 6.00 for live pig breeding for the 9th consecutive week. Data released by the National Bureau of Statistics on May 6 showed that between April 21 and 30, the average price of pork in 50 cities across the country fell again, with the price of pork hind leg (rear leg meat) down 0.9% month-on-month; the price of pork belly was down 0.8% month-on-month.
A senior executive of Shuanghui Group told China Business News yesterday that affected by the drop in pork prices and the shift in consumer demand since avian influenza, the company's sales of fresh products rose significantly in April, with sales tonnage basically on par with meat products, "previously our meat product sales far exceeded fresh products." According to public information, in 2012 Shuanghui achieved 23 billion yuan in meat product sales and 15.4 billion yuan in fresh and frozen product sales.
At the same time, the executive also told reporters that Shuanghui's costs are currently at a historical low. "Live pig prices are falling, and the company promptly built up raw material reserves, which has reduced costs a great deal. So this round of pork price declines is actually good news for us," the executive said.
Yuan Song, an agriculture and animal husbandry industry analyst at Zhihua Business Data, also told reporters that from annual historical data, generally if pork prices fall in a given year, pork consumption will rise. At the same time, the fluctuation range of pork prices is far smaller than that of live pig prices, so although live pig prices are currently very low, pork products still have a certain profit margin.
"Overall, this round of live pig price declines is good news for slaughtering and processing enterprises, especially well-known processing enterprises, but bad news for live pig breeding enterprises. Viewed across the entire industry chain, a trend of polarization is emerging," Yuan Song said.
In this regard, a senior executive of Guangdong Wens Foodstuff Group Co., Ltd. told reporters that the company's current ex-farm price for live pigs is between 6.2 and 6.3 yuan/jin, "although the costs of large-scale breeding enterprises are far lower than those of ordinary farmers, this price is already near the cost line." A relevant person from another large domestic live pig breeding enterprise, Chuying Agro-Pastoral (002477.SZ), also expressed the same concern to reporters.
"Second-quarter performance is expected to decline by about 65% to 95%," Wu Yide, board secretary of Chuying Agro-Pastoral, told reporters. According to the 2013 first-quarter report recently published by Chuying Agro-Pastoral, in that quarter the company's net profit attributable to the parent company fell nearly 48.11% year-on-year, to 54.39 million yuan.
Wu Yide told reporters that at present Chuying Agro-Pastoral's sales of piglets and breeding pigs have not yet suffered losses, but because live pig prices have fallen severely, the pressure has been transmitted to piglet sales, which may cause a sharp decline in piglet sales in the second quarter. Of the 1.489 million pigs the company sold last year, piglets accounted for more than 70%.
"We have already lengthened the industry chain to avoid the risks brought by pork price fluctuations. In addition to live pig breeding, we now also have slaughterhouses and cold storage. Once pork prices fall severely, we can freeze the meat; frozen pork can be kept for half a year, and we can sell it again when prices recover," said the aforementioned person in charge of Chuying Agro-Pastoral.
"The pig farming industry is highly cyclical. Mature foreign enterprises have done very well in risk control and risk hedging, but domestic enterprises are still far from adequate in risk avoidance," an analyst said. "On the one hand, this is because domestically there are not yet well-developed products for enterprises to choose from; on the other hand, it is also related to the thinking of enterprise managers. The head of a leading domestic breeding enterprise once said, we have no risk hedging; if pig prices fall, we just tough it out."