China breeder increases slaughtering capacity

By Mark Godfrey

- Last updated on GMT

Muyuan Foods Co will invest CNY500 million to build a slaughtering and processing capacity
Muyuan Foods Co will invest CNY500 million to build a slaughtering and processing capacity
One of China’s leading pig breeding firms is building a massive new slaughtering capacity as it seeks to diversify and bets on a long-term trend of consolidation in the pig breeding sector.

Muyuan Foods Co, which claims to be Asia’s largest producer of pigs by headcount, is spending CNY500 million to build a new slaughtering and processing capacity in its home base of Henan province.

Slaughtering capacity for two million pigs will be built in the first stage of the project, with pork processing facilities added in phase two. The company has signed an agreement with local government committing itself to “reducing poverty​” by providing employment and investment.

Muyuan also recently announced feed and poultry investments in easterly Jiangsu and Shandong province. A company statement said the investments were part of its efforts to “increase competitiveness​” by expanding in “downstream enterprises​”.

Even as African swine flu grips China, Muyuan has a long-term plan to expand herd numbers. Based in Nanyang city, in China’s most populous province (Henan), the company has long sought to control costs by processing its own feed while also slaughtering its own pigs. The firm, which also supplies piglets to other breeders, was experiencing short-term pain, noted Ding Ting Ting, an analyst at Guo Sheng Securities, who follows the pork sector. “Piglet prices are at an historical low, but we foresee an improvement in pig prices in May or June​.”

The long-term trends were working in Muyuan’s favour, noted Ding. Both the African swine flu epidemic and increased enforcement of environmental rules in China would mean a consolidation towards “large standard farms​” noted Ding. “Currently the top ten pig-producing firms have a market share of about 10%, so there’s a lot of room to grow for firms like Muyuan​.”

Muyuan Foods Co produced 7.23 million pigs for slaughter in 2017, an increase of 132.4% on the previous year. In filings last year to the stock market, Muyuan aimed to up its numbers to a massive 25 to 30 million hogs a year by the end of 2021 by adding an additional five to six million head per year up to then. The huge increase in pig numbers at Muyuan is set to come from increasing its own herd numbers, but the firm said it would also cooperate with farmers, supplying them piglets, feed and antibiotics.

Guo Sheng has projected that profits at Muyuan will soar from CNY520m in 2018 to CNY7.9bn in 2020. Company founder Qin Ying Lin is a former civil servant, now ranked among China’s wealthiest, according to annual ranking Hurun Wealth Report​, which placed him at 70th in the 2018 listing.

China’s number one hog breeder, Guangdong Wens Food Group Co, increased its pig output in 2017 by 11.2% to 19.04m, but it’s not clear how much of that figure was made up by supplies from contracted farmers. 

Related topics: Industry & Markets, China, Pork

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