Pork price increase to bolster profits in China
July 11, 2011
by Meat&Poultry Staff
JIAMUSI CITY, China – Sen Yu International Holdings Inc., a leading commercial hog breeder and supplier in Heilongjiang Province, the People's Republic of China, said increasing pork prices are expected to help increase breeders' profits and support growth as farmers are encouraged to replenish hog stocks and increase supply.
On July 5, the average wholesale price of pork reached 24.8 yuan (US$3.86) a kilogram at the Beijing Xinfadi Farm Product Wholesale Market, a three-year high since the middle of 2008, according to a report from China's Global Times. Between June 21 and June 30, the average price of lean pork reached 30.58 yuan (US$4.71) a kilogram, 5.3 percent higher than that of June 11 to June 20. The price of pork belly rose by 5.4 percent during the same period, the largest increase since early February, according to recent data from the National Bureau of Statistics on food prices in 50 Chinese cities.
Pork prices will continue rising until the end of the year, observers predict. Higher prices are being driven by insufficient pork stock and a pig epidemic from late 2010 to early 2011 and are also linked to an increase in the price of corn, which accounts for roughly 60 percent of pig feed. After the Chinese New Year, supplies of pork diminished as most stored pork was sold during this peak season.
June is typically the low season for pork sales and a time to replenish pork stock, which has contributed to tightening pork supply. As the hog breeding industry requires a period of production cycle recovery, it is expected that pork prices will remain stubbornly high in the near term. Pork accounts for roughly 65 percent of China's meat consumption.
"In the near term, higher pork prices will lead to increased profits for breeders," said Zhenyu (Jack) Shang, founder, chairman and CEO of Sen Yu International Holdings Inc. "Under our partnership-based business model, this could increase the number of hog farmers that we work with while the increases in average prices of commercial hogs support higher revenue, gross profit and increases in gross margins that we have experienced.
“Though we expect pork prices to fluctuate over time as increases in supply come into the market, we believe that China's economic expansion and rising middle class with its taste for high quality pork will continue to spur demand for our superior quality breeding and commercial hogs for the long term," he concluded.