Share prices of Chinese pig breeders rise as African swine fever continues to kill the country’s pigs
June 11, 2019 Category China News Round-up, Weekly
As an epidemic of African swine fever is killing China’s pigs, the share prices of its pig breeders are soaring. Shares of Muyuan Foodstuff and Jiangxi Zhengbang Technology have shot up to record levels, at least doubling over the past year. Traders are betting the pig disease that has rapidly swept through China will continue to disrupt supply and keep boosting the share prices of breeders. Brokerages predict pork prices will top their record high set in 2016 as early as the end of the year. They cite the massive slaughter of pigs aimed at curbing the spread of the disease, that has already sent the stock of breeding sows plunging by a record 20% this year. China’s population of pigs will shrink by 134 million herds, or 20%, in 2019, according to the U.S. Department of Agriculture.
“Experience and logic tell us that the more the stock of breeding sows falls, the higher pork prices will rise,” said Dai Ming, Fund Manager at Hengsheng Asset in Shanghai. “We are seeing the pig numbers falling by record numbers this year. So that means pork prices will rise far more sharply going forward than ever before. A big imbalance between supply and demand will support share prices.” The share price of Muyuan Foodstuff, a pig-farming company in Henan province, has jumped 102% over the past 12 months on the Shenzhen exchange, while Jiangxi Zhengbang has shot up 260% and Wens Foodstuffs Group has climbed 54%.
“Pig breeders’ earnings haven’t peaked yet, and earnings are still accelerating,” said Wang Chen, Partner at Xufunds Investment in Shanghai. “The numbers will look much better in the second half of the year and the first half next year than now. From this point, there’s still potential for the shares to rise by as much as 30% from current levels,” the South China Morning Post reports.
Pork prices rose 3.4% over the past week to CNY15.42 per kilogram, still lower than the record high of CNY21 in June 2016. Factors that curb a fast increase in pork prices include forced culling of pigs amid fear of contamination, and the unleashing of hoarded frozen meat into the market, according to Citic Securities. But once the impact of these one-off disrupting factors fades, pork prices will see quick gains after June, the brokerage said.
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