Thai: Agro&Food - China’s pig herd recovery hoofs along despite ASF resurgence

  • ASF resurgence in northern China during 1H21
  • Pig herd recovery underway led by large-scale pig farms
  • Current pork price is close to CTI’s break-even point

We attribute the further drop in China’s live pig price (CNY16.2/kg as of Jun 7) to the increased output by large-scale producers and panic selling due to a resurgence of African Swine Fever (ASF) outbreaks and view it as negative for CPF, given its China pork unit (CTI)’s production cost of CNY15-16/kg. Despite the new ASF wave in China in 1H21, large-scale operators have been investing in new capacity. Though we have a bearish view on livestock sub-sector, we reiterate a BUY call on CPF due to its cheap valuation.     

ASF resurgence in northern China during 1H21

Based on USDA’s GAIN (Global Agricultural Information Network) report titled China: Perspectives on the Feed and Swine Sectors on May 14, China has now experienced an ASF resurgence which has turned more serious especially in northern China, evidenced by 40% and 50% declines in the sow herds in Henan and Shandong, respectively. Henan is China’s third-biggest hog-producing province. The recent pork price tumble was due to producers selling their live pigs to reduce their risk of losses to ASF and selling them underweight. The latest ASF round will heavily impact small-scale pig farms, incurring losses from lower pork prices and higher feed costs. In contrast, large well-capitalized firms will continue to invest to expand their pork market share. Some have decided to increase investments during this round.

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