On April 14, shares of Zhengbang Technology, a mainland pig-farming-based company, opened sharply lower and were once close to a halt. The first quarterly report released by mainland pig enterprises showed a significant decline in profits, and the industry believes that the continued decline in pork prices is the main reason for the decline in performance.
Comprehensive mainland media reported that on April 13 and 14, three mainland pig enterprises released their first quarterly results this year.
The announcement of Zhengbang Technology, with a market capitalization of 40 billion, showed that the company expected to achieve a net profit attributable to shareholders of listed companies of 205 million yuan (RMB, the same below) to 305 million yuan in the first quarter of 2021, down 66.32% to 77.36% year-on-year.
On the evening of the 14th, New Hope, which has a market capitalization of 80 billion, announced that it expects a net profit of 120 million to 180 million yuan for the first quarter, down 88.94% to 92.62% year-on-year.
In the evening of the same day, market capitalization of 19 billion Tianbang shares announced that the company expects to achieve a net profit attributable to shareholders of listed companies of $191 million to $238 million in the first quarter of 2021, a year-on-year decrease of 50% to 60%.
Although the first quarter results of two pig enterprises, Sheyuan and Luoniushan, were both up year-on-year, the market still reacted to this with actual actions.
After the stock market opened on the 14th, Zhengbang Technology opened sharply lower once close to a stop, most of the pork sector weakened, Yisheng shares fell more than 4%, Zhenghong Technology fell 3.96%, Wenzhi shares, Great Northern Agriculture, Tiankang Biological, Aonon Biological, Tang Ren Shen, etc. fell more than 2%.
The profit of pig enterprises fell, the industry pointed to the reason for the continued decline in pork prices, especially the net profit fell sharply year-on-year three pig enterprises. Zhengbang Technology said in its announcement that the decline in hog prices during the reporting period compared to the same period last year was the main reason for the decline in the company’s performance during the reporting period.
Tianbang said in its announcement that the decline in performance was mainly due to two reasons: firstly, the market price of live pigs in the first quarter was lower than that of the same period last year; secondly, the structure of live pigs slaughtered in the first quarter was different from that of the same period last year.
New Hope, on the other hand, said in its announcement that the decrease in pig sales price during the reporting period compared with the same period last year, coupled with the increase in feed material prices and the impact of the plague, which led to the increase in pig breeding costs and the decrease in profitability of the pig industry, was the main reason for the decrease in the company’s performance during the reporting period.
Pork prices in China started to decline after the Yellow New Year. According to the monitoring by the Ministry of Commerce of the Communist Party of China, the wholesale price of pork has been declining for ten consecutive weeks since late January (Jan. 18-24), with the price of pork dropping by about 27%.
According to the joint monitoring by the Information Center of the Ministry of Agriculture and Rural Affairs of the CPC and Shandong Zhuo Chuang Information Co., the weekly average of the total ex-factory price index of lean white pork in 16 provinces (municipalities directly under the Central Government) was 27.05 yuan per kilogram in the 14th week of 2021 (April 6-9), down 13.1% from a year earlier and 37.8% from a year earlier, expanding by 6.9 percentage points from last week.
Pork prices continue to fall has caused some areas to fall below the fertilization cost line. Niu Zhe, analyst of Zhuo Chuan Information, said: “For self-breeding farmers, affected by the decline in pig prices, after March, the self-breeding profit value from 1650 yuan/head to 960 yuan/head, a drop of 41.82%. For piglet fattening households, farming profit is also in shrinkage, piglet fattening cost is around 24.0 yuan/kg, and the current pig price has fallen below the secondary fattening cost line.” In addition, “this batch of fat pigs slaughtered corresponds to piglets in December last year, when piglet prices were at a high level, so farm losses were common.”
Feng Yonghui, analyst of China Hog Alert Network, also thinks: “The purchase price of hogs in North and Northeast China was as low as 8 or 9 yuan a catty two days ago, which has fallen to the cost line for some hog breeding enterprises.”
A netizen said, “Hogs over here have fallen from 18 yuan a catty (500 grams) in January to 18 yuan a kilogram now, plus corn, soybean meal and other feed price increases, and now they are already losing money. The current pig is 9 yuan a catty, but the piglets before the year is 1,600 yuan a head, plus the price increase of feed, the new pig farmers started last year lost a lot of money.”
For the future direction of pork, Feng Yonghui believes that “the short-term trend of falling pork prices has ended, and after April 9, prices have rebounded due to the anti-price behavior on the production side.” For the next period of time, prices should rise moderately, and are expected to rise by a few dollars, but do not have the conditions to rush back to the previous highs.
But in the long run, Feng Yonghui believes that “this wave of pork price increases although it may last for a few months, the late price will go down.”
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