Mainland poultry and livestock firm Henan Chuying Agro-Pastoral plans to spend four billion yuan (HK$4.74 billion) to set up a 400,000-hectare organic pig farm in Henan province.
Expected to be completed in five years, the facility will include a pig-feed processing plant as well as pig farms and a pig processing plant. Approval has already been given for the development.
Wu Yide, a director of the Shenzhen-listed group, said the mainland meat industry was starting to integrate and modernise rapidly amid the central government's concerns about food safety and food security.
'Food safety is one of the major issues highlighted in NPC and CPPCC meetings. And the recent incident concerning the Shanghui Group has rung alarm bells,' Wu said, referring to the discovery of the illegal additive, clenbuterol, in pork products by the Shanghui group's Shineway brand.
'There is a strong demand for safe, quality pork products. If a big corporation can control the whole supply chain - from farming and feed to the actual production of pork, it can definitely control the quality of pork,' Wu said.
The price of pork has increased steadily over the past 12 months.
According to figures from the Ministry of Commerce, the wholesale price of pork was 20.21 yuan per kilogram in mid-March, up from 15.29 yuan per kilogram at the same time last year.
Wu expected the price of pork to remain stable this year.
'What we see is a trend for big producers in the industry to further expand and integrate relevant businesses, while small- and medium-sized players, particularly those with less control over quality, exit the scene,' he said.
The mainland poultry market was still relatively fragmented, he said, with a sizeable number of small- and medium-sized operations.
Henan Chuying produced about 700,000 pigs last year, a fraction of the mainland total of 600 million.
The group plans to boost sales to more than 1.1 million pigs per year in 2011, and acquire middle- and lower-stream businesses to further integrate the supply chain. But management has not announced any concrete plans.
In its annual report released on Friday, the group reported revenue for the year to December of 683 million yuan, up 26.2 per cent from 541.8 million yuan in 2009. Net profit, excluding non-recurrent losses and gains, reached 111.1 million yuan, up 45.5 per cent from 76.57 million yuan in 2009.
The group issued 33.5 million new shares in September, which yielded 1.08 billion yuan.
Its 2010 balance sheet recorded 1.8 billion yuan in total assets, including 1.18 billon yuan in liquid assets. Total liabilities reached 228.5 million yuan.
Wu said the group had no plans to issue new shares, and would not consider any joint ventures with overseas companies.
'The food industry, for security reasons, is much protected in China. I don't see direct foreign investment welcome yet in this area.'
Henan Chuying Agro-Pastoral closed at 55.65 yuan on Friday, down from 57 yuan.
Pork prices have risen steadily in the past 12 months
The pork wholesale price on the mainland soared to 20.2 yuan in mid-March, a year-on-year rise of about: 32%
Henan Chuying plans to boost its annual pig production this year to: 1.1m