Hong Kong company reporting season

WH Group sees China’s pork prices falling over next 15 months after hitting record high in May

PUBLISHED : Monday, 22 August, 2016, 3:54pm
UPDATED : Monday, 22 August, 2016, 11:00pm

The head of the world’s biggest pork producer expects China’s pork prices, a key driver of the country’s consumer inflation figures, to enter a downward trend over the next 15 months.

“Pork spot prices are likely to fall to 16 yuan per kilogram from historical highs of over 20 yuan by the end of 2016, and could continue dropping in 2017,” Wan Long, WH Group chairman and chief executive officer, told reporters in Hong Kong.

The CEO of the company known as “China’s No. 1 butcher” made the projections after China’s soaring pork prices retreated from a record high in May, while the surge in white meat prices in the first half of the year led to substantial inflation for Chinese consumers.

China accounts for around half of global pork consumption and its price factors heavily into the calculation of headline consumer inflation figures, known as the Consumer Price Index.

We are going to import more pork products from the US and put them up for sale in China given the price difference between the two countries
Wan Long, WH Group chairman and CEO

Sky-high pork prices in China, hovering around the level of 20 yuan per kilogram a few months ago, came as pork imports from countries such as the US reached a record 63,500 metric tonnes in May.

Authorities have attributed the recent pullback in pork prices to farmers increasing pig supply in response to robust demand as well as government measures to tap into its pig reserves to help fill the steep shortfall.

“The decline in pork prices bodes well for us and we are going to import more pork products from the US and put them up for sale in China given the price difference between the two countries,” Wan said.

He added that a decline in feed costs would help pull down pork prices.

The supply of pigs in China has been in short supply after many farmers culled hog herds to cope with plunging prices in 2014 and widespread disease that killed many of the animals.

Top pork producer WH Group beats expectations to post 27pc first half profit gain

OnSunday WH Group reported a better-than-expected 26.98 per cent jump in net profit for the first half of the year, boosted by a product-mix upgrade and effective cost cutting.

The hog producer, which also controls US meat processor Smithfield Foods, booked a net profit of US$466 million, up from US$367 million a year earlier, outstripping analysts consensus estimates of US$402 million. Revenue increased 2.3 per cent to US$10.45 billion.

Shrugging off pressure from the soaring pork prices that deterred consumers, WH Group, formerly known as Shuanghui International, was the latest in the industry to benefit from an upgrade in product mix on the back of shifting Chinese tastes to healthier options, as well as business growth in the US market.

WH Group shares fell 0.33 per cent to HK$6.02 as of 3:25pm Monday. The shares have risen 30.23 per cent in the past six months.

Since the US$7.1 billion Smithfield Foods takeover in 2013, the pork producer has brought more premium US-style sausages, bacon and ham products to supermarkets in China, while it has also introduced low temperature meat, which is considered healthier and tastier.