China’s largest agricultural companies turn swine fever epidemic into growth opportunity while small farms perish
- Hong Kong-listed CP Pokphand, one of the top players in China, has raised output of poultry and aqua feed as demand for swine feed falls on the back a decline in the country’s hog population
- Fitch says there is a growing trend among Chinese animal feed and protein producers to diversify their product mix and extend their value chain as they look to ride out the swine fever epidemic
Companies that make the bold decision to diversify and expand well before a crisis often thrive. And some of the region’s biggest agricultural companies have turned the ongoing swine flu epidemic crisis sweeping across China and Southeast Asia into an opportunity, while smaller players have fallen by the wayside.
“While African swine fever resulted in a sizeable decline in the overall swine population in China, it had less impact on larger players as they have more resources and knowledge to defend themselves against the disease,” said Arunee Watcharananan, an executive director of Hong Kong-listed CP Pokphand. “As one of the leaders in the agri-food industry, we have benefitted from the ongoing industry consolidation process.”
Commodities brokerage INTL FCStone said in a report that the epidemic “will almost certainly accelerate the decline” of small farmers in China. The country has an estimated 26 million hog farms.
While CP Pokphand’s swine feed sales in China fell 2.6 per cent year on year in the first half because of a decline in the hog population, it cranked up production of its poultry and aqua feed, with sales growing 4.2 per cent and 3.3 per cent respectively.
Although the firm was hit by the spread of the disease in two of its key markets – China and Vietnam, it posted a moderate profit decline, which fell 23 per cent in the first half to US$82.5 million from a year earlier.
