ao link

Companies

Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

WH Group cautions over China hog threat from 'toxic' ASF vaccines

TwitterLinkedineCard

WH Group underlined the threat to China’s hog herd rebuild from “toxic” vaccines against African swine fever, even as the group highlighted Covid in the US as a bigger blow to its profits last year.

 

Ma Xiangjie, a WH Group director, and head of its Henan Shuanghui Investment and Development domestic unit, said that the use by some Chinese hog producers of unapproved vaccines against African swine fever (ASF) had led to fresh herd losses.

 

“Since the second half of last year some pig producers in China, especially south of the Yangtze river, used some immature pig vaccines and caught African swine fever again,” Mr Ma said.

 

The impact has prompted the group to raise its estimate for Chinese pig prices this year, although forecasting that they will still fall below 2020’s record level of 33.91 renminbi ($4.91) per kilogramme, a rise of 60% year on year, according to the country’s farm ministry.

 

In the US, hog prices, as measured by Chicago futures, rose by 10.7% to average $1.00 per kilogramme last year, with while average carcass prices in Europe fell by 4.5% to E1.63 per kilogramme, WH Group reported.

 

‘Creating significant uncertainty’

The outperformance of Chinese prices reflects the clamour for animals both from meatpackers, seeking to meet the country’s massive demand for pork, and producers rebuilding their herds following heavy ASF losses, which peaked in 2018.

 

However, some fresh outbreaks of the disease blamed on unapproved vaccinations – and also new strains of ASF - have prompted some commentators to cut expectations for recovery. Rabobank earlier this month cut to 8-10%, from 10-15%, its forecast for growth in Chinese pork output this year.

 

“ASF is creating significant uncertainty in key areas, such as China’s herd numbers and the outlook for 2021, especially for the sow population, but also on China’s pork production and pork prices,” the bank said.

 

US-based Global Agritrends said early this month that analysis of Chinese reports suggested a loss of 7m-8m sows in the previous eight weeks, well above levels suggested by farm ministry data.

 

Chinese hog dynamics are important not only for the world protein industry, in signalling pork import needs, but also to grain markets, with the revival in the pig herd, and its increasing focus in industrial units using high-quality feed, seen as a big driver of the jump in the country’s corn imports.

 

Import boost

Hong King-based WH Group said that the number of pigs processed by its Chinese operations slumped by 46% to 7.09m head last year, “constrained by the reduction in market supplies of live hogs”.

 

However, despite the despite the “drastic” drop in processing volumes, “the decrease in external sales volume of pork was only 6.9% as we benefited from the growth of import business”, said the company, which also has operations in the US and Europe.

 

The group’s operating profits in China rose by 8.8% to $271m in pork and by 24% to $836m in packaged meats, as rising meat and pork product prices outpaced the increase in costs, allowing margin expansion.

 

‘Production inefficiency’

However, in the US, where WH Group owns Smithfield, the company reported a slump to an operating loss of $33m in pork, from a profit of $233m a year before, while in packaged meats profits fell by 33% to $571m.

 

The declines were blamed on the hit from the Covid-19 pandemic, which in the US forced abattoir shutdowns, prompting a backlog of animals which in fact sent Chicago futures below 40 cents per pound last April for the first time since 2002.

 

In US packaged meat, “operating profit in the year declined notably… primarily due to the impact of Covid-19 which included production inefficiency, unfavourable sales, incremental charges on employee protection and workforce stabilisation as well as provisions made on the expected losses of receivables and inventories”.

 

In US pork, “our processing volume and external sales volume of pork were also down as capacity utilisation was held back by labour shortage, temporary closure of facilities and implementation of more stringent protective measures in relation to Covid-19”.

 

‘Market disruptions’

For Europe, WH Group reported a 70% increase to $92m in operating profits on packaged meats, and a 17.0% rise to $103m in profits from pork, helped by “growth in sales and decrease in hog costs.

 

EU pig prices “trended downward in 2020 due to market disruptions induced by Covid-19 and outbreak of ASF in some member states including its largest producer, Germany”.

 

The group reported a 23% fall to $1.23bn in earnings for 2020, on revenues up 6.2% at $25.59bn.

TwitterLinkedineCard
Related Stories

Milk price hopes get double upgrade, despite disappointing GDT auction

Both ASB and Westpac upgrade forecasts for New Zealand milk prices, even though dairy values underperformed at the latest benchmark auction

Carr's Group shares rise, as it reveals 'positive' trading, profits rise

The engineering-to-farm retail group sees tailwinds from a strategic review and reviving feed margins. But what about USDA forecasts for UK wheat in 2021-22?

Reshaping grain trade? China moves to change animal feed recipes

Chinese officials recommend the reduction of corn and soymeal in feed, a measure that could reshape the flow of grains into the world’s top corn and soybean buyer

Ghana cocoa 2020-21

Agrimoney Markets Extra’s running table of estimates for Ghana cocoa supplies in 2020-21 season
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2021

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069