Global Processing

China''s AgFeed Pigs Out

May 30, 2008
Forbes.com is reporting that with pig prices soaring in China, AgFeed is bulking up its hog production business.

The Chinese feed and pork producer acquired two commercial hog farms in Fujian province. One of the farms is a breeding facility, making it the company''s second.

The company, China''s market leader in pre-mix and hog production, doesn’t waste any time. Agfeed said Deutsche Bank was helping it explore growth opportunities and then, just a few days later, the company said its management was already operating the newly purchased farms, which are expected to immediately benefit earnings.

Songyan Li, the company''s chairman, said that the recent earthquake has further pressured pork supply and contributed to inflated hog prices.

China''s strained hog supply is due to a combination of a harsh winter that caused widespread piglet deaths, an epidemic of blue ear disease and increasing incomes, which have enabled more people to buy meat. According to AgFeed, 65.0 percent of China''s total meat consumption is pork.

Global Hunter Securities analyst Ping Luo said in a recent report that hog prices have risen to between $240 and $270 per 110 kilograms, from the $200 to $210 range in 2007. She said AgFeed''s hog-raising business produces about 40.0 percent of its gross margins and more than 25.0 percent of net margins.

AgFeed said it''s still shopping for commercial hog farms since pig sales are expected to remain robust through 2008.

Including the company''s newest additions, it now owns controlling interest in 24 producing commercial hog farms throughout China with annual hog production capacity of 550,000 hogs.