Packaged food company eyes IPO amid “lazy economy” boom
Xianmeilai, a company specializing in pre-processed packaged seafood products, is looking to go public in Shanghai. These products generally fit into a category commonly called the ‘lazy economy’ which includes things like frozen pre-made dishes that can be heated and consumed in a short amount of time.
This has been an incredibly hot area in recent years as consumer habits shift. Similar to how dining habits in Dalian were affected by the November covid outbreak, consumers in China are increasingly staying at home to eat and opting for convenient options.
Hence, the area of quick-frozen foods is growing exponentially in China. According to iiMedia Research, a Guangzhou-based consumer data provider, frozen food market in China grew 18% last year and will continue to grow at 20% per year.
However, one challenge facing Xinmeilai is China’s aggressive testing of imported frozen products for coronavirus. There have been many cases in the past year where the Chinese customs found coronavirus on the packaging of seafood and this has been disruptive to imported supply chains of frozen seafood products.
Cargo market update: More purchases of US soybeans, French wheat
Chinese importers contracted more soybeans from the US and Brazil during this week and reportedly booked French wheat cargoes, according to market sources.
Large-size Chinese soybean crushers and trading houses booked at least four cargoes from the US this week so far, with two January shipments from the Pacific Northwest, as well as one January shipment and one February shipment from the Gulf.
CFR China premium offers for January shipment from the PNW was last heard at 320 c/bu over March 2022 CBOT futures and the same shipment from the Gulf was indicated at 305 c/bu over the same futures contract.
In South America, buying interest focused on January and March shipments from Brazil with about 5-6 cargoes traded to China this week.
January shipment from Santos was offered at 293 c/bu over March 2022 futures on CFR China basis, and March shipment was heard at 183 c/bu over the same futures. Premiums for 2021/22 Brazilian soybeans have been mostly stable this week.
In addition, two to three cargoes of French wheat cargoes were said to have been sold to China this week. But the shipment and price are unknown at this stage.
Continuous wheat purchases from China were in line with our analysis of more wheat imports in 2021 and possibly next year.
China’s wheat imports are expected to hit a new record high in 2021 as imports in the first ten months have already paralleled with total imports (8.3 million tons) in 2020.
Feed production fall on weak aquaculture feed output
China’s feed production in November this year totalled 24.57 million tons, down 2.5% compared to October, but up 5.7% year on year, according to data from China’s Feed Industry Association.
Hog feed production was the largest segment at 11.4 million tons, up 4.6% m/m and 12.9% y/y.
Feed for laying hens was 2.7 million tons, up 1.5% m/m but down 3.6% y/y.
Broiler feed was 7.3 million tons, down 5.5% m/m and down 8.3% y/y.
Aquaculture feed showed some wide variations with monthly production dropping 38.1% m/m to 1.4 million tons, but still up 22.6% y/y.
Lastly, ruminant feed was 1.4 million tons, rising 9.7% m/m and 5.0% y/y.
From January-November, total feed output was 268.2 million tons, up 13.8% y/y.
Production of pig feed was up 44.9%, aquaculture feed production was up 14%, and ruminant feed output was up 11.4%.
Feed for laying hens was down 9.2% and broiler feed was down 5.9%.
Feed prices mostly rose in November. Compound feed for hogs is now at 3.48 yuan/kg (US$547 per ton) which is up 8.6% y/y.
Hog producers continue to see their margins squeezed as hog prices are down substantially from last year, but their input costs keep rising.
Feed for layers is at 3.19 yuan/kg (US$5,016 per ton), up 11% y/y while broiler feed is at 3.58 yuan/kg (US$563 per ton), up 9.8% y/y. Aquatic feed was 4.8 yuan/kg (US$755 per ton), up 7.0% y/y.
Seed-tech stocks extend rally after recent government push
Agriculture stocks continue to perform strongly after recent policy guidance and increased government focus on the domestic seed industry.
Shares of Wanxiang Denong, a seed company focused on corn hybrids, surged 10% to hit a limit-up.
The stock started the month at 10.83 yuan per share and closed today at 13.95 yuan per share.
Other companies in the same sector rose including Hainan Shennong, up 2.3%, Gansu Dunhuang, up 2.0%, and Shandong Denhai Seeds, up 1.7%.
Food waste
China’s National Development and Reform Commission (NDRC) issued new guidance on food waste on Friday. This topic gets a lot of attention outside of China, but most of the actual policy guidance has been relatively mild.
The new NDRC guidance includes:
- Promote anti-food waste in the canteens of government departments
- Carry out food saving efforts in school canteens
- Optimize food labeling system, encourage food producers to clearly mark “best before date” and “shelf life” on food packaging
- Promote utilization of kitchen waste
There are other parts of the guidance which are starting to get closer to enforcement and penalties.
For example, “give warnings or impose fines on catering service operators who induce or mislead consumers to over-order meals and cause obvious waste” or media operators being prohibited from publishing content meant to “promote food waste such as overeating”.