Pre-made food company shares hit limit-up as holiday bolsters demand
Prices of food company equities in China soared on Thursday as funds are flocking into the pre-cooked food sector ahead of the Lunar New Year holiday season.
Shares of ZJ Guolian Aquatic Products (SZSE: 300094) listed on Shenzhen Stock Exchange surged nearly 20% intraday to 7.46 yuan per share midday Thursday. Shares of ten other food companies including Shandong Delisi Food (SZSE: 002330) and Haixin Foods (SZSE: 002702) all spiked 10% higher since open.
The speculative frenzy has also extended to other smaller firms like Dalian Gaishi (BJSE: 836826), a firm mostly involved in making pre-packaged seaweed, seeing its stock price rising over 50% in two trading days.
Funds piled into the sector as demand for pre-cooked food in China grew significantly in recent years amid changing diet among the world’s largest population.
Orders of pre-cooked meals spiked ahead of the upcoming holiday season with more families staying local this year compared with pre-covid era.
The sector was valued at nearly 346 billion yuan (US$54.4 billion) in 2021, and most demand are currently in first and second tier cities in China. The market saturation rate is only around 10% according to analysts, relatively small compared to 60% in neighboring country Japan.
Analysts are also bullish about the sector. Guohai Securities, a domestic brokerage, estimates that the sector will see a compound average growth rate of 15% over the next 5 years.
In an interview with Securities Times, the chairman of Guolian Aquatic Products said he expects the growth rate to be even higher at 20% and eventually reach a scale of 3 trillion yuan per year.
European pork exports to China under pressure amid weak prices
European pork exporters, who have had several strong years of exports following African swine fever (ASF) epidemic in China, are being squeezed as Chinese demand for imports continues to fall.
A livestock industry association in Spain estimates that pork prices are down over 20% from their 2021 peak and that the Chinese market accounted for 79% their region’s exports.
Live hog prices in China have slumped in recent months and are down 23% from their recent highs set in November. At these price levels, most farmers in China are losing money raising pigs.
Many pork companies, especially in Europe, rushed to expand export capacity as China’s demand for imported pork jumped in 2020 due to ASF decimating domestic stocks. However, China’s hog herd has recovered faster than expected and exports to China have slumped.
Chinese grain trader buys 2023 Brazil soybean new crop
A major Chinese grain trading house has booked a cargo of unplanted 2022/23 Brazilian new crop soybeans just when the harvest of 2021/22 crop is underway.
A February 2023 shipment of Brazilian soybeans was said to have traded at 185 c/bu over March 2023 CBOT futures on CFR China term late Wednesday (January 12), according to several trade sources.
This is the first cargo of 2022/23 new crop traded from Brazil to a Chinese buyer.
The world’s largest soybean importer has been snapping up 2022/23 new crop beans from the US in the past two weeks with the USDA confirming two cargoes this Wednesday in a flash sales notice.
2022/23 new crop soybeans began to attract buying interest from China in the past two week amid mounting concerns of Brazilian 2021/22 harvest to be lower than previous expected.
This is widely interpreted as a way for Chinese buyers to hedge their positions if the supply from Brazil is sharply lower than the original projection.
Dalian port managers sentenced to prison terms over breaching covid rules
In December 2020, Dalian reported an outbreak of covid that was linked to imported cold chain products. Recently, three executives of the company which unloaded the containers linked to the outbreak were fined and given prison terms of between 39 and 57 months.
The court found that the company, Dalian Enterprise Management Co., Ltd had hired workers to unloaded imported cold chain products without requiring their workers to wear masks or personal protective equipment.
Neither did the company follow covid testing regulations, nor other covid regulations which led to a wider community outbreak.
Strict regulation and testing of imported cold chain products, in addition to higher compliance and legal risks, will continue to affect meat imports for the foreseeable future.