Pork equities rally amid February price rebound
Publicly traded shares of Chinese pork companies rallied sharply on Friday.
Share price of major feed and hog producer Beijing Dabeinong Technology jumped as much as 7% after market open, followed by peers including Wens Foodstuff Group and New Hope Liuhe whose shares rose nearly 4-5% during the day.
Hog price in China rebounded nearly 2% in the second half of February to 12.5 yuan/kg (1,978 USD/ton), according to the National Bureau of Statistics, but are still near their lows, down 23% since the start of 2022.
China’s sow herd is currently at around 43 million heads, which is about 5% higher than the normal level, based on data from the Ministry of Agriculture and Rural Affairs.
The excessive expansion of hog herd has been the key factor behind China’s weak hog price that has plunged more than 60% in 2021.
Hence, any uptick of hog price could excite the market and reignite their optimism of a price recovery in 2022.
US sorghum sales to China robust, new crop soybean sales active
Net export sales of US grains and oilseeds to China during the week of February 18-24 were mixed with sorghum volume remained strong while Chinese demand for US soybeans continued to focus on new crops.
Net sales of 2021/2022 sorghum to China totalled 145,000 tons during the week, but US gross sorghum net sales that week were only 102,000 tons due to an offset of 63,000 tons of reductions.
US 2021/22 soybean net sales fell nearly a third last week to 857,000 tons, of which China cancelled 15,000 tons.
For 2022/23 new crop soybean, sales to China reached 1.26 million tons last week, accounting for nearly 91% of total sales.
Pre-made food industry in China faces stumbling blocks
Pre-made or frozen dishes have been a hot topic in Chinese food recently, with sales on the popular online shopping platform Taobao doubling year on year, and sales on the Hema grocery delivery service surged 345%.
To better understand the market, Jiangsu province recently conducted a survey of over 13,000 customers to assess the market strength and shortfalls.
For the Chinese New Year holiday, 25% of respondents bought only pre-made dishes, while 31% bought some pre-made dishes in addition to home cooking, 29% prepared their entire meals themselves, and 15% opted to eat at restaurants.
Among consumers who has not purchased any dishes, the main concern was price and that the offering was not a good value for money. Food safety was also a key factor as nearly 1/3 of surveyed customers saying it was a concern for them.
The primary demographic for pre-made dishes is younger people, with 80% of customers under the age of 40 and 62% of the dishes were purchased online.
Pre-made dishes is a new segment in China, and clearly has room for improvement. Only 3% of consumers said the products exceeded their expectations, 34% said it was average, and 62% said the product quality and taste were below expectations.
Nearly 90% of respondents also reported issues with delivery, 53% reported slow delivery by merchants, 16% cited slow delivery by the logistics companies, and 19% reported that when they went to pick up the products they were out of stock.
Pre-made food is a rapidly growing industry that is going to substantially change dietary behavior in China and is expected to be a trillion-yuan-industry in the next few years.
As the country has wealthier, younger, more tech-savvy consumers who value convenience and time savings, and are going to eat more pre-made dishes. However, based on consumer surveys, the industry is still in its early stages, and needs to continue its growth and improve the products offerings and services to win over consumers.