Investors question hog company hedging efforts amid losses

Investors have been increasingly focused on the performance of large publicly traded hog following large losses in 2021. Recently investors asked Shuanghui, owned by WH Group, which also owns Smithfield in the US, about its hedging activity. In October 2021, the company announced it started to engage in futures hedging in the Dalian hog market.

The investors questioned if the company employed a professional futures team to engage in hedging because the sales prices in the company’s financial reports fell relatively far and created a large loss.

Shuanghui responded that while it did engage in futures hedging for hog prices, the scale of the hedging is small.

In recent weeks there was focus on the company’s 2021 results and losses related to imported pork. At the end of June 2021, the company reported stocks of 228,000 tons with a large portion of this being imported pork. As prices fell, the company incurred losses on this inventory.

During 2019 and 2020, importing pork into China was highly profitable as prices soared due to African swine fever. As prices fell through 2021 and into 2022, exporters in the US, Europe, and South America saw demand fall sharply.