Betting on Turmoil: Pig Stock Prices Have Room to Grow

( National Pork Board and the Pork Checkoff )

Analysts believe stock prices have room to grow as African swine fever (ASF) devastates China’s pig herd. Shares of Muyuan Foodstuff and Jiangxi Zhengbang Technology have shot up to record levels, at least doubling over the past year.

Traders are betting the pig disease that has rapidly swept through China will continue to disrupt supply and keep boosting the share prices of breeders, the South China Morning Post said.

The massive slaughter of pigs to slow the spread of the deadly disease has already decreased the breeding stock sow herd by 20% this year according to USDA estimates, and more is likely to continue.

The outlook of pork prices amidst a strained supply with no vaccine in the short-run means pig breeding stocks have more upside room to run, even after sizeable gains, the South China Morning Post said.

“Experience and logic tell us that the more the stock of breeding sows falls by, the higher pork prices will rise to,” said Dai Ming, a fund manager at Hengsheng Asset in Shanghai. “We are seeing the (pig population) stock falling by the record magnitude this year. So that means pork prices will rise far more sharply going forward than ever before. A big imbalance between supply and supply will support the stock prices.”

Muyuan Foodstuff has jumped 102% over the past 12 months on the Shenzhen exchange, while Jiangxi Zhengbang has shot up 260% and Wens Foodstuffs Group has climbed 54%.

Wang Chen, a partner at Xufunds Investment in Shanghai, said numbers will look much better in the second half of the year and the first half of next year compared to now, with the potential to rise as much as 30% from current levels.

Undoubtedly, ASF has set the stage for a significant increase in pork prices in the future. Chen Qi, an analyst at Zhongtai Securities, said prices are expected to trend up soon with the advent of the peak seasons for consumption from June to August.

“Though pig-farming stocks have already made significant gains, they are still cheap in valuations and cash flow will improve significantly in the future in the perspective of a complete cycle of price increases,” Chen said.

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