(Yicai Global) Jan. 4 -- Shares of Chinese meat processing giant Shuanghui Investment and Development and leading pig breeder Muyuan Foods jumped after the pair signed a framework cooperation deal on procurement that would see the firms prioritize one another.

Shuanghui [SHE: 000895] closed 3 percent higher today at CNY32.49 (USD5.10), while Muyuan [SHE: 002714] gained 8.3 percent to CNY57.80.

The two penned the agreement on Jan. 1 with the intention of improving their brand values and market shares, they said in separate statements today. Under the deal, Muyuan will prioritize pig supplies to Shuanghui, which in turn will prioritize purchases from Muyuan. The pair have never cooperated before, despite both being based in Henan province.

The arrangement will help Muyuan to optimize its original sales model and Shuanghui to ensure stable supplies, Securities Times reported today, citing industry insiders.

Last October, the Shenzhen Stock Exchange queried Shuanghui’s big purchases of pork from US affiliates at high prices. In the first half of last year, Shuanghui bought CNY28.1 billion (USD4.4 billion) worth of meat, of which CNY5.8 billion (USD912 million), equal to about 30 percent of the total, was from abroad.

Shuanghui spent CNY21 million (USD3.3 million), CNY380 million, and CNY290 million on direct hog purchases from Muyuan in 2019, 2020, and the first three quarters of 2021, respectively, accounting to for just 0.1 percent to 1.4 percent of its total procurement in those periods.

Hog prices dived to CNY12.7 (USD2) per kilogram at one point last year, down from CNY40 at the beginning of 2021, and then rebounded somewhat. According to some research reports, the price is likely to bottom out this May.

Editor: Futura Costaglione