(Yicai Global) Dec. 9 -- As China’s real estate sector falters in the era of Covid-19, many of the country’s big property developers are diversifying into pig rearing which promises rich pickings as pork prices soar due to a recent outbreak of African swine fever that has decimated China's hog herds. However, insiders caution that raising pigs ain’t that easy.
There are over 1,400 companies registered in China whose business scope includes both pig rearing and real estate, according to business data platform Tianyancha. Of these, 60 percent were set up in the past five years and 44 percent are registered in the economic powerhouse of Guangdong province.
These include industry giants China Evergrande Group, which in 2016 announced it was investing CNY300 million (USD45.95 million) to build more than 110 pig farms in southwestern Guizhou province, Country Garden which started to headhunt for a manager for its pig farming department in May 2018 and Vanke which began recruiting veterinarians and pig farm managers in May.
They are looking for better sources of revenue to help boost their dwindling share prices. Guangzhou-based Evergrande’s stock has lost 19.41 percent of its value since a year ago, Shunde-based Country Garden has plunged 15.63 percent and Shenzhen-based Vanke has dropped 5.97 percent. In fact, the share prices of 58.1 percent of real estate companies listed on the mainland have fallen in the past year, according to Wind data.
By contrast, the stock of leading hog producer New Hope [SHE:000876] has gained 23 percent since the start of the year and that of Muyuan Foods [SHE:002714] has risen 76 percent in the last 22 months.
Real estate companies should be cautious about crossing over to raise pigs, Mao Yifan, an agricultural analyst at Industrial Securities, told Yicai Global. Pig rearing is not so easy, he said. Without an effective vaccine for African swine fever, hog producers need to have very strict disease prevention and control measures. This will test the company’s breeding system, human resources and management ability.
It may also not be the best timing to enter the industry at this point, Mao said. Pork prices are likely to fall from next year as pig herds recover, he said. The cost of feed is high but the profits from breeding are low.
If there are thousands of developers moving into pig farming, not everyone is going to succeed, researchers from the Chinese Academy of Sciences said. These firms must not turn a blind eye to the periodicity and volatility of the hog industry and just seek short-term benefits, they said.
They would do well to heed the lesson of real estate giant Wanda Group, whose CNY1 billion (USD150 million) investment in pig rearing in 2014 came to nothing, with the pig farms shutting down less than a year later.
Editor: Kim Taylor