Chinese duck farmers make profits while disease hinders pork production

JIAXIANG, China (Reuters) – On a 30-hectare plot located in the poultry hub in China's Shandong Province, more than half a million white feathered ducks are eating, chatting and laying eggs for produce cheap meat for thousands of people from factory canteens.

The owner of the farm, Shenghe Group, continues to expand, with the goal of increasing production by 30% this year, to achieve record profits, while the drop in the number of pigs reduces production of pork, meat favorite of the Chinese.

"The market outlook is very good now because of African swine fever," said Shenghe chairman Wang Shuhong, whose company sells about 300,000 ducklings a day for fattening and l & # 39; 39; slaughter.

The deadly swine disease has already reduced Chinese hog inventories by more than a quarter, according to official data. It is estimated that nearly half of the country's breeding sows are dead or have been slaughtered to cope with epidemics.

Pork production will drop by 30% to around 16 million tonnes, badysts at Dutch lender Rabobank said, pushing prices to new highs and leaving a gaping hole in the country's protein supply.

GOOD PROTEIN

Rising pork prices – about 35% in one year – have already fueled demand for poultry meat. Chicken bad costs about 20% more than a year ago, while duck bad has almost tripled to 14,600 yuan (1,707 pounds) per ton, according to Shenghe.

This still represents only about half of the cost of pork, but these prices are unknown in China, where the chest is usually the least expensive part of the bird.

About 80% of the world's ducks are raised in China, but are traditionally eaten in the south of the country, where the tongue of fried ducks, braised feet and spicy duck neck are popular snacks, and duck intestines constitute a hot spot.

In recent years, however, more ducks have been processed for use by cost-conscious catering companies, providing large canteens for food schools, factories, businesses and the armed forces.

These buyers are now trading as much expensive pork as possible.

A purchasing manager of a catering company supplying about 100 major customers in China said that he had replaced about 20% to 30% of the pork on the menu by chicken or duck meat . He refused to be identified because of the sensitivity of the problem.

"We could change even more. But we are concerned that the price of poultry is also rising, "he said.

The price of the day ducklings, sold by farms like Shenghe, has hovered around 6 yuan, three times the usual level since last July.

Prices eased last month as farmers stopped rebuilding during the hot summer months, they rose again and are expected to rise again, said Dong Xiaobo, general manager of French genetics company Orvia, the second largest supplier of ducks breeders.

Orvia is exhausted six months in advance and has even received calls from pork producers considering raising ducks after losing their pork because of African swine fever.

"I have not seen this for 10 years in this market," Dong said.

PIG CRISIS, DUCK OPPORTUNITY

As swine fever continues to spread, Chinese Vice Premier Hu Chunhua urged poultry farmers to help fill the protein gap in order to maintain social and economic stability.

Analysts warn that the disease could affect several farms more than once and the Fitch rating agency predicts that pork production will remain below 2018 levels until 2021.

With production of about 5 million tonnes last year, less than half of China's chicken production, duck meat has a lot of growth potential.

The gate at entry is lower for ducks than for broilers and breeding stocks are more available, said Pan Chenjun, senior badyst at Rabobank.

Broiler farmers depend almost entirely on imported breeders, which have been limited by China's prohibitions on importing imported products from key markets due to bird flu. Production could increase by less than 5% this year, said Pan.

However, any rapid expansion carries risks. In densely populated farms, diseases such as bird flu, many of which circulate in China, spread easily.

And it remains to be seen if duck producers can retain a larger share of the meat market when pork production resumes.

Duck farmers were forced to leave the industry en mbade between 2012 and 2016, when overproduction killed profits, and most people still want more pork dishes than any other meat, said the head of the catering company.

But Wang, Shenghe, who plans to expand downstream with a slaughterhouse later this year, is not worried.

"Pork production will not increase in the next three years and it will take at least five years to recover," he said.