Fish feed companies bullish on rising seafood prices
China’s major fish feed firms are bullish about 2013 thanks to a reported jump in fish prices as consumers switch to seafood due to the ongoing bird flu crisis.
Scares over the H7N9 virus have seen consumers replace chicken and pork with aquatic products, driving the price of fish up by 30 percent to 50 percent in prosperous Jiangsu and Zhejiang provinces on the east coast and by 20 percent in the south of the country, according to Shanghai-based daily Dong Fang (Oriental) Daily. Separately, the ministry of agriculture in Beijing this week announced that volumes of fish sold rose 7 percent last week compared to the previous week.
That’s welcome news for investors in Guangdong Haid Group, which reported revenue of CNY 15.5 billion (USD 2.5 billion, EUR 1.9 billion) for 2012, up 29.02 percent year-over-year with net profit reaching CNY 450 billion (USD 73 billion, EUR 56 billion), up 31.45 percent over the previous year. The firm plans to increase its output capacity from 7.7 million tons in 2012 to 10 million tons this year and 13 million tons in 2014. Qilu Securities predicting that in 2013 Haid’s client base will increase by 40 percent to 50 percent while the sales of feeds will recover thanks to strong demand.
China’s No. 2 fish feed provider, Tongwei Co, announced revenue in 2012 of CNY 13.49 billion (USD 2.2 billion, EUR 1.7 billion), up 16.29 percent year-over-year, with net profit at CNY 96.97 million, up 14.64 percent year-over-year. Sales of feed in 2012 totaled 3.72 million tons, up 22.22 percent on the previous year. Fish feed sales hit 2.12 million tons, up 29.43 percent year-over-year, with a gross margin of 8.76 percent. Fish feed clearly is a more attractive margin earner for Tongwei than other business lines like seafood processing: revenues from processing at CNY 847 (USD 137, EUR 105) fell 5.45 percent year-over-year, with a gross margin of 0.75 percent.
With the weather warming up and fish ponds being stocked in southern China, investors in China’s listed aquafeed firms have questioned anticipated rises in imported fishmeal and fishoil prices - caused in part by dock strikes and congestion in Latin America. Citic Securities meanwhile pointed to the “unprecedented-ly low survival rate of shrimps in 2012 suggested a low base and huge growth potential in 2013 aquatic feed sales.” Citic claims shrimp survival levels were as low as 25 percent in some key output zones like Guangdong province, Haid’s home base.
Yet both firms are clearly in expansion mode. Tongwei this month announced a CNY 100 million (USD 16 million, EUR 12.5 million) prize fund for its new Tongwei Technology Award Fund that is intended to promote research in agriculture and aquaculture. Haid in March decided to spend CNY 5.05 (USD 0.82, EUR 0.63) to purchase Guangdong Modern Agricultural Group Institute, a feed and animal pharma developer.
Restricted by a narrow land base and high grain production costs, China is increasingly tapping into global grain markets as its need for animal feed expands. The bulk of China’s feed output goes to satisfy a pig herd of 600 million hogs and sows. Imported grain is cheaper than local output, in part due to a government policy of raising purchase prices paid by state monopoly Sinograin to farmers.