Muyan, a leading pig farming enterprise, emphasizes the importance of respecting market forces and adhering to a consistent production schedule, regardless of fluctuating hog prices. This approach, grounded in cost efficiency, has helped the company achieve significant profitability in the first half of 2024. The firm’s Secretary of the Board, Qin Jun, shared insights into their operational strategies and future outlook, highlighting improvements in production efficiency and cost reductions. With optimistic market forecasts for the latter half of the year, Muyan remains committed to maintaining its production targets and enhancing its market position.
In a recent investor call discussing the 2024 half-year performance forecast, Qin Jun, Secretary of the Board at Muyan, stressed the importance of respecting market dynamics rather than adjusting production and sales schedules based on price predictions. “From our extensive experience in pig farming, we believe that adjusting production and sales based on price forecasts shows a lack of respect for the market,” Qin stated.
Operational Insights and Financial Performance
Muyan’s financial performance has seen a substantial turnaround, with a forecasted net profit of CNY 700-900 million (about USD 96 -124 million ) for the first half of 2024, marking a significant year-on-year improvement. This profitability is primarily attributed to increased hog sales volumes and average sales prices, coupled with reduced production costs compared to the same period last year.
In June 2024, the company’s complete cost of pig farming was near CNY 14.00/kg (USD 1.93/kg), down by around CNY 0.30/kg (USD 0.04/kg) from May, with reductions in feed costs and production improvements equally contributing to this decline. Qin Jun expressed confidence that continued improvements in production performance and decreasing feed prices could further reduce the farming cost to CNY 13.00/kg (USD 1.79/kg) by the end of the year.
Market Outlook and Production Plans
Qin Jun offered an optimistic outlook for the second half of 2024, suggesting that hog prices might either remain stable or rise slightly from current levels. Muyan’s sales data reflects this positive trend, with the company selling 32.39 million hogs in the first half of 2024, up 7% year-on-year. This total includes 28.98 million commercial pigs, 3.09 million piglets, and 312,000 breeding pigs. As of the end of June, Muyan’s breeding sow inventory stood at 3.31 million.
Despite the fluctuating market conditions, Muyan plans to maintain its annual production target of 66-72 million hogs, with an existing fattening capacity exceeding 80 million heads and sow capacity around 3.8 million. While some construction projects may resume as market conditions improve, the company anticipates only marginal increases in overall capacity.
Addressing Production Variability
Qin Jun also addressed concerns about fluctuations in hog weights, explaining that the company’s continuous production model inherently causes some variability. “While high pig prices can lead to slightly higher average weights at market exit, this relationship is not particularly strong,” Qin noted. He further clarified that sales to secondary fattening customers remain low, historically peaking at 7-8% and currently far below that level. The sustained low pig prices from the previous year have made secondary fattening a less attractive option for many customers, who are now more cautious.
Feed Cost Trends
Regarding feed costs, Qin Jun indicated that the rapid declines seen last year have largely stabilized, with future prices expected to fluctuate modestly. He emphasized that further cost reductions would likely come from improvements in production efficiency and management practices rather than significant decreases in feed prices.
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