New Hope Liuhe’s recent performance highlights significant progress in reducing pig farming costs, targeting a reduction to CNY 14/kg (approximately USD 1.93/kg) by the end of 2024. The company’s Q2 results showed a strong recovery, driven by reduced piglet and feed costs. New Hope Liuhe also focuses on operational efficiency and disease prevention, with plans to expand sow inventory and increase pig production targets in the coming years. The company remains optimistic about the market outlook, emphasizing that internal cost control will be critical to sustaining profitability.
New Hope Liuhe, a major player in China’s pig farming industry, recently shared detailed insights and projections during its 2024 H1 performance analyst meeting. The company, which faced significant challenges in Q1, is now on a promising recovery trajectory, thanks largely to strategic cost-cutting measures and operational adjustments.
In Q2, New Hope Liuhe’s pig farming sector returned to profitability, reporting earnings of CNY 350 million (approximately USD 48.40 million). This marks a substantial recovery from the CNY 1.79 billion (approximately USD 247.46 million) loss in Q1, which was primarily due to deliberate adjustments in the company’s northern operations. These adjustments involved reducing inefficient production capacities and culling pigs.
As of Q2, the company reduced its overall pig farming costs to CNY 14.60/kg (approximately USD 2.02/kg). The breakdown of these costs is as follows: piglet costs at CNY 3.10/kg (USD 0.43/kg), feed costs at CNY 7.60/kg (USD 1.05/kg), veterinary medicine costs at CNY 0.28 /kg (USD 0.04 /kg), mortality rate costs at CNY 0.20/kg (USD 0.03/kg), agricultural manufacturing fees at CNY 1.00/kg (USD 0.14/kg), and foster care fees at CNY 1.20/kg (USD 0.17/kg).
The improvements in cost efficiency are largely attributed to reductions in both piglet and feed expenses. Piglet costs decreased by CNY 0.40/kg (USD 0.05/kg), and feed costs fell by CNY 0.38/kg (USD 0.05/kg) compared to Q1. Additionally, notable decreases were observed in veterinary medicine costs, mortality rates, and agricultural manufacturing expenses.
The company also reported a narrowing of cost disparities across its operations. In Q2, the top 25% of its farms achieved an all-in cost of CNY 13.90/kg (USD 1.92/kg), while the bottom 25% had costs of approximately CNY 15.80/kg (USD 2.18/kg).
Despite stable operating costs between June and August, New Hope Liuhe expects further reductions in Q3 and Q4. The company aims to lower production costs to CNY 14/kg (USD 1.93/kg) or below by December, driven by the expected benefits from recent operational adjustments and enhanced disease prevention measures.
Looking ahead, New Hope Liuhe is focused on several key initiatives, including strengthening winter disease prevention and completing positive pressure ventilation upgrades to protect against seasonal outbreaks. The company is also working to improve production efficiency by increasing its sow inventory from the current 740,000 to approximately 800,000 by year-end, strengthening external cooperation, leasing, and joint development of idle pig farms.
In terms of production targets, New Hope Liuhe has set an ambitious goal of surpassing 15 million hogs by the end of this year, with plans to scale up to 17-18 million hogs in 2025.
Regarding the market outlook, New Hope Liuhe noted a slight increase in the national breeding sow inventory in July, with a decelerating growth rate compared to previous months. The company believes that while pig price volatility may continue, the entry of large-scale players into the industry will likely moderate price fluctuations.
New Hope Liuhe remains optimistic about the hog market in the second half of the year, expecting prices to remain high. The company believes that stable prices this year would likely lead to a better price environment next year. However, it emphasized that internal operations and cost control will continue to be the core drivers of its business performance rather than market prices alone.
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