Source: cafef.vn
After hitting the bottom of 45,000 VND/kg, live hog prices are gradually recovering and have had good gains in recent days. Closing today’s session on May 23, 2023, the average live hog price was at 58,400 VND/kg, in some places it exceeded 60,000 VND/kg – an increase of 34% in 2 months (compared to the lowest level in mid-March/March). 2023).
This has been expected by business leaders before. Because the pig industry is cyclical, not to mention the fact that smallholder farmers gradually abandon their herds (because they can’t stand it), making the supply scarce, pushing up the price of pigs.
At the nearest bottom level, which ranges from 45,000 to 50,000 VND/kg, an insider said that if small farmers can keep their herds during the epidemic, they will have to suffer losses. Because, their cost is 53,000 – 54,000 VND/kg, whoever does better is 51,000 – 52,000 VND/kg.
While the cost of capital of large-scale enterprises is lower, the share of leaders Hoang Anh Gia Lai (HAGL) and BaF Agriculture is about 42,000 – 45,000 VND/share. These two units have the advantage of self-producing bran, especially HAGL can take advantage of waste bananas, so the production cost is more competitive than other units in the same industry.
In addition, other big names include Dabaco (DBC), which did not specifically share the cost of the pig. A source said that the production cost of DBC’s pig segment is at 55,000 – 56,000 VND/kg. And in fact, in the first quarter of 2023, DBC reported a record loss of more than 320 billion dong.
The market share of livestock farming households fell sharply into the hands of businesses: From 70% to only 20-30%
This shows that the pig industry is restructuring itself strongly after the recent crisis. In particular, the market share from small livestock farmers is gradually falling into the hands of listed companies, of course with units with advantages in production cost. If before 2019, small households accounted for 70% of livestock, then after the recent swine fever (ASF), this number is decreasing sharply. The number of farm households in Vietnam has decreased nearly fivefold to less than 2 million households in the last 10 years.
For example, in Dong Nai province alone, the market share of small-scale livestock production is only about 25-30%, a sharp decrease compared to the previous 70%, shared by Mr. Truong Sy Ba – Chairman of BAF – at the last General Meeting of Shareholders. On the other hand, businesses in general and BAF in particular are receiving this wave, ie taking market share from smallholder farmers.
Up to now, the total herd of BAF has recorded about 230,000 pig heads. BAF intends to continue expanding the modern farm system, putting into operation 9 more farms by the end of 2024. It is expected that the total herd of BAF will reach 90,000 sows and 2.2 million commercial pigs, aiming to reach the Top 3. livestock company.
On the side of HAGL, in 2023, according to the plan approved at the Annual General Meeting of Shareholders, it will maintain the scale of 10 barns with a capacity of 600,000 pigs per year. Depending on the situation, if the pig price improves, it will change flexibly.
“The story of hog prices to 100,000 VND/kg as in 2020 is entirely possible “
Currently, pork prices are in a good uptrend. The reason, in the context of the ASF epidemic raging recently, the total pig herd of Vietnam has been reduced by 20-25%. In addition, the price of pigs traded around the bottom area caused farmers to sell out massively and limit the re-herd. Under the impact of the disease, it is forecasted that from the end of May until the end of the second quarter of next year, the average live hog price will fall between 60,000-65,000 VND/kg.
Not to mention, according to the OECD’s forecast, Vietnam will rank second in Asia (after China) in terms of pork consumption, with an annual growth rate of 3.1% in the period 2022-2030. Fitch Solution also forecasts that the growth rate of Vietnam’s pork consumption in the period 2018-2026 will increase to 25%, until 2026, the average pork consumption in Vietnam will be 31kg/person.
While the supply of pigs continues to be limited in the near future, along with the recovery of aggregate demand will be the main catalysts driving hog prices.
“With the development of the epidemic, it is possible for the price of live pigs to rise to 100,000 VND/kg as in 2020. In short, this is an opportunity for modern breeders “, Mr. Si Ba said.
Gaining market share, pig prices recovered again, not to mention determining that living with the epidemic is both a challenge, but a great opportunity for businesses if they protect the herd. Especially the story of companies that are taking market share of the small livestock sector. It is predicted that in the next 7-10 years, when the rate of smallholder farming is stable, the story of hog competition will be very fierce.
Therefore, from now on, leaders emphasize to take into account the future competition story with Feed – Farm – Food. In fact, most listed companies soon developed this closed model.
Sharing specifically about the process of making 3F chains, the BAF representative said:
One, Feed segment is the easiest and most effective segment, but must sell products and profit can be around 8-10%. But, recently, livestock companies are also struggling and starting to restructure. This segment has reached the saturation stage in the last 5-7 years and is now declining.
Two, Farm segment is the source of consumption for the Feed array. However, doing this array is also extremely difficult. Because with money, it can be built, but effective management is extremely difficult and complicated. It can be affirmed that raising pigs is the most difficult in the ecosystem that BAF is doing.
Final, The Food segment must definitely be built because if all factories are restructured to Feed – Farm and stop there, the competition will be fierce. The Food segment has to be slaughtered and then sold to distribution channels, as well as deep processing to optimize the value-added problem.
3F model and two big problems businesses need to solve
There are two big problems to be solved, the first is to change the consumption habits of customers. Currently, over 90% of Vietnamese consumers go to the market to buy fresh meat, also known as hot meat. Even housewives touch and press fresh, freshly bought meat that doesn’t sink.
The second problem is by-products. The more businesses slaughter, the more meat they sell, but the by-products also have a lot of leftovers. Therefore, BAF now focuses on processing by-products, only to be able to sell them once they are resolved.
Currently, Siba Food of BAF is building a chain of stores following the mother and child model. Similar to Bach Hoa Xanh, Siba Food will have a large store (parent store) at one point, from which 7-10 neighboring stores will be developed called Meat Shop.
At HAGL, after the first year of testing Bapi Food, earlier this year the Company changed its strategy due to inefficiencies. Accordingly, Bapi Food will promote through franchising, while simultaneously enhancing the product portfolio (including upcoming self-grown vegetables and fruits).
Despite many difficulties, the continuous increase in pig prices has reflected in the trading of shares of listed companies on the market. HAG, DBC and BAF had green sessions after falling deeply.
