Breeders like Leong Hup stand to benefit from higher domestic demand for chicken meat and eggs due to health fears, says analyst
By SHAZNI ONG / Pic By TMR
THE outbreak of the African swine flu (ASF) across China and Indo-China provides no immediate opportunity to Malaysian poultry producers to meet the rising demand for protein from poultry sources.
JF Apex Securities Bhd analyst Siau Li Shen said poultry producers like Leong Hup International Bhd could benefit from the ASF outbreak if there are plans by the Chinese and regional governments to mitigate the demand for pork with poultry imports.
“It is very early to tell, I am not sure how Leong Hup would enter the China market. They do not have any presence in China. Right now, I think they won’t benefit until they invest in China,” he told The Malaysian Reserve.
Leong Hup’s share price closed at 94 sen yesterday, well below its relisting price of RM1.10 in mid-May.
According to a recent Bloomberg report, executives from agri giant Cargill Inc forecast China’s pork industry could take up to a decade to recover from the ASF impact, while the disease spreads to neighbouring countries like Thailand, Laos, Mongolia, North Korea and Vietnam, affecting production of pork across the region.
Siau added that JF Apex maintains its ‘Buy’ call on Leong Hup as the company would see a better performance from its operations in Indonesia and the Philippines.
Rakuten Trade Sdn Bhd VP of research Vincent Lau said breeders like Leong Hup stand to benefit from higher domestic demand for chicken meat and eggs due to health fears.
“People are likely to switch to chicken meat due to ASF. Egg prices have gone up — therefore, I foresee poultry players in Malaysia benefitting due to their regional presence.
“Poultry players may reap some of the benefits regionally, but tangible results have not yet occurred. As of now, it is too early to tell,” he said.
Bloomberg recently reported that the higher demand for poultry in China has created another problem — egg shortages, which have sent prices to the highest level in over four years.
The article reported China-data.com.cn CEO Jim Huang as saying that egg prices have risen from increased buying by food companies ahead of the mid-autumn festival that falls on the second week of September.
Meanwhile, a report released on Monday by the Organisation for Economic Cooperation and Development and the United Nations’ Food and Agriculture Organisation said the spread of ASF in China has disrupted the world’s biggest pork market and is one of the major risks to a well-supplied global agricultural sector.
The report forecast broadly stable agricultural markets from 2019 to 2028, as productivity gains are set to help output keep pace with rising demand for food, livestock feed and crop-based biofuels.
In the 10-year outlook report, pork production is projected to recover in 2020 and reach 2018 levels before resuming a longer-term growth path supported by robust underlying demand.
According to the US Department of Agriculture, global poultry production is expected to rise 3% this year.