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China’s WH Group warns of ‘unprecedented challenges’ in 2020

World’s largest pork company ‘highly cautious’ over future impacts of COVID-19

China’s WH Group, the world’s largest pork processor, says it will face ‘unprecedented challenges’ this year as the spread of Covid-19 adds to problems created by African Swine Fever (ASF).

The company, which owns US market leader Smithfield Foods, reported a steep rise in profits in 2019 as higher pork prices in China helped offset a steep drop in pig slaughterings.

WH Group said it processed 13 million hogs in China last year – down by 19% when compared to 2018. This reflects the wider impact of ASF on China’s pig sector. Date from the National Bureau of Statistics of China shows that the total production of hogs in 2019 was 544 million heads, 21.6% lower than 2018. The total production of pork was 42.6 million tonnes, a decrease of 21.3% as compared to the previous year.

Looking forward, the company says there are early signs that government measures are helping spur a recovery in Chinese pork production. With Covid-19 adding to complications caused by ASF however, the company remains cautious and says it will expand its poultry operations to reduce its exposure to problems in the pork sector.

“In 2020, the overlay effects of sluggish global economic growth, risky geopolitical relations, continuation of ASF and outbreak of coronavirus disease 2019 (“COVID-19”) will bring us unprecedented challenges. In China, the impact of ASF is expected to endure,” the company explains.

“We will take advantage of industry rationalisation and market consolidation to grow our market share in processing and enhance our vertical supply chain. We will also increase our exposure to poultry business for risk management and further value creation,” it adds.

On the US side, the group says it sees the two greatest challenges as oversupply and trade tensions between the US and other countries. Efforts to boost US pork exports to China and other Asian markets will be ramped up in 2020, as will steps to manage risks through hedging and to enhance production efficiencies.

WH Group expanded its European operations in 2019 with the purchase of Pini Polonia. The company says it now aims to accelerate growth in Europe by boosting volumes and productivity.

Meanwhile, the group says it is ‘responding proactively’ to COVID-19 – taking measures to protect employees while also acting to assure business continuity.

“We believe that pork products are consumer staples, the impact of COVID-19 on the Group will be manageable under current assessment. Yet we are highly cautious about the latest development and the later implications of the epidemic,” the group states.

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