Reports of Flu Infections rising among hods, and Illegally processed pigs...
New to the board and OINK and thinking about getting in. Was doing research and got a little nervous about the recent news of the dumping of dead pigs into a primary drinking water source in east China, AND also that flu infections are rising among hogs raised for slaughter on farms in south and southeastern China, and reports that illegally processed pigs have been making their way to dining tables. Should we be worried about any of this, or overall sentiment of the business? Thanks!
The pig dumping matter is related to more rigorous enforcement of existing laws regarding sick herds. The laws were always on the books, just not enforced. Then the government of Zhejiang province began enforcing the laws and visiting the pig farms. In advance of this, a lot of farmers with sick herds just drowned them in the river which is free, versus paying to have the herd culled. It's not related to the flu outbreak.
It's also not related to OINK because their market for breeder hogs is further west in Hubei province.
China has regular scandals related to food, dating back to the melamine disaster in the milk in 2008. They've had many recent issues (selling rat meat as mutton for example). It's a fact of life there. Considering that pork is over 50% of the protein consumed in the Chinese diet, hard to imagine they would go without for any period of time (try taking beef off the menu in the US!) irrespective of such scandals.
Herd culling is generally good for OINK provided it's not their herd that is getting culled (as happened in 2011 when they fed them the contaminated corn). Farmers need new hogs when they re-stock. The good news is that corn prices are expected to be lower this year so we should see a general growth in the overall herd.
Even better though is the fact that OINK is building a second leg in its black hogs program which is a higher quality, more differentiated product. They are also building a third leg in their feed mill which should become productive this year.
The simple reality is that in any agriculture business, you are open to shocks to the system related to disease or weather and therefore, there is always a certain volatility to the operations. But they also tend to recover fairly quickly as well.
Flu outbreak actually may help OINK. From CDC, it is swine flu and mostly affects chicken, so OINK will see more hogs.
here is the paste from CDC....
As of April 29, 2013, China had reported 126 confirmed H7N9 infections in humans, among whom 24 (19%) died (1). Cases have been confirmed in eight contiguous provinces in eastern China (Anhui, Fujian, Henan, Hunan, Jiangsu, Jiangxi, Shandong, and Zhejiang), two municipalities (Beijing and Shanghai), and Taiwan (Figure 1). Illness onset of confirmed cases occurred during February 19–April 29 (Figure 2). The source of the human infections remains under investigation. Almost all confirmed cases have been sporadic, with no epidemiologic link to other human cases, and are presumed to have resulted from exposure to infected birds (3,4). Among 82 confirmed cases for which exposure information is available, 63 (77%) involved reported exposure to live animals, primarily chickens (76%) and ducks (20%) (3). However, at least three family clusters of two or three confirmed cases have been reported where limited human-to-human transmission might have occurred (3).
The median age of patients with confirmed infection is 61 years (interquartile range: 48–74); 17 (21%) of the cases are among persons aged ≥75 years and 58 (71%) of the cases are among males. Only four cases have been confirmed among children; in addition, a specimen from one asymptomatic child was positive for H7N9 by real-time reverse transcription–polymerase chain reaction (rRT-PCR). Among the 71 cases for which complete data are available, 54 (76%) patients had at least one underlying health condition (3). Most of the confirmed cases involved severe respiratory illness. Of 82 confirmed cases for which data were available as of April 17, 81 (99%) required hospitalization (3). Among those patients hospitalized, 17 (21%) died of ARDS or multiorgan failure, 60 (74%) remained hospitalized, and only four (5%) had been discharged (3).