Thailand’s Charoen Pokphand Foods PLC (CPF), one of the world’s largest food conglomerates, has agreed to acquire a 50.1 percent stake in Canada’s second largest pork producer HyLife for C$498 million (US$372.7 million). The remaining 49.9 percent stake will be retained by Japan’s Itochu Corp.
CPF is the flagship business of Charoen Pokphand Group, the largest agro-industrial conglomerate in Southeast Asia with integrated operations within the farming, feed, and food value chains, serving three billion customers in 18 countries. The vertically integrated company is active in livestock production including swine, broilers, layers, and ducks; aquaculture production of both shrimp and fish; meat processing; food retail, and restaurants.
The deal for HyLife gives CPF, the third largest pork producer in the world, a significant foothold in the North American market, giving it control of a company with four high-tech feed mills, six new hog barns in Manitoba, and 87,000 sows that produces 2.5 million pigs per year.
“This is a win-win for HyLife, CPF and Manitoba’s agricultural industry,” said Grant Lazaruk, CEO, HyLife. “Together, our globally established companies will significantly strengthen our market position. Not only do we share similar values, but our strategies also correspond with one another.”
“Through this agreement, we will build on the success of our growing pork business and brands to our customers globally, including our fresh chilled pork products to Japan which we proudly grow and process right here in Manitoba.”
In a Fever
Aside from a desire to expand into North America, the deal may likely also be driven by disease pressure across Asia, stemming from the rapid spread of African swine fever (ASF) and the decimation of hog herds.
The virus that causes ASF is currently harmless to humans, however it is ravaging Asia’s pig farms, and has led to the culling of nearly 1 million pigs across China, which accounts for 60 percent of the world’s swine. Further concerning are forecasts for this year by Rabobank, that estimate that China’s overall pig herd will decline in size by between 30 and 40 percent versus last year.
“The pork meat production decline is expected to be between 9 million and 15 million tons, depending on the disease’s development in the next few months,” said Chenjun Pan, senior analyst for animal protein at Rabobank. “It’s not very likely that the rest of the world will be able to fill the supply gap in China, given the sheer size of China’s pork production.”
As outbreaks continue, experts are now stating that the situation is “endemic”, indicating that the spread of the disease is not able to be contained or eradicated. And as evidence appears to indicate that ASF has spread into Vietnam, Thailand, where the pork industry, valued at $3.3 billion per year, is understandably concerned.
Thailand’s Ministry of Agriculture and Cooperatives (MOAC) published its findings that calculate if ASF affects 30 percent of the country’s swine herd, the economic damage will reach $672 million. If the disease affects 50 percent of the herd, the economic impact will be $1.1 billion, and if it affects 80 percent, $1.8 billion.
In response, on April 9, 2019, the Thai Cabinet agreed to fund and implement a plan of preparedness for the potential of an ASF outbreak. Under this plan, a National Committee on African Swine Fever Prevention, Control, and Eradication has been established, which will be chaired by the Deputy Prime Ministers and include delegates from government agencies, farmers, and the private sector.
Overall, the pork sector in Asia is bracing itself for a long period of challenges, as China’s agriculture ministry predicts that the price of pork in-country will soar by 70 percent to record highs by the end of this year. As such, CPF’s geographic diversification into Canada is a timely and strategic move.
-Lynda Kiernan