Saturday, August 30, 2008

Some Economics of Food.....for thought :) UPDATE

This is an update with some updated factoids for people to chew on.....VERY interesting numbers


"Processing is the most vulnerable player in the Canadian pork industry today, says Bouma, with the U.S. holding a significant advantage in terms of capacity and labour intensity. Comparing the productivity of the top U.S. and Canadian processors highlights this gap. Today, the U.S.’s largest 29 plants process 21,000 hogs per day while Canada’s largest 29 produce an average of 3,200 hogs per day. The result? U.S. producers put an estimated six to 10 more dollars in their wallets per hog sold compared to their Canadian counterparts. "

So how does this compare to Chinese Pork/Production???

From HOGS/FEED (two chinese pork raisers/processors). Here are their recent filings. Both companies are growing ENORMOUSLY. Wall Street seems to indicate that HOGS is the most undervalued of the two.


AgFeed Industries bought 4 more Hog Farms recently and has been consolidating the industry throughout China.


"Given the rapid rise in food prices in China amid increasing wealth, investors could stand to gain from exposure to U.S.-listed Chinese companies with 90% to 100% exposure to China, such as AgFeed Industries (nasdaq: FEED - news - people ), American Dairy (nyse: ADY - news - people ), HQ Sustainable Marine Industries (amex: HQS - news - people ), Synutra International (nasdaq: SYUT - news - people ) and Zhongpin (nasdaq: HOGS - news - people )."

I saved the best udpate for last :) Looks like this company is hiring some a very senior american to help develop its company.

"NASDAQ Global Market listed AgFeed Industries ( is a US company with its primary operations in China. AgFeed has two profitable business lines -- premix animal feed and hog production. AgFeed is China's largest commercial hog producer in terms of total annual hog production as well as the largest premix feed company in terms of revenues. China is the world's largest hog producing country that produces over 600 million hogs per year, compared to approximately 100 million hogs in the US. China also has the world's largest consumer base for pork consumption. Over 65% of total meat consumed in China is pork. Hog production in China enjoys income tax free status. The pre-mix feed market in which AgFeed operates is an approximately $1.6 billion segment of China's $40 billion per year animal feed market, according to the China Feed Industry Association."

Original Post

China, 1995: average person eats 55 lbs of meat per year. China, 2007: average person eats 116 lbs of meat per year. Here is what I can't tell you. What kind of meat?

It takes 15 lbs of grain to produce 1 lb of meat. According to expert figures, China has increased grain requirements to 350 million metric tonnes in 2007 from 150 just 12 years earlier. That’s a +133% increase just so the average Chinese citizen can enjoy more meat.

Fertilizer is used to produce grain to feed the animals – in fact, for every pound of beef produced, a steer must consume 15 pounds of grain. This further drives up the demand and the cost of fertilizer. So we can understand why there is a demand for more fertilizers and why stocks such as Potash, Mosaic, etc. are going through the roof right now.

How much feed does a pig need though? I'll get that in the upcoming days.....Info. re: beef isn't applicable. Why?

Pork occupies a special place in the Chinese diet and economy. It is estimated that the Chinese consume more pork than any other nation. This makes sense given that pork is also estimated to account for two-thirds of the average Chinese's protein intake. According to this article below

"It is prepared in almost every conceivable way, from roasted whole suckling pigs, commonly served during holiday .easts, to sweet and sour pork, whose Americanized version is a Chinese restaurant staple."

Dan Ross

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