The Sichuan quake that caused widespread damage to lives and properties will have a relatively mild impact on the country's already strained pork supply, according to China Yurun Food Group.

The mainland pork producer, which runs a live slaughter facility in Dujiangyan, one of the worst-hit areas, said that production had been temporarily suspended.

Yurun's chairman Zhu Yicai said other than some cracks in the structure, the facility remained intact and after thorough safety review, experts had deemed the building safe to resume production. "The impact on the group's live pork output should be very mild," Zhu said. He explained that the Dujiangyan facility represents only 1 percent of the group's total live pork output per annum.

When asked whether the earthquake will reduce pork supply even further, leading to additional hikes in prices for the meat product, Zhu said:"I predict that pork price will remain stable with chances of a mild downward correction around July and August." With Sichuan being a major pork importing province, Zhu said the quake should not result in a strain in pork supply.

"And the results of last year's government policies should begin to surface later this year," Zhu told reporters after the company's annual general meeting yesterday in Hong Kong. The central government, in response to the shortage of pork last year, had implemented policies aimed at encouraging more farmers to raise pigs by making the industry more profitable.

As a result, Zhu said, the number of ready-for-sale pigs on the mainland had already been bolstered by 7.9 percent in the first four months of this year. "Price of pork per kilogram had gone down HK$1 in the latter half of May from HK$17 a kilogram late last year," Zhu said. He expects pork price to hover around HK$15.5 to HK$16 per kg this year.

Production capacity

Yurun, which operates both live pig slaughter business and down stream meat-processing facilities, said that the company had set aside HK$1.7 billion in capital expenditure this year to increase production capacity. It aims to increase the annual output of its slaughter business by 4 million pigs to approximately 18 million heads, while the goal for meat processing is to boost production by 50,000 tons to 270 million tons per year.

Zhu said the company will expand its businesses mainly through mergers and acquisitions, since the more stringent regulatory environment for food business on the mainland had provided favorable opportunities for consolidation. "We hope our (acquisition) goal will materialize within this year," the chairman said declining to give further details.

Shares in China Yurun Food Group surged 6 percent or HK$0.72 yesterday to close the trading day at HK$12.74.

(HK Edition 05/22/2008 page2)