Pig giants Muyuan, Wen's and New Hope lost a total of 14.3 billion last year. These three companies sold a total of 10.8 billion pigs, a record set. However, even with such a large number of sales, they still suffer huge losses. Generally speaking, the more products are sold, the higher the profit should be. However, the opposite is true in the pig industry, where the expansion of the scale of farming is directly proportional to the loss. So, how exactly do they lose money?
Whether it is the pig industry or other types of breeding industry, there are periodic changes in supply and demand, which leads to fluctuations. This cycle is mainly caused by the change between oversupply and demand exceeding supply in the market. In 2018, an outbreak of African swine fever led to a significant decrease in pork**, which in turn led to a spike in pork**. In this round of pork *** wave, those pig giants who have not been plagued by African swine fever ushered in the spring, and the annual profit of Muyuan shares once exceeded 20 billion, and Wen's shares, New Hope, Zhengbang Technology, etc. have also made a lot of money.
As the state began to rectify small pig farms for environmental reasons, the industry was further integrated, and pork ** remained at a high level. The pig giants saw the opportunity and began to expand wildly. The expansion of pig farming mainly includes two aspects: one is to build more pig farms, and the other is to introduce more breeding pigs. However, this round of expansion has caused the key reason for the huge losses of the giants - the large amount of pork.
Today, the pork market has fallen below the cost price of pig enterprises. Therefore, the more pig giants sell, the more they lose. Unlike mining enterprises, if the market is large, mining enterprises can choose not to sell for the time being, and wait for the product to improve. However, the pig industry cannot do this because once the pigs are raised, they must be sold, otherwise they will continue to consume feed and occupy the site, which will increase costs. Therefore, even if it is a loss, the pig company must sell the pigs.
So, why did pork ** suddenly fall? The key reason is that the pig giants are too blind in this round of expansion. For example, a few years ago, the company's annual sales volume was only 10 million pigs, but in a few years it has increased to more than 60 million. Several other pig giants have also basically increased their production capacity several times. Due to the large increase in the number of pigs, ** greatly exceeds the demand, it is impossible for the Chinese population to consume such a large amount of pork, so **naturally**.
One might ask, in this case, why can't the pig giants reduce the number of pigs, so as to reduce the number of pigs, so that the pig industry is relatively complex, which involves the problem of breeding pigs. In order to expand their production capacity, pig giants have not only established many new farms in previous years, but also introduced a large number of breeding pigs. These breeding pigs are constantly bred and passed down from generation to generation. Therefore, there is also a certain time lag in reducing production capacity. Only after waiting for a period of time can market supply and demand be rebalanced and ** return to a reasonable range. In fact, this problem exists in any breeding industry, but the expansion of pig giants is too blind.
The expansion of the pig industry is often achieved by borrowing, in an attempt to outperform competitors with large-scale operations. However, it is not the size of the scale that can really beat the competition, but the innovation of technology. In the pig industry, the sale of breeding pigs is more profitable than that of pork. However, China has not yet solved the problem of breeding pig breeds, because the fertility rate and meat quality level of local pigs in China are far inferior to those of foreign breeding pigs compared to foreign breeding pigs. At present, in the Chinese market, breeding pigs are almost entirely dependent on imports. To truly make a breakthrough in the pig industry, solving the problem of breeding pigs is the key. Only companies with core technologies can become leaders in the pig industry, just like CATL did in the field of batteries. Therefore, technical barriers are the real competitive advantage.
The reason for the loss of pig giants Muyuan shares, Wen's shares and New Hope last year was as high as 14.3 billion yuan. This round of pig expansion is too blind, resulting in a surplus and a surplus of pigs. The failure of the pig giants to focus on technological innovation in their expansion has led to the inability to compare with foreign competitors in terms of breeding pigs. Only companies with core technologies can stand out in the pig industry. The lessons of the pig industry tell us that large-scale operation is not the only way, and technological innovation is the key to long-term development.