Sino-French JV to breed better pigs

A hog farm in Handan, Hebei province. China is the world's largest hog producer, with more than 735 million raised in 2014, up from 715 million in the previous year. [Photo/China Daily]

France-based Choice Genetics SAS, a leading global swine genetics and breeding company, will set up a subsidiary in China.

Choice Genetics China will be the group's eighth overseas branch. It already has branches in Europe, the Americas and Asia. "Progress toward opening the subsidiary is going smoothly," said Fu Yan, vice-president of Ningbo Tech-Bank Co Ltd, an agro-processing company.

Ningbo Tech-Bank, which is listed in Shenzhen, acquired a 40.69 percent stake in Choice Genetics from the latter's parent company－Groupe Grimaud－for $15 million in August. The deal, carried out through Ningbo Tech-Bank's wholly owned subsidiary Hanswine Swine Industry Ltd, makes Ningbo Tech-Bank the second-largest shareholder in Choice Genetics.

Choice Genetics China will be founded by Ningbo Tech-Bank and Grimaud in Hexian county, Ma'anshan, Anhui province, where Hanswine is based. Ningbo Tech-Bank said earlier that the two partners will invest $2 million in the subsidiary.

Fu said the partners are discussing details of the joint venture, including final candidates for the post of its chief executive officer, who will probably be a Chinese national.

Although cooperation between Chinese hog producers and Western swine genetics companies is expanding, the Chinese partners often find it difficult to get core technology from their Western partners, which have the most advanced genetics technologies and management practices.

"Most of the sows and boars have been imported, mainly from the United States and Europe. Western breeders have monopolized the supply of breeding stock for many years," said Fu. But the case would be different at Choice Genetics China. "As a major shareholder, we consider it our right to obtain Choice Genetics' core genetics technologies."

Fu said: "Although Ningbo Tech-Bank is getting more internationalized, we will be very careful when it comes to patent issues, which is a lesson from the case of Choice Genetics." Choice Genetics' US branch lost a patent suit last year, causing financial problems for the group. The investment from Ningbo Tech-Bank helped the company.

Fu got his doctorate in Germany and worked at genetics company PIC, a division of Genus Plc. He returned to China through the government's "1,000 Talent" program, which aims to attract experts from around the world. Fu is also a professor of animal genetics at Zhejiang University, one of the country's top universities.

Ningbo Tech-Bank, founded in 1997 in Ningbo, Zhejiang province, has developed rapidly in the recent years with support from international cooperation, he said. The company initially focused on animal feed, animal vaccines, aquaculture and biodiesel, before expanding to swine breeding in 2013.

That same year, Ningbo Tech-Bank set up Hanswine and announced the takeover of AgFeed Industries Inc's assets in China for $48 million. AgFeed, listed on the Nasdaq, was a US company with primary operations in China.

In the following year, Han-swine raised about 500,000 hogs, sows and boars, making it one of China's top 10 swine-breeding companies. "We are confident we can reach annual production of 3 million swine in five years," said Fu.

Huang Chaoyang, executive general manager of Han-swine, said that when annual production reaches 1.5 million hogs, the company will build a slaughterhouse and meat-processing plant.

China is the world's largest hog producer, with more than 735 million raised in 2014, up from 715 million the previous year, according to the National Bureau of Statistics.

Fu warned that China's hog industry faces overcapacity. "Even without imported pork, domestic output can almost satisfy the needs of Chinese consumers," said Fu.

Fu said that overcapacity will not deter Ningbo Tech-Bank from expanding into the hog industry. Rather, it will give the company more opportunities, since its average costs are lower than many of its domestic peers.