The International Finance Corporation is considering a $50 million loan to Chinese pig farming and feed company Guangxi Yangxiang for a $293 million project to increase herd size and improve food safety.
Yangxiang, the largest private pig company in China, wants to increase its capacity to 80,000 parent stock sows and raise 2 million hogs in south-eastern Guangxi and north-eastern Lioaning, near the Korean peninsula.
Dwindling domestic supply in China pushed pork prices up sharply in the first half of 2016, according to Rabobank. Food safety is also a key factor for the IFC.
“The Chinese pig sector is still characterised by poor hygiene standards, inadequate biosecurity, and over-use of antibiotics,” according to the IFC’s project disclosure database. “By investing in Yangxiang, IFC is supporting a company with both the capacity and willingness to improve food safety.”
The investment should also improve meat quality, the feed conversion ratio and the mortality rate.
The project will add another 4,000 contract farmers to the 1,000 the company already works with.
Yangxiang said the investment from the IFC would give the company a stamp of approval, “sending a positive signal to the capital market and supporting its planned IPO in the near future”.
The deal will also require Yangxiang to plan for sustainable waste disposal and fertiliser production, and give the company access to IFC’s base of pork industry contacts and expertise around the world.
Food safety has been a major issue for Chinese consumers, who have faced scandals in the meat and dairy sector, including rotten meat and poisonous milk.
In August, the Asian Development Bank has committed $62.5 million in debt capital to Saikexing, China’s fourth-largest dairy, to increase the country’s domestic fresh milk supply. The IFC is also considering a $40 million loan to Chinese pig feed company Anyou, and committing up to $30 million to agribusiness and food-focused Hosen Investment Fund III.
Yangxiang operates in Hebei, Henan, Hunan and Liaoning provinces, all considered frontier regions by the IFC.
Earlier this year, FMO director Suzanne Gaboury told Agri Investor it would move away from investing in Chin, given market access difficulties and competition to invest in the sector.