Live­stock firm makes hay as sheep meat de­mand soars

China Daily (Canada) - - BUSINESS - By LYUCHANG and YUAN HUI in Bao­tou, In­nerMon­go­lia

When Yan Shuchun turned his hand to sheep meat pro­duc­tion in 2012, the for­mer se­nior fi­nan­cial ser­vices ex­ec­u­tive knew it would be a lot harder to make money.

Three years on, how­ever, the com­pany he formed, Meng Yang Group, has not only be­come one of the largest meat pro­duc­ing and pro­cess­ing oper­a­tions in China, but it is now plan­ning a stock mar­ket list­ing.

The In­nerMon­go­lia au­ton­o­mous re­gion-based firm dou­bled its rev­enue to 1.2 bil­lion yuan ($188 mil­lion) last year and it is ex­pected to hit 2 bil­lion yuan this year, driven by in­creased ex­ports par­tic­u­larly to coun­tries in the Mid­dle East.

Yan at­tributes the growth squarely to the re­gion’s rich pas­tures, which are per­fectly suited to live­stock farm­ing, but as a coun­try, de­mand for sheep meat has never been stronger, and sup­ply from the area sim­ply can­not keep up with de­mand.

“It is a tough busi­ness, but the po­ten­tial is huge,” he said.

“I would never have imag­ined just how strongly the sheep meat mar­ket has grown in these short three years.”

Of­fi­cially, China’s an­nual sheep meat pro­duc­tion grew just 5 per­cent this year, but de­mand is many times more be­cause of the ris­ing do­mes­tic ap­petite for lo­cal dishes such as hot­pot, which rely on sheep meat.

Hot­pots are shared re­gional del­i­ca­cies, that use thin slices of meat and veg­eta­bles that are served in a broth, and their growth in pop­u­lar­ity is be­ing seen as ar­guably the sin­glebiggest con­trib­u­tor to the coun­try’s es­ti­mated 200 bil­lion yuan sheep meat mar­ket last year.

But Yan reck­ons the ac­tual de­mand is more like 300 mil­lion yuan.

“There is a huge gap be­tween sup­ply and de­mand, at least 100 bil­lion yuan, and I ex­pect that to grow due to a lack of large-scale sheep meat pro­duc­ers,” he said.

This year, Yan’s an­nual pro­duc­tion ca­pac­ity reached 2 mil­lion sheep, but with in­creased in­vest­ment in han­dling more pro­cessed lamb and meat prod­ucts, his out­put is ex­pected to in­crease to more than 10 mil­lion heads by 2020.

In­ner Mon­go­lia is China’s ma­jor agri­cul­tural and live­stock base, sup­ply­ing around 22 per­cent of the to­tal num­ber of sheep. But pro­duc­tion in the re­gion faces a num­ber of chal­lenges, none more so than grow­ing com­pe­ti­tion from abroad, par­tic­u­larly New Zealand and Aus­tralia, said Yan.

Prices of im­ported sheep meat re­mains much lower than do­mes­tic pro­duce, be­cause of the more ef­fec­tive man­age­ment sys­tems in place and the of­ten larger-scale pro­duc­tion in the main global mar­kets.

In China, sheep meat sup­pli­ers are gen­er­ally lo­cal herders who of­ten run very small out­fits, scat­tered ru­rally.

Con­tact the writ­ers at lvchang@chi­ and yuan­hui@chi­

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