(Yicai) July 12 -- Two-thirds of China’s listed pig breeders have so far given updates on their first-half earnings, with only four in profit, as the second-quarter upturn in hog prices failed to make up for heavy losses in the first three months of the year.

Industry leader Muyuan Foodstuff said it expects a net profit of CNY700 million to CNY900 million (USD96.4 million to USD123.9 million) for the six months ended June 30, compared with net losses of CNY2.8 billion (USD385.5 million) a year earlier and CNY2.4 billion in the first quarter.

Yunnan Shennong Agricultural Industry Group, Tangrenshen Group, and Tech-bank Food also predicted first-half profits, though the latter’s likely resulted from the sale of subsidiary, as its pig breeding business was still in the red.

Eighteen of China’s 27 listed hog breeders had released their semi-annual earnings updates as of July 10.

Live hog prices began to recover in May and the pace accelerated last month, reaching a high of CNY19 (USD2.62) per kilogram. Second-quarter prices rose by about 23 percent.

Muyuan sold pigs for CNY17.73 per kg on average in June, compared with less than CNY16 in May and CNY14.49 in the first two months of the year.

Lower production costs also contributed to Muyuan’s earnings. Its farming costs fell to nearly CNY14 per kg on average last month, down from about CNY14.30 in May and CNY15.80 in the first two months of the year, according to the Nanyang-based company’s figures.

Hog prices have pulled back a little since mid-June, but remain above the industry’s average break-even point. Analysts interviewed by Yicai are upbeat about the price recovery in this half of the year.

Based on fertile sow herds and market demand, spot prices should meet strong support at around CNY17 to CNY18 per kg, so those breeders in profit in the first half can expect to grow their earnings over the rest of the year, while those that were still in the red have the opportunity to turn a profit, a source at a Shanghai private equity fund told Yicai.

After long loss-making periods, pig breeders usually have high gearing ratios, according to the source. So investors need to pay attention to any improvements in their first-half balance sheets and data related to cost control, such as cash flow, inventory, and profit per animal, as important indicators for assessing their market value.

Editors: Tang Shihua, Futura Costaglione