SIAFs beef business is difficult because it is capital intensive. They are waiting for a government plan. Solomon does not want to do capex.
Solomon sees canned beef value added products as the future if the government can’t come up with a good plan. Solomon is sure canned beef is the future because there is still not a single big brand of canned beef in China.
They might have a solution with the government before the end of year.
Lots of countries have entered the beef market in China, around 12 countries. US entry of China beef market is extra troublesome for SIAF since the US has high quality meat and SIAF also have high quality meat, i.e. the US imports pushes down the prices that SIAF would receive – making SIAF take a hit again (before it was Australian lower quality meat that made them take a hit).
One problem with the cattle business is that it is difficult to make big changes since it is a capital intensive multi year process (especially when changing to higher quality beef like SIAF did last time). In the fish business it is easy to make quick changes.
General comment about land value, not only about beef business: It is complicated to realize book value from land, and cannot sell agricultural land. Some land that they have built on also have mortgages.
P.S. The best parts of the meeting was about Tri-way and Capital Award. In the first two parts I cover the HU flowers and beef business and save the best bits for later.
Etiketter: Sino Agro Food
Spännande, och när kommer nästa postning
Hej Fredrik!
Jag skrev just klart det sista och har schemalagt Capital Award till kl. 18 ikväll och Tri-way till kl. 15 imorgon söndag
Capital Award blir en ganska kort bloggpost (kort men kärnfull). Tri-way blir en ganska lång artikel.
Who buys canned beef?….
I’ve been in the retail food business for 12 years. Canned beef is not a volume product, people want to buy fresh meat imo.
In Sweden there is no market for this kind of product. The idea is not good and it will probably not work. The situation in SJAP is troublesome.
Hi Purchaser! Yeah but on the other hand I never buy any canned products at all and still the stores sell them
You are probably right that it is no volume product escpecially since you know from experience. But China is very big and SIAF beef business is relatively small so perhaps there is room for one brand of canned beef. But of course I do not know how such a thing would play out.
I am not so excited about SJAP and as far as I am concerned they can just sell it if they get the opportunity. I don’t want more significant capex there at least.
Yes, if they get a decent offer they should.
Thanks for our updates, much appreciated!
Thanks Purchaser glad to hear it.
Is there really any money to earn in canned beef? I thought fresh beef was more expensive then canned beef.
I think Siaf has changed to a higher quality beef, will they really be able to sell this beef in a can at a premium price?
I think it would be best if they sold SJAP.
I’m wondering how canning beef is a “value adding” process. I guess it’s more or less waste that is ground up and pressed into some suspicious paste and put in a can? Then I can see how it adds value. Do you know if this is the case? Waste turned into product.
As previously mention, canned meat is not a high volume product. But as you’ve also mentioned, China is a very big country. We used to buy canned ham when I was a kid, good for bringing on a trip when you don’t really have enough money to go to a restaurant with your big family. Otherwise I never buy canned meat. Canned tuna though, that I really enjoy!
Concerning American beef, I’ve bought American and Mexican beef sold as “steak” (it was made from bringa/högrev, not really the part I’d like to cook as a steak) at the supermarket in Asian countries. Comparing to Swedish beef it’s not a high quality product. (Of course also not when compared to Japanese beef.) It’s more like German beef. Also high in antibiotics. Not what I associate with high quality meat. If SJAP focus on Wagyu (skip the Angus imo) and device a system for reducing the use of antibiotics (I haven’t heard that they would do this though) it could be a success. Non of us are interested in more capex for SJAP though. I could be on-board with more capex IF we get a really nice deal with the Chinese government. Merge with that government owned company that there’s been some talk about, and become the official supplier of meat for schools or something like that. That would be nice.
One thing that I also don’t understand… How come US beef can compete with Chinese beef? Is it being sold at a premium compared to domestic products? Is the production cost higher in China due to less developed agriculture? Shipping it to China and paying customs should also make it less profitable. I’m not sure I have the correct number, but the duty seem to be 12% on beef. For carcasses/half carcasses it’s higher, 20% for chilled and 25% for frozen. I looked here if anyone wants to check the numbers:
https://www.usmef.org/export-resources/import-duties-by-country/
It would be really interesting to know the price of American Angus vs. Chinese Angus and Chinese Wagyu vs. Japanese Wagyu. Does anyone have these numbers handy?
Got no real answers to any of your questions SIAF!
But I am worried about if Solomon decides to make bigger capex in SJAP than he can afford in conjunction with the government plan. I hope he won’t overextend himself as usual, but it is a risk.
Okay, I might dig around a bit and see if I can figure something out on my own. I haven’t really spent a lot of effort thinking about SJAP since TW mainly is what I’m interested in.
Solomon spending too much money on capex wouldn’t be anything new. Though he has shown some restraint during the past 1-2 years, right?
Like SIAF! Said, I wish Mr Lee had seen the “no capex” light a good time ago. Pressure is on and to maintain guanxi with goverment, I’m afraid SIAF throws more capex money to cattle business. Just to find out it’s not a good business – without import restrictions, like China put a some French cheeses lately.
I agree with others that canned beef is not a true value added product. To make ready-to-cook beef packages with mayonnaise is a one. Well, they don’t really have muscles to go there so maybe canned beef is a unmanned niche, but not a big source of profits, I’m afraid.