Huawei’s “Smart Pig Farming” project is in the ascendant, and the corresponding chain reactions have begun to ferment.
Jin Xinnong took the opportunity to release a signal that pig farming is moving toward intelligence, and the stock price, which had been sluggish for many days, immediately began to rise; Tang Renshen publicly stated that the smart pig farm management platform is being advanced in an orderly manner, and the company will comprehensively promote intelligence Pig raising; Zhengbang Technology and New Hope have also made public statements one after another. Intelligent and automated pig raising will be the general trend...
If nothing else, following the cross-border pig raising of Internet companies such as NetEase, Alibaba, and JD.com, After real estate companies such as Country Garden and Vanke enter the pig industry, Huawei's "Nanniwan" project will once again push "pig farming" into the spotlight.
Humans’ domestication of pigs is said to have a history of more than 9,000 years. Gongsun Hong, the first commoner prime minister in the Western Han Dynasty, had a story of “herding pigs by the seaside” before he became famous. However, large-scale pig breeding did not appear until the end of the 19th century. The so-called modern large-scale breeding only lasted for more than 40 years.
There is something special about China’s pig farming: Chinese people consume more than 50 million tons of pork every year, accounting for almost 50% of the world’s total consumption. However, China’s pig farming industry is still based on free-range households. Mainly, the market share of the top 20 companies is less than 10, which is a typical "big industry, small company" pattern.
Why has the seemingly "abnormal" market repeatedly become the darling of the capital market in the past few years, so much so that thousands of real estate companies have turned to pig farming?
The answer is inseparable from the high profits of "pig farming". According to the 2020 performance forecast released by Muyuan Co., Ltd., the net profit attributable to shareholders of listed companies is approximately 27 billion yuan, an increase of 341.58 yuan over the same period last year. The average profit of a pig is 1,500 yuan, which is equivalent to the profit of two bottles of Kweichow Moutai.
Simply attributing the reason to the "huge profits" of pig raising may not be enough to attract Huawei's attention. After all, the pig industry will experience a pig cycle every three or four years: pork prices rise - —Expansion of pig industry—overcapacity of pigs—falling pork prices—large pig farmers changing careers—declining pig supply—pig prices rising again. If the pig cycle is misjudged, even the leading players in the industry may be forced out of the game.
The variable that really induces outsiders to flock in is actually "African swine fever". The emergence of African swine fever in 2018 directly caused the domestic pig population to decrease by more than 40%. The pork market subsequently started a price increase in the past three years, and deeply changed the market structure of domestic pig breeding: the ruthless "African swine fever" Free-range farmers were quickly eliminated, and the unresolved model battle gradually gained a clear answer.
There are two main schools in the domestic breeding industry. One is the asset-heavy model of “self-building, self-propagation, and self-support” represented by Muyuan, and the other is the asset-light model of “corporate farmers” represented by Wen.
Before 2020, Muyuan's market value was firmly suppressed by Wen's, but after 2020, a polarization phenomenon occurred. Muyuan's market value skyrocketed, but Wen's market value continued to fall. In the end, A gap of 200 billion yuan has opened up. The reason is not difficult to explain. Muyuan’s strict control of the industrial chain has verified the advantages of intensification and standardization in combating uncertainties, while the asset-light model that Wen relies on for survival unfortunately missed the dividends of the continued rise in pig prices. .
The asset-heavy model of pig farming has been deeply verified, which may be an opportunity seen by major technology companies.
Perhaps in many people’s minds, “pig raising” is a business with almost no technical threshold, so that the behavior of “Peking University talented man selling pork” became a phenomenon-level news more than ten years ago. This kind of prejudice has obviously become common sense, and the real estate companies' sudden moves are the best example.
It is precisely the "honesty" of real estate companies that allows the outside world to see the complex side of the pig industry.
At the end of 2014, Wang Jianlin, who likes to set small goals, announced an investment of 1 billion yuan in Guizhou, with the goal of building a 300,000-head native pig propagation plant, slaughtering and processing plant and feed processing plant.
However, just over a year later, Wanda gave up its pig-raising plan. The explanation given at the time was: "It costs hundreds of millions to build a pig farm with 100,000 pigs. Let's build a five-star hotel." How much does it cost?”
In the same year that Wanda terminated its pig-raising plan, Xu Jiayin made a high-profile announcement to spend 300 million yuan to build 110 pig-raising farming and animal husbandry bases in Guizhou; in 2018, Vanke and Country Garden couldn't resist its inner impulse and began to deploy pig-raising business... The results tell us that real estate companies that seem to be not short of money are just testing the waters inside and outside the pig farm, and are not determined on the journey of "pig-raising". Go down.
It’s not that real estate companies are not greedy for the huge profits from pig farming, but that they can feel how deep the water of pig farming is after taking half a step.
Take Muyuan, which has made a lot of money in 2020, as an example. Its heavy report card can be said to have stolen the limelight in the capital market. 58 research reports on Muyuan all gave "buy" or "Overweight" rating. A closer look at Muyuan's operating conditions reveals that internal problems such as frequent equity pledges by major shareholders, a high proportion of short-term borrowings, and uncertainty about performance growth are far from establishing a market position that matches the market value.
To be precise, Muyuan's sudden rise has a certain amount of luck. For a leading company with a market share of only 3%, if it wants to perform the Matthew Effect of the strong in the market, it still needs to provide sufficient hard power. For example, when the price of pork drops, the profit margins of breeding companies are destined to be compressed. And with the normalization of African swine fever, rigid investment in safety prevention and control will continue to increase. How can Muyuan continue to maintain its leading position?
The answer given by economics is to reduce costs and use low costs as a bargaining chip to survive the "pig cycle".
The path Muyuan people are looking for is to improve production efficiency, and there are many corresponding examples. Muyuan once recruited talents from some universities with a monthly salary of no less than 20,000, with the purpose of attracting high-quality talents to enter the breeding industry and supplement the intellectual resources lacking in the pig industry; for the same reason, Jin Xinnong, Zhengbang Technology, Tang Renshen, etc. Huawei's actions after revealing the news of entering "smart pig farming" also confirmed the demands of the breeding industry to a certain extent.
NetEase, Alibaba, JD.com, Huawei and other major technology companies have successively launched the "Pig Raising Plan", perhaps with the intention of solving the pain of Muyuan people.
NetEase’s “Pig Raising” is full of petty bourgeois sentiments. It is said that Ding Lei came up with the idea of ??raising pigs when he ate a portion of suspicious pig blood while scalding hot pot. Regardless of whether these stories are true or not, judging from NetEase Weiyang’s recent strategic direction, it is ultimately a path of external empowerment.
The relationship between Alibaba, JD.com, etc. and "pig farming" can even be attributed to the products of To B. In the context of the Internet's transformation to To B, whether it is Alibaba Cloud's AI pig farming or JD Digits' "pig face recognition", they are essentially transforming the traditional farming model with new technologies.
Huawei seems to be no exception. According to Huawei's speech at the 2020 Agriculture and Animal Husbandry Digital Ecosystem Development Forum, the so-called "smart pig farming" is nothing more than exporting ICT technology to pig farms, including sensors, Internet of Things technology and the artificial intelligence algorithms behind it. The focus is on pig farm facilities upgrade.
To put it simply, the real estate company’s consideration in entering the pig farming industry may be to get a share of the pie, while the purpose of technology manufacturers is to make money from pig farms. If real estate companies are "barbarians" in the eyes of Muyuan people, technology manufacturers have kindly extended an olive branch for cooperation.
As a “layman” in farming, can a technology manufacturer pry open the door to a pig farm? At least two favorable positive signs can be found.
The first is the cooperation between NetEase Weiyang and Zhejiang Capital Investment, the latter will undertake the investment and construction of the Weiyang pig farm. After experiencing the heavy model of "self-building, self-propagation, self-cultivation and self-marketing", NetEase Weiyang intends to further lighten the model, that is, export the breeding model to partners and focus on marketing and operations. The addition of players such as Zhejiang Capital Investment indicates to some extent that the farming model and business model explored by NetEase have been accepted by the outside world.
The second is the stance of leading companies such as Muyuan and Wenshi.
For example, Muyuan has opened its "intelligent pig farm" to the media many times, especially during the outbreak of African swine fever, where inspection robots were used for disinfection and monitoring. Although leading companies such as Muyuan have not yet disclosed information about cooperation with technology manufacturers, judging from each other's understanding of the "smart pig farming" model, the smart transformation of pig farms cannot bypass technology companies such as Huawei, Alibaba, and Baidu.
What needs to be clarified is that currently "smart pig farming" is only a conscious existence and has not yet become a mainstream model in the pig industry. Even for the leading enterprises with the largest breeding scale, such as Wen's, Muyuan, and New Hope, the main use of funds is still to expand production capacity and extend the upstream and downstream industrial chains, and their investment in "smart pig farms" is not obvious. "New pig-raising forces" such as Huawei and Alibaba still have a long way to go.
From the perspective of technology manufacturers, “smart pig farming” may not be an easy path, but it is a blue ocean market that cannot be missed. A simple economic calculation: at the end of 2020, the domestic pig population was 407 million, and the cost of a pig house was about 1,000 yuan/head. It can be said to be a veritable 100-billion-level market.
What’s more, judging from the potential market trends, there is no shortage of possibilities for a short-term break.
On the one hand, pig futures have been listed on the Dalian Commodity Exchange in early 2021. With reference to the centralization process of pig breeding scale in the United States, pig futures have played an indispensable role. Large-scale breeding enterprises can avoid the risk of market price fluctuations through pig futures, which will continue to force small and medium-sized retail investors to exit the market. At least in the more than 20 years since the launch of pig futures in the United States, the proportion of the inventory of extra-large pig farms with more than 5,000 pigs has increased from 20 to 74. There is a possibility that China can rely on pig futures to accelerate the centralization process.
On the other hand, large-scale production will ensure stable market supply to a large extent, thereby smoothing the "pig cycle" and forcing the focus of competition in the pig industry to shift to production costs and production efficiency. The imagination of "smart pig farming" is that liberating people through technologies such as the Internet of Things, big data, and artificial intelligence will not only reduce uncertain risks such as epidemics, but also accelerate the transition of pig farms to standardization and unmanned operations. In the context of the centralization process of the domestic pig industry, "smart pig farming" is destined to be a must-have topic for Muyuan people.
It is not difficult to understand Huawei’s motivation to enter “smart pig farming” at this time. The “small farmer model” that has lasted for thousands of years in China’s breeding industry is showing cracks in disintegration. The modernization, scale, and Standardization has become the mainstream will of society. Entering the market at this time is undoubtedly an excellent time to get the first move.
It is foreseeable that Huawei is by no means the last major technology company to announce "pig farming". When the market pattern of domestic pig farming is further clarified, more and more technology players will pour in. .