Booming Asian mega farms are an ‘economic risk’

By Oscar Rousseau contact

- Last updated on GMT

Related tags: Livestock, Agriculture, Beef, Pork, Poultry

China's bird flu struggles have hit local chicken prices, which could dent return on investment
China's bird flu struggles have hit local chicken prices, which could dent return on investment
Investors should not get overexcited by the risky Asian meat industry as booming production may not translate to soaring profits, a FAIRR (Farm Animal Investment Risk & Return) Initiative report has claimed.

Poor food safety and environmental standards, mixed with dangerous antibiotic overuse​ that could more than double in the next decade, have not deterred investment in the Asian meat industry. In fact, with meat demand expected to rise by 19% in the next five years across the continent, investors’ eyes are lit up with big dollar signs.

But with big growth comes big risk and the FAIRR Initiative report has highlighted a number of risks investors should be aware of. Antibiotics, food safety​ and Chinese demand for animal feed, driving deforestation in South America​, are the big ones to be aware of. But rather than discouraging investment, the FAIRR Initiative wants stakeholders to put pressure on firms to change their ways for the good of world.

Blinded by 'growth'
Maria Lettini, director of FAIRR, told GlobalMeatNews​ she wanted investors to use their “influence as a shareholder​” to put pressure on Asian meat giants “to help change the operational practices​” in place at these firms.

We think investors need to think deep about the risks in this sector. It is a market that is growing very quickly and any market that is growing very quickly has risks, so you can’t get caught up in the excitement of the growth story,​” she said.

Jeremy Coller, founder of the FAIRR Initiative, said “failure to reform​” standards, such as food safety, could leave investors with a “bout of financial food poisoning​”.

He added: “Investors have a big appetite for Asia’s animal protein sector, but growth is driven by a boom in factory farming, which tends to mean more emissions and more epidemics, abuse of antibiotics and abuse of labour – all risks to returns.​”

Coller warned “lessons have not been learned​” three years on from a tainted meat scandal in China​ that cost fast-food giants McDonald’s and KFC an estimated $10.8bn loss in market capitalisation.

Call to support sustainability
The FAIRR Initiative report also highlighted areas such as labour abuse, animal welfare​ and livestock epidemics, such as bird flu, that could prove troublesome for investors looking to capitalise on rising Asian meat demand.

Demand has increased due to population growth, urbanisation and rising incomes that have led to a move toward industrial farming. But Stuart Palmer, head of ethics research at Australian Ethical Investment, said the current system was “broken​”.

From antibiotics to animal feed, the inputs that Asian factory farms rely on to do business are proving catastrophic for public health and the environment.

Global investors are exposed to these risks in myriad ways and in multiple sectors through investments operating in and outside Asia. It is crucial that investors understand the rapidly evolving Asian food landscape in order to safeguard the value of their investment portfolios and to support development of sustainable food production and consumption models.​”

The FAIRR report highlights risks under the surface of the Asian livestock industry
The FAIRR report highlights risks under the surface of the Asian livestock industry

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