peet on pigs China is making the transition from backyard herds to larger modern operations
I have just come back from my fourth visit to China inside 18 months and am now beginning to understand the structure of the pork industry in this rapidly evolving and fascinating country. The scale of change in China has to be seen to be believed and is witnessed by myriads of construction projects, from high-rise apartment blocks and industrial buildings to shopping malls and new roads.
In the pork industry, the transition from traditional “backyard” production to large-scale industrial farms, often within integrated companies, has been taking place at a speed that can only be defined as revolution, rather than evolution.
China has a slightly smaller land area than Canada, with 9.6 million square kilometres, compared to Canada’s 9.9 million. But Canada’s 34 million population is eclipsed by the 1.4 billion people in China, roughly 20 per cent of the world’s population.
While the government’s “one child” policy has contained population growth compared to many western countries, that is still a lot of mouths to feed. It is hardly surprising that a key part of the national government’s policy is to ensure that its people have access to affordable staple foods such as rice and pork. In fact, it intervenes directly to control the supply of pork and consequently the price, through a variety of means such as increasing or decreasing imports and purchasing pork as a price-support mechanism.
Half the world’s pigs
Estimates of the number of pigs in China vary, but are in the region of 455 million, or half the world’s pig population. Sow numbers totalled just over 50 million in September 2013. The number of hogs slaughtered each year is not so easy to quantify, with the National Bureau of Statistics of China giving a figure of 698 million for 2012 and the Ministry of Commerce saying 355 million. The discrepancy is likely due to the large numbers of hogs that are slaughtered on farm or by small-scale butchers, which is difficult to quantify. Assuming the higher figure is correct, this is equivalent to an average of just 14 pigs marketed per sow per year. Average carcass weight is relatively low at 76 kg, but anticipated to rise to 80 kg by 2015.
Meat consumption in China has risen more than fourfold since economic reform started in the late 1970s and now stands at 37 kg of pork, 13 kg of poultry and nine kg of beef and sheepmeat per capita. Although pork is still the most popular meat, its share of total meat consumption has fallen from 80 per cent in 1985 to 64 per cent in 2012. Growth in pork demand has now slowed to a rate of one or two per cent per year.
The rapidly changing structure of the pork production and processing sectors has been the most important development over the last 20 years. There has been a massive exodus of backyard producers, which are being replaced either by independent specialist producers or large-scale, often integrated operations. This reflects China’s urbanization, whereby people have left villages in the country to get jobs in the cities.
The modernization of the pork industry has been supported by the government because it wants the industry to become more professional and efficient, while improving food safety. A per-sow subsidy was initiated in 2007, withdrawn in 2010-11, then reintroduced again at a rate of 100 yuan ($15) per sow. In addition, there are a variety of incentives, grants and tax breaks that encourage structural change. Official statistics show that the percentage of pigs produced on backyard farms — those marketing less than 50 pigs per year — fell from 73 per cent in 2002, to 34 per cent in 2010.
Herd size increasing
Independent “professional” producers — typically those with 10 to 100 sows — have taken up the slack and still represent the majority sector in the industry. Herd size is increasing as the industry consolidates, but there are still a lot of farms with 20 to 30 sows. Breeding herd productivity averages about 13 to 14 pigs weaned per sow.
Large-scale, or “commercial” farms are defined as those producing more than 3,000 pigs per year, and this sector is expanding the most. A number of major processors have established their own farms to create vertically integrated systems, often sending pigs from their own breeding units to contract finisher farms, which they also supply with feed. These companies are developing rapidly, building new farms which utilize North American or European technology and genetics.
However, while the newer farms provide excellent facilities, productivity is constrained by a shortage of skilled and experienced staff. Typically, these farms are weaning about 20 pigs per sow, so have a lot of potential for improvement. Over the past 18 months, I have been working with two integrated companies to train staff in modern pig production techniques, and also teaching them to deliver training in production skills to workers on their farms. While many of the staff are well educated, they lack knowledge about pigs and the processes involved in production, and so are not equipped to achieve the performance levels we expect in the West. However, the production companies are very aware that this is an issue and are now starting to address it, opening up the opportunity to improve performance significantly in the future.
Finally, a word about economics. Since 2006, hog prices have increased considerably, partly because the development of large-scale operations failed to keep up with the reduction in backyard producers. Also, diseases such as PRRS, Circovirus and PEDv have led to large production losses and tight pork supplies, notably in 2008 and 2011. While high feed prices bit into margins in 2012-13, currently producers are making good profits, with the hog price at $3/kg carcass weight, double that of 10 years ago.