Focus on the Changing Industry in China

Rising costs and diminishing returns are changing the way that China, the world's top pork producer, raises pigs.

According to local official sources, small family farms are buckling under the combined weight of volatile prices, disease and rising costs.

At the other end, industrial-scale farms are becoming part of the landscape. But between these two options is a new cooperative venture that combines the personal attention of the family farm with the economic advantages of a corporation.

For example, one farmer in Qinyang in Henan province used to raise more than 100 pigs at a time, making him the most prolific pig farmer in his village. In May 2010, he built a new barn for 200 pigs but higher costs and lower returns took their toll and he quit the pig business earlier this year. Poultry inhabit the big new barn now.

The smaller farmers blame the high cost of feed as well as the attractions of better paid work in the cities and disease and may have quit the industry..

Henan produces 50 million hogs on average every year or nearly 10 per cent of the country's total. Qinyang's average production is more than 200,000, ranking it in the middle range. But of the 26,000 pig breeders in Qinyang, 90 per cent have fewer than 1,000 pigs and less than 25 have 1,000 to 4,000 pigs.

As the small-scale breeders withdraw from the market, the bigger producers have not expanded for fear of prices dropping due to oversupply in the market. The result is the current shortage and high price of pig meat across the country.

Central government has recently invested heavily in the industry to feed its growing middle class, which is consuming more meat, last month resuming a large subsidy to spur pig breeding and prevent future supply shocks. Family farms, with fewer than 500 pigs, however, do not receive any of this subsidy.

A recently emerging solution to the problem of supplying sufficient pork to the population are firms such as Chuying. Based in Henan, it sold about 660,000 hogs last year. It has developed what it calls a ‘staging’ system that has attracted thousands of participating farmers. Chuying has divided the traditional raising process into four stages – pregnancy, delivery, care of baby pigs and raising them to market size. Farmers are guided by trained technicians and are involved in just a single process.

Chuying has 80 other breeding bases in the province, each with a single stage. Workers, who are independent contractors, are paid according to how much work is required so they are no longer at the mercy of the fluctuating pig market.

In 2008, fewer than one per cent of China's pigs came from producers raising more than 50,000 pigs every year. Now, Chuying is investing heavily in a breeding farm in Henan that will have an annual capacity of one million hogs.

And Chuying is not the only company using large-scale production models. Sichuan-based New Hope Group (China's top animal feed producer) and Thailand's CP Group are also investing large sums in large pig facilities and many family pig farmers are signing up with these organisations.

Owing to a public holiday on Monday next week, the next newsletter from ThePigSite will be sent out on Tuesday 30 August.