Sunday, May 15, 2011

Factory Farms on the Horizon?

A recent article about the hog industry highlights a quiet structural shift toward big farms that also signals a major change in the social and economic fabric of rural China.

In Taihe County during the 1980s and 1990s, nearly all households raised hogs--some to sell and some for the family's own consumption. But now only a few households in each village raise hogs because it's hard to make money. The reporter cites a similar situation in Yunnan, Henan, and Anhui Provinces.

An expert on the hog industry at Guangzhou's Zhongshan University attributes the disappearance of "backyard" hog farms to several fundamental changes in farming. "Backyard" farming is based on the small-scale farm structure and availability of slack labor. He says that the relaxation of constraints on land transfer has led to consolidation of land, and migration of young people to city jobs has eliminated the slack labor traditionally used for raising hogs. The shift from traditional local breeds to imported breeds and disease epidemics are additional deterrents to small-scale production. Imported breeds are more expensive, are designed to be raised on expensive purchased feed (instead of slop and waste), and must be kept in clean conditions since they are more vulnerable to disease than are traditional breeds.

This article says commercial-scale farms have been quitting too. The reporter cites the example of Mr. Liu, in Jiangxi’s Jian County with over 10 years in the business, slaughtering over 3000 head per year. Mr. Liu quit last year, saying, “When I started out I could make money, but in the last five or six years I didn’t make anything.” He said the profit is eaten up by rising feed costs on one end, but he also complains that monopolization of the local slaughter industry has led to downward pressure on hog sale prices as well.

The reporter adds, "In fact, now farmers in many provinces are losing money raising hogs, being replaced with a few large enterprises that slaughter 1000 head or more." The reporter describes this as the beginning of a major consolidation process: "a small drip converging to a big river."

Food safety scandals are putting pressure on the industry to consolidate. The chairman of the Shuanghui Company--implicated in the scandal regarding use of illegal feed additives in March--announced that the company will shift from being a "killer of pigs" to a "raiser of pigs." He pledges that the company will construct a 500,000-head hog farm to meet one-third of the capacity of every 1.5-million-head slaughter house the company builds. The rest of the hogs will come from commercial-scale hog farms and farmer cooperatives.

A Xinhua opinion piece is skeptical that Shuanghui can create food safety by creating this kind of "pork industry empire." He says Shuanghui may not shy away from high costs of raising pigs, but it would reduce competition, add unnecessary costs to pork. He argues that one company alone can't save the market and bring about safe food--in the end government oversight is needed.

An opinion in "The Masses Daily" says Shuanghui's logic seems reasonable but doesn't stand up under scrutiny. Whether or not illegal additives are used is not a matter of who raises the pigs. The reporter points out that soon after the incident many pointed out the many postings on the internet offering the illegal "lean meat powders" like clenbuterol. How could a big company like Shuanghui not be aware of it? A news report revealed that hogs generally have 30%-40% lean meat but Shuanghui demanded 70%. Farmers added the clenbuterol to meet Shuanghui's standard for lean meat. With these incentives, "the company's own pigs may not be safe." The author asks rhetorically whether Shuanghui will also build its own feed mill and vaccine factories? [Actually, yes they do.]

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