Pork Slaughter Clean-Up

Last month Chinese authorities announced an audit of pork slaughter companies that will continue through July 31, 2012. Local authorities have been instructed to check up on the qualifications of pork-slaughter enterprises and make sure they are not engaged in illegal behavior. Those who are don't meet the standards and fail to make improvements demanded by auditors will be shut down.

The crackdown was announced in a noticed jointly issued by nine different ministries and bureaus which included commerce, industry, quarantine, food and drug, environmental protection, finance and health. The announcement said this "cleanup" audit is required to carry out the State Council's food safety work. This is a message to local officials that they should take this seriously.

Local officials have been ordered to form coordinated teams to carry out the audit. Officials promise to set up a "black list" of companies caught in illegal behavior. They will explore setting up a system for rewarding snitches who report illegal pork slaughter behavior. Bad behavior includes pumping water into pigs, selling dead or diseased animals, butchering uninspected pigs, and re-selling products that were recalled.

This audit sounds very similar to the re-licensing of dairy processors that was carried out last year at this time. About half of dairy processors had to shut down at least temporarily after last year's audit.

The audit form for small slaughterhouses in Sichuan includes 18 items to check for compliance. The enterprise must have the proper licenses and certificates, be approved as part of the local government's plan, be in a location distant from bodies of water that could be polluted, and cannot be near a factory or other source of pollution. It must have a plentiful supply of water that meets city drinking-water standards. The layout of the plant must meet required standards and equipment is required for various parts of the slaughter and butchering process. There must be rooms to separate sick animals, equipment for disposal of sick or dead animals, and wastewater treatment equipment. Blood must be drained for no less than 5 minutes. Meat can be transported only in specialized trucks. Slaughter technicians must have health certificates from a county-level or higher medical authority. A traceability system must be in use. Shipments of hogs must have records of the time received, volume, place of production, supplier, slaughter and inspection information, time leaving the plant, products, volume and destination. The slaughterhouse can be graded as "compliant," "basically compliant," or "not compliant."

China's pork slaughter industry is huge and widely dispersed. In 1998, authorities set up a "designated slaughter point" system--a hierarchy of slaughterhouses that serve the urban population. In 2008, revised regulations ordered establishment of traceability and product recall systems. The regulations ordered companies to stop production when unsafe products are found, recall and destroy products, and inform consumers. Penalties of 10,000-30,000 yuan were set for selling uninspected meat, improperly transporting meat, or using forged, stolen or borrowed licenses and approval stamps. The 2008 regulations ordered the government to publish a national list of designated slaughter houses.

A google search turns up lists of designated slaughterhouses for only a few municipalities. In Zhoukou, a district in Henan Province, the list shows 140 slaughterhouses. They form a hierarchy: two on the outskirts of Zhoukou city and a network of slaughterhouses in each county city and township throughout the district. One county can have 20-30 slaughterhouses. The government claims that the designated slaughterhouse system covers the entire country except for Tibet.

This clean-up audit likely portends a consolidation of slaughterhouses. Last year authorities announced a plan for the industry that would reduce the number of enterprises by closing small unmechanized operations that don't meet standards.

This forced consolidation could result in a proliferation of small illegal butchers--this seems to have been a result of past rounds of crackdowns. The dimsums blog has frequently reported on raids of "black dens" and underground butchers.

If authorities are able to effectively shut down small slaughterhouses and, in effect, create city monopolies, the remaining slaughterhouses may be able to raise pork prices and make money. This has occasionally led to strikes by retail meat vendors squeezed by slaughterhouse monopolies and attempts by gangsters to monopolize local meat commerce.

High prices for big capital-intensive pork processors (also aided by subsidies for holding government pork reserves) will be able to make money (for a change). High Chinese pork prices will also help keep imported pork price-competitive in China.