Solving China's Cow Problem

Livestock should have the same status as grain in China's food security efforts, according to an Economic Daily article published last week. The article--which cited difficulties maintaining meat supplies, "social resistance" to high prices, and great pressure from imported meat--was reposted on numerous state-controlled news media sites, indicating it was a message from the propaganda gnomes.

The Economic Daily article observed that beef and mutton supplies have not kept up with growing demand. The article cited a 5-year action program for developing beef and mutton production issued by the Ministry of Agriculture and Rural Affairs (MARA) as an important new effort to ensure meat supplies and tamp down meat price fluctuations. The MARA "action program" document blames a poor industry base, long production cycle, and outdated production methods for failing to keep up with growing consumer demand for beef and mutton. 

An assessment by the Chinese Academy of Agricultural Sciences in December 2020 praised the beef industry as a "bright spot" and a "pillar industry" in the rural economy, but criticized lack of progress in developing specialized breeds, failing to conserve and utilize indigenous cattle breeds, backward production methods, high production costs, unscientific fodder management, and a preponderance of low-grade, low-value, and homogeneous beef products. 

The MARA beef and mutton plan's wide-ranging objectives include upgrading cattle and sheep breeding and protection of native breeds; maintaining balanced stocking rates in traditional pastoral regions while utilizing new regions, grazing animals on hillsides in mountainous southern provinces; replacing grain with fodder production in marginal cropping regions; luring private companies to rural regions to promote beef farming businesses that incorporate households; upgrading the processing and distribution by setting up beef-oriented industrial parks and sheep industry clusters; matching up production regions with meat-buyers; and improving disease control.

A beef production "community" in the mountains of Guizhou Province. 7 farmers rent space for 130 cattle in the blue-roofed barn built on a terraced mountain. This is an "ecological" farming project.

China has been trying to develop ruminant production for decades, but shortage of pasture and forage crops and the long production cycle for cattle have been barriers. In most of China, cattle were traditionally kept for their value as draft animals, and they were only eaten when no longer productive in field work. Rapid farm mechanization eliminated many oxen and water buffalo. About 10 years ago, a campaign to eliminate water buffalo in the south central region as carriers of schistosomiasis also eliminated a lot of ruminants.

These are not new ideas. Back in 1995, China's Agricultural Yearbook described a plan for a "structural shift" in livestock production and consumption from pork to cattle. The idea was to replace pigs--which consume large amounts of grain--with cattle that consume inedible stalks, straw and other fodder to conserve feed grain--called "straw for beef" at the time. The recent December 2020 Chinese Academy of Agricultural Sciences article echoed this strategy by describing beef cattle as "grain-conserving" livestock and complained that China's huge supply of straw and stalks is not utilized as cattle fodder--the same mismatch that motivated the "straw for beef" campaign three decades ago.

The 1995 Agricultural Yearbook reported that tens of millions of yuan were allocated to set up 100 model cattle counties in the early 1990s. The 2021 beef and mutton plan also features money for model farms and model counties. Economic Daily describes beef and sheep-raising methods in parts of Inner Mongolia that have hosted model farms for decades. 

The 1990s beef plan focused on the central plains, northeast and southwestern mountainous areas--the same ones targeted by the 2021 "action program." The 1990s plan called for incorporating sheep in the initiative, but the 2021 plan emphasizes both sheep and beef. 

There are some differences in the new plans. Old plans subsidized imports of foreign breeding stock--often Simmental or Angus. This year's animal breeding plans emphasize the need to protect China's indigenous breeds from extinction and to incorporate them in forming hybrids of foreign and domestic breeds.

The 1990s plan promoted corn production in the northern regions and use of sugar cane fiber in the south to feed cattle and sheep. Foreign exchange was set aside to import material and equipment to ammoniate fodder. In 2021, corn is China's biggest crop and still doesn't meet the demand, but corn for silage is still promoted as a cattle feed. In 2016 there was a national campaign to cut back on corn production in the same semi-arid, mountainous regions targeted for cattle and sheep production in a "crescent" region stretching from Heilongjiang in the northeast to Yunnan in the southwest. Other fodders promoted are alfalfa and oat hay. 

During the 2000s, ruminants were included in more 5-year plans that featured "modernization" and "standardization" of livestock, although beef cattle and sheep got less attention than crisis-hit pigs and dairy. The 2006 plan launched subsidies for breeding stock, vaccinations, and upgrades of processing and marketing. Last week's Economic Daily commentary emphasized that "increased attention" did not necessarily mean subsidies. The MARA plan features lots of planning and coordination, with a demand that local officials take on their "responsibility" for "market basket" food supplies--that means most of the subsidies are given by local governments. The plan calls for subsidies for breeding farms, protection of indigenous breeds, and artificial insemination; financial transfers to fund programs in cattle- and sheep-producing counties; pilot programs to make bank loans using live cattle as collateral; subsidized insurance; and support for model farms, industrial parks and associated infrastructure.

China has few state-owned actors in the beef and sheep industry. The MARA plan calls for prodding big companies to set up business in poor regions, forging alliances between breeding companies and research institutions, nurturing prominent companies with branded meat products, and organizing clusters of sheep-related companies. 

The Guizhou beef-farming "community" is built for people of the Miao ethnic minority. Many beef projects are billed as poverty alleviation efforts.

The chart below illustrates China's difficulties in beef production. Statistics showed steady progress in beef output until 2017. China's Ag Ministry projected continued growth to 2024 in its first ten-year projections released in 2014. However, the progress turned out to be an illusion. China's third agricultural census discovered the number of beef cattle was actually 20 percent less than statistics had shown. Statisticians revised beef production data to account for the deflated cattle population, wiping out the growth in beef output. 

Statistics show production edging upward again in the last few years, and the latest MARA projections issued last month show renewed optimism, with beef output growing to 8 mmt in 2030.

Source: China Ministry of Agriculture, China Agricultural Outlook Reports.

While high pork prices have attracted attention over the past two years, beef and mutton prices have been stubbornly high and rising for a dozen years.

Source: China Ministry of Agriculture; USDA.

Source: China Ministry of Agriculture; IMF primary commodity prices.

While beef industry plans put forth in the early and mid-2000s included aspirations to boost meat exports by conforming to internationally-accepted standards and regulations promulgated by "developed countries." China's latest plans acknowledge that its livestock products have costs double those in the world market and are consequently uncompetitive. China's aspiration now is to formulate standards unique to China's own needs.