China's Hog Factory Farms Taken to a New Level

In land-scarce China, swine farming companies are making a great leap to factory farming by spending billions on high-rise, high-tech hog barns up to seven stories high. With generous subsidies, Chinese officials view these farm factories as a improvement on the traditional "backyard" livestock farming model--long viewed as a road to riches for generations of rural households. However, this corporate farming model is highly experimental, still unproven, and investors probably did not count on the cratering of hog prices this year. 

Swine go down a ramp inside a high rise barn.

These farms have varying designs, but they typically feature 5-7 story buildings that move pigs from floor to floor by elevator at different stages of their life cycle. Ventilation, temperature control, feeding, monitoring of pigs is often controlled by automated sensors, thermometers, and cameras. Animal waste is transported through tubes to centralized treatment facilities.

A recent article by Agriculture Industry Observer estimates nearly 200 projects to construct multi-story pig barns are in the works or already in operation. The article notes that no country has ever pursued the high-rise hog farm model to this extent and describes the current wave of investment as "exploratory." 

High-rise pig facilities reduce the land footprint of farms by putting more pigs in the sky instead of spreading them across the land. In December 2019 China's agriculture and natural resource ministries jointly published a circular endorsing use of "infrastructure facilities" in agriculture to reduce land use. About the same time local governments began to aggressively subsidize construction of farms and arranged bank loans for them in a menu of 19 policies to restore hog production after the industry was decimated by African swine fever in 2018-19. 

The facilities include extensive automation to address problems with biosecurity and scarce labor. They are expected to treat manure and are often paired with fruit orchards or vegetable patches where manure can be used as fertilizer in a "circular" model. 

Agriculture Industry Observer described projects valued at about $1.5 billion by leading Chinese swine companies. Some examples follow:

• Muyuan, China's biggest swine farmer, is building 21 buildings in Henan Province's Neixiang district with over 2 million head capacity with investment of 148 million yuan (nearly $23 million). Muyuan says its fixed cost for high-rise buildings is 1200 yuan (about $185) per head, 20 percent more than traditional swine farms.
• New Hope-Liuhe spent 270 million yuan ($41 million) on a complex in Guang'an, Sichuan Province with places for 6,750 sows and 48,000 finishing hogs covering 42 hectares. Other projects are planned for Jiangsu and Zhejiang Provinces.
• Wens Foodstuff is spending 380 million yuan ($58 million) on a 27-hectare complex in Guangdong Province expected to produce 150,000 piglets annually in its first phase.
• Tangrenshen is spending 200 million yuan ($38.5 million) on 5 barns covering 6.1 hectares that will house 112,000 sows. 
• Niuluoshan plans to make high-rise barns its "brand" with investment of 3.7 billion yuan ($569 million) on 11 hog industry chain projects. 
• Capital Agriculture Group is building a 125,000-head project on 22.7 hectares in the southern outskirts of Beijing paired with a 333 hectare vegetable production base. 

The article comments that high capital requirements of high-rise farms exclude small and medium enterprises. 

With hog prices having fallen 50-60 percent in 2021, the focus is now on cost-cutting. These projects mostly focus on farrowing segments of the operation and they were able to recover investment costs quickly when piglet prices were high, but even piglet prices have dropped now. In theory, operating costs will be lower than conventional farms, but it's unclear whether savings on land leases are outweighed by construction costs and whether economies of scale and automation will achieve anticipated efficiencies and cost-savings.

An article by a supplier of feed additives warns that high-rise pig farms face risks of waste contaminating water pipes, disease transmission due to excessive concentration of animals, and potential for excessive use of chemical disinfectants to make manure untreatable. The article warns readers to ensure columns and foundations are sufficiently load-bearing to ensure long life since it will take years to pay off initial investments. The author helpfully recommends some of his company's products to address the problems, gives recommendations about manure scraping, and warns readers that design should consider seasonal sunlight, moisture and temperature, farms should not buy feed or pigs from areas that have disease, farms should be surrounded by trees or ditches to guard against disease, and all-in-all-out management is necessary. 

The Feed Industry Information Net said many pig farmers are thinking about quitting due to twin pressures of low hog prices and environmental enforcement. Twelve companies reported lower net profits in the first half of 2021 and five posted losses. Muyuan also encountered difficulties with sales in August. The Feed Industry article warns that the hog industry is in a "deep winter" and warns that strict environmental enforcement could strike a heavy blow to the industry. Some localities have launched environmental remediation following complainants of persistent "chaotic" manure-handling and emissions by hog farms. A breeding farm in one Guangdong Province county had its electricity and water cut off and equipment was dismantled until all the pigs were cleaned up and disinfected.

Oops! We canceled the corn insurance

Corn was the crop most impacted when floods covered large swathes of China's Henan Province during July 2021. It turns out that officials had canceled insurance for corn four years ago, even though corn is by far the biggest crop grown in Henan during the summer, so many farmers were not insured.

Flooded fields in Henan Province in July 2021

This oversight was revealed in an August 16 Beijing News interview with two agricultural insurance experts from China's Academy of Agricultural Sciences which revealed numerous shortcomings in the country's huge subsidized agricultural insurance program. 

The experts explained that China's agricultural insurance program is the biggest in the world. According to the Beijing News interview, premiums grew 27-fold to about $12.5 billion from its launch in 2007 to 2020--significantly larger than the U.S. agricultural insurance program. China's agricultural insurance covers 16 major commodities and 60 local specialties. Insurance covers major grain crops as well as rubber plantations, greenhouse crops, seed producers, sows, hogs, cattle, and fish. Each locality can decide which commodities are included in the program. Nearly all insurance is subsidized, with subsidies from central, provincial and local governments covering about $9.3 billion of the premiums. 

In 2016, China's agricultural officials launched a 5-year campaign to cut back on corn production in a "sickle" region--an arc of territory stretching from China's Russian border through the arid northwest, grasslands, and mountainous areas of the southwest. The campaign was meant to reduce surplus corn output and grow more suitable crops in these environmentally fragile regions. In 2017, Henan Province withdrew corn from its agricultural insurance program--even though the province appears to be outside the "sickle" region. One agricultural technicians' commentary noted that Henan did not restore insurance for corn in 2021 even though the national corn glut turned into a deficit in 2020 and China began importing large amounts of the crop. Readers' comments observed, "Ha ha, the crop grown the most is not insured," and "Insurance is a joke."

The experts interviewed by Beijing News said the agricultural insurance needs lots of improvements. Most insurance insures only farmers' expenses for material inputs like seeds, fertilizer and pesticides, only a fraction of the crop's value. Payouts are lower for seedlings  hit by disaster than for mature crops. Farmers are often dissatisfied because they were not compensated for the lost income from selling crops. China has launched new pilots to insure the full cost of production and income insurance for wheat and rice in order to address these problems. 

The claims and indemnification process is long and drawn-out, with negotiations and disputes between insurance companies, local governments, and farmers. Payouts are typically made in a piecemeal fashion. Farmers who want their payouts quickly have to settle for a heavily discounted claim; they have to "wait patiently" if they want a bigger payout. Local officials often intervene in the claims process to "maintain stability." It is common for payments to be spread over the maximum number of farmers with a small average amount after a widespread disaster. A survey of farmers found that their insurance payouts tend to be about 30%-40% of their actual losses. 

Chinese insurance companies devote little effort to agricultural insurance. They rarely have a full network of representatives in rural areas. Farmers have trouble contacting the company when they want to file a claim. Insurance personnel have varying qualifications, uneven training, and are often unaware of insurance policies, provisions, and procedures. 

Insurance premiums are not adjusted for differences in risk across commodities, regions, and producers. Subsidies only cover premiums. One expert recommends that subsidies should also be given for operating insurance programs, for reinsurance, education, training and promotion. 

The experts interviewed by Beijing News say China's agricultural insurance is still in its initial stages. They recommend clarifying indemnities, improving risk assessment, public sharing of information, incorporating environmental protection and carbon reduction in insurance products, and better coordination in administering and monitoring the program.

"The Soil That Breeds Statistical Fraud Still Exists"

Chinese officials are acknowledging that the country's statistics are riddled with fraud now that Xi Jinping has targeted statisticians in his expanding campaign to purify the Chinese communist system. Chinese statistics in the "new era" will be improved by endless audits, punishment of perpetrators, and replacement of humans with "smart" computers and gadgets when possible.

The attack on statistical fraud kicked into high gear with an August 30 speech by Xi Jinping summarizing his ideas for improving the quality of data in his "Opinions on more effective use of statistical supervision functions." That was followed by a series of articles posted on the National Bureau of Statistics web site explaining a third round of statistical inspections to root out fraud, falsification, and concealment of data. 

The Bureau's director Ning Jizhe issued slogans for statisticians to contemplate: "Statistical data quality is the lifeline of statistical work." and "Truthful correct, complete and timely supply statistical data is the lifelong task of statisticians." The director explained that, "The soil that breeds statistical fraud still exists, and the struggle against unhealthy trends [continues]."

A September 2 article from the all-powerful Central Commission for Discipline and Inspection (CCDI) explained that inspections in 19 provinces over the last two years uncovered problems and improved statistical quality. CCDI warns statisticians that a new round of inspections will address local offices that drag their heels in complying with new statistical requirements, failure to punish or prevent statistical violations, and persistent inaccuracy in data. The new inspections will cover statisticians in all localities and departments. 

CCDI described a web of collaborative deceit perpetrated by local statisticians, companies that report data to them, and local officials that pressure them to report flattering data. One example given was a "shocking" arrangement to inflate industrial statistics in one locality of eastern China. Local statisticians ordered companies to inflate their business income if needed so they could keep their status as an "above scale" company in a database that is tracked to monitor industry performance. Companies had to submit preliminary reports to statisticians so they could determine whether the numbers were big enough. Companies failing to meet the threshold for inclusion in the database were threatened with loss of government projects and other benefits. Companies were ordered to erase electronic chats with the statisticians to cover up the collusion. 

CCDI said some local governments pressure companies to report inflated numbers "out of investment considerations," and some statisticians give companies tables with desired targets and ask them to report data that conforms to these targets. Growth rates are specified for certain months to maintain smooth growth in data. CCDI alleges that some local Economic and Information Departments held meetings to arrange the massaging of data for the year and issue "fraud subsidies" to companies. Some enterprises made false reports to meet the "regulatory" standards. Data reported to statisticians was often inconsistent with tax bureau data, CCDI said, and some did not even submit tax records.

Last week's report on the National Land Survey by the Ministry of Land Resources and Statistics Bureau demonstrated fealty to the crackdown by leading off with the the slogan of "truthfulness and accuracy as the lifeline", and a pledge to "[never] waver in the authenticity of surveys...and severely punish false reports." The survey employed "special inspectors" to scrutinize 394 local survey teams, and the process entailed hundreds of meetings and 7 rounds of "check-feedback-rectification-check again."

Frustrated by immoral and incompetent human statisticians, Chinese officials are putting their trust in machinery to collect statistics. The land survey reported extensive use of technology to minimize "the degree of human interference" in the statistical process. Data was collected with an “Internet + survey” mechanism involving remote sensing, satellite positioning, geographic information systems, mobile internet, cloud computing, and drones to reduce opportunities for statisticians to fake or screw up the data. 

China's National Animal Husbandry Station (NAHS), an arm of the agriculture ministry, held a March meeting to implement a new auditing requirement for the data its network of town, prefecture, provincial and national veterinarians and technicians who count animals and meat. In July, NAHS held a training meeting where officials from national and provincial offices and six livestock and artificial intelligence companies signed a "cooperative framework agreement for joint construction of a comprehensive livestock industry information platform." Officials in the livestock information systems bureaucracy complained about "islands" in data collection, inconsistent data entry at the grass roots level, and failure of local clerks to use APPs. The new system promises a new "shared" platform with "informatized" and "smart" livestock data monitoring to open a new chapter in the modernization of animal husbandry and comprehensive revitalization of the countryside in "the new era."

CCDI blames local statisticians, officials, and companies for statistical fraud, implying that central government and party leaders are victims of misinformation. CCDI blames local officials and companies for paying too much attention to inflating indicators to achieve targets, to burnish the reputation of their city or company, or to get loans or investments. The CCDI finds no blame in the system that incentivizes the fraud by evaluating officials based on statistical achievements and success in meeting targets, distributing transfer payments and subsidies to local governments based on statistical indicators, and handing out bank loans through a state monopoly on banking based on statistical reports. 

Industrial data is the most prominent example of statistical data-bloat, but the incentives extend to every area of the economy where statistical targets are handed down rung by rung in the bureaucratic ladder, including land and livestock data. 

• Under Xi Jinping's rule hysteria about "food security" has prioritized targets to preserve farmland and "create" new land to "balance" land lost to development; indicators of agricultural production--including land statistics--have been included in evaluation criteria for provincial and local officials. 
• Progress on a poverty-alleviation program handing out huge amounts of money is monitored with statistical surveys.
• Big money is invested in "constructing high quality cropland", fruit orchards, and rehabilitation of grasslands. 
• Counties compete to get transfer payments for being major grain, oilseed and pork-supplying counties on the basis of statistical indicators. 
• In 2019, officials at all levels were given targets for swine inventories and meat output to accelerate the recovery of pork supplies following the African swine fever epidemic that decimated the pig population. Hence, officials have been competing to see who can report the biggest swine numbers since last year. 

It's unclear whether China's new, improved statistics will be released to the public before they have been massaged and manipulated. Xi Jiping's other priorities include doing a good job on shaping public opinion and telling China's story (not necessarily non-fiction).

China's Loss of Cropland: 7.5 mil ha over 10 years

China's latest survey shows that cultivated land comprised 16 percent of national land use. Orchards and plantations account for another 3 percent. Forests and grasslands are the most prevalent land use, covering a combined 68 percent of land area. Urban/industrial/mining covers 4 percent of land, according to the survey results. The land survey results were released in a communique by China's Ministry of Natural Resources and National Bureau of Statistics after 3 years of work. This survey measured land area as of December 31, 2019. The previous land survey had gathered land data as of 2009. 

Calculated from China 3rd National Land Survey.

The sum of land area categories reported by the Chinese land survey totals near 7.8 million square km, substantially less than the 9.4 million square km China total land area reported by World Bank statistics. China's 2020 Statistical Yearbook reported data for 2017 slightly different from the 2009 land survey totals.

Officials are congratulating themselves on the success of their "strictest" land protection measures because the 127.86 million hectare cultivated land exceeds the 2020 target of 124.33 million hectares (1.865 million mu) set in a 2016-2030 national land plan. The cultivated land total is down 7.53 million hectares (6.2 percent) from the amount reported ten years earlier. At an average grain yield of 5.5 metric tons per hectare, the net decline in cultivated land area implies loss of 41 million metric tons of grain production capacity. Official statistics say grain yields rose 15 percent over 10 years. A different statistic on the area sown to crops reported by the National Bureau of Statistics somehow increased 10.5 million hectares over the same ten years that the area of land under cultivation declined 7.5 million hectares.

The communique doesn't mention it, but China would be at the "red line" of 120 million hectares and below its 2030 target (121.7 million hectares) if cultivated land falls at the same pace during the next decade.

Chart shows difference between land use amounts reported in national land surveys for 2009 and 2019. Wetlands were not included in the 2009 survey, so the wetland change reflects the amount reported in 2019.

Urbanized land area went up 6.6 million hectares between 2009 and 2019, but the communique claimed there was no net loss of cultivated land to urbanization.  The main loss of cropland was conversion to orchards. The communique says 4.2 million hectares of cultivated land were converted to plantations/orchards while some forest/orchard land was also converted to cropland. The communique insisted that 5.8 million hectares of plantations could easily be converted back to cropland, and another 11.1 million hectares could be converted through engineering projects. The communique said 15.27 million hectares of cultivated land was converted to forest, grassland, wetland, river beds, lakes, while 14.47 million hectares of forests, grassland, wetland, riverbeds, and lakes were converted to cultivation. 

China has ratcheted up its cropland statistics over the years. Data showed a modest decline from 1960 to the 1990s, but that total was widely believed to be understated. A 30-percent upward revision after the first land survey in 2006 was followed by another decade of modest decline. The 2009 land survey ratcheted the cropland area up again, followed by another decade of modest decline. 

Ecological land uses are a new emphasis in this land survey. The 23.5 million hectares of wetlands had not been included in the previous land survey. The 30-million-hectare increase in forest land between 2009 and 2019 is consistent with new emphasis on ecological uses, but there was no explanation of the 22.8-million-hectare decrease in grassland. 

According to the communique, the survey will be the basis for land planning. Local officials will be responsible for protecting cropland and preventing unauthorized conversions to nonagricultural uses. Requisition of cropland for urban uses must be "balanced" with new cropland created elsewhere. Cultivated land may be used to grow grains, cotton, oilseeds, sugar, vegetables, and other agricultural products. Some cropland is designated as "permanent basic farmland" which can only be used for grain production. 

Detailed data on land area within the major categories reported in the communique are compiled below. No regional breakdown was reported in the communique.