Officials Scrap Hog Subsidies, Revive Environmental Controls to Cut Capacity

Chinese authorities met with 25 major hog companies on September 16 in an ongoing effort to eliminate excess capacity that is driving down hog prices. Companies and provincial officials were ordered to reduce productive sow herds by 1 million head by the end of January 2026. Companies were ordered to reduce their hog slaughter by 10 percent during 2026, cut back "secondary fattening" and keep slaughter weights at no more than 120 kg. Central and local officials were ordered to stop subsidies and bankers were ordered to stop giving loans for hog farm expansions. Provincial officials are under pressure to tighten up on enforcement of environmental regulations, a campaign that could shut down large numbers of non-compliant farms. 

The agriculture ministry's livestock and veterinary bureau and the National Development and Reform Commission's price bureau gathered representatives from 25 major hog-producing companies at the September 16 meeting in Beijing. This was the latest in a series of documents and meetings since April that called on the industry to pare back production capacity to halt a long slide in hog prices. 

• An April 28 "Implementation Plan for Conserving Grain in the Livestock Industry" called for controlling the "master switch" of sow inventories, guiding farms on appropriate timing of slaughter and optimizing herd size.
• A late May meeting called for zero increase in sow numbers, holding slaughter weight at 120 kg, and refusing to sell hogs for "secondary fattening." 
• At a July 23 forum on "high-quality hog industry development" the minister of agriculture called for strict control of production capacity, rational culling of sows, cuts in sow inventories, a pledge to stop selling hogs for secondary fattening, controlling slaughter weights, and pausing additions to production capacity.
  

The September 16 meeting went beyond the earlier orders by issuing specific targets and dates to companies, setting sow herd targets for provincial governments, and including subsidies, bank credit and environmental regulation in the scope of measures to curb production capacity. 

By calling for a halt to central and local government subsidies for hog production and farm construction Chinese authorities tacitly acknowledged that their own subsidies created the excess capacity they are trying to pare back. This year's list of swine subsidies includes payments-per-sow of up to 1000 yuan per head, subsidized insurance for sows and finishing hogs, funds for building barns, manure collection and biogas facilities, earmarked loans, streamlined environmental approvals for new farms, artificial insemination and breeding animal subsidies. Guizhou Province gave sows subsidies to 116 companies and cooperatives that had between 98 and over 16,000 sows. In Yinchuan, Gansu Province, there is a subsidy of 100 yuan per head for each hog slaughtered. In Jianping County of Liaoning Province, semen from improved breeds was subsidized for 13,338 farmers with between 1 and over 600 sows. The September 19 order to pare back subsidies appears to be a reversal of a generous subsidy campaign launched almost exactly 6 years ago by Vice Premier Hu Chunhua to alleviate a serious pork shortage during an African swine fever epidemic.

The September meeting's recognition that subsidies contribute to excess pork capacity in China is ironic in view of the antidumping of imported European pork--released 11 days before the September 15 meeting--that faulted subsidized imported pork for driving down prices in 2021. Last year when the investigation was launched this blog highlighted the role of subsidies in expanding Chinese pork production and driving down prices.  The antidumping investigation observed huge growth in production, sales, market share and employment during the 2020-23 investigation period for the Chinese hog companies it surveyed, yet it found "harm" from imported pork causing prices to go down. In fact, during 2020-21 bringing down prices for consumers was a priority, and the Chinese Government's pork reserve company was actually one of the primary importers of pork during 2019-21. Nearly all pork auctioned to alleviate shortages during those years was identified as imported.

Another commentary on the September 16 meeting pointed to a revival of strict environmental enforcement as a factor that was estimated to squeeze out 12% to 16% of sows by 2027. According to this article, provincial officials have been ordered to strictly investigate livestock and poultry pollution control with surprise inspection programs as a "political task." Shandong's Jinan municipality found problems in 16 of 41 farms they checked, and Guangxi's Bobai County found problems in 335 of 17,622 farms. An emphasis on ensuring farms separate rainwater from sewage and prevent overflow during the monsoon season suggests this environmental crackdown may have been spurred by recent flooding and complaints of sewage-tainted tap water in some communities this summer. 

The new environmental program is an echo of an earlier push to reduce or eliminate livestock farms in areas prone to pollution. That program closed hundreds of thousands of farms before vanishing during the 2019 pork shortage. It now appears to have been resurrected. The new effort targets the same Yangtze and Pearl River water source protection regions that were targeted a decade ago in a plan to shift hog production into central and western regions. It also targets farms with old equipment within 500 meters of residential areas and bodies of water that were previously targeted. The commentary warns that millions of sows could be eliminated by shutting down non-compliant farms.