Structural Changes in China’s Hog and Feed Production

Francis C. Tuan and John Dyck

ERS/USDA

Overview

• China’s Livestock Production• China’s Hog and Pork Sector

- Production and Consumption- Trade

• China’s Feed Industry• Sources of Data• Related Policy Changes

China’s Livestock Production

- 6000 years of household “backyard” production

- Large but still growing rapidly

- Experienced significant structural changes since mid-1980s- Total meat output increased 58% (red meat 56%), poultry meat 44%, eggs 39%, cow milk 259%, over the last 9 years- Specialized household and commercial

operations grew rapidly since the mid-80s

China’s Hog and Pork Sector

- Hog slaughter totaled 618 million head in 2004

- Pork output is the core of the China’s livestock industry, reaching 47 million tons in 2004, largest in the world

- Improved feeding efficiency due to policy changes, production structural change, and use of manufactured feed

- Majority of pork still comes from household backyard feeding

China’s Hog and Pork Sector- continued

50%

60%

70%

80%

90%

100%

1985 1993 1996

Year

Back yard hog farms Specialized hog frams Hog enterprises

China’s Hog and Pork Sector- continued

Production

Under 6 head

91.6%

6-10 head4.63%

11-30 head2.47%

31-50 head0.15%

51-200 head1.12%

201-1000 head0.02%

Over 1000 head0.01%

Number of farms

Over 1000 head

Under 6 head59%

7%

201-1000 head3%

51-200 head4%

31-50 head2%

11-30 head16%

6-10 head12%

Hog Production Distribution by Region

China’s Pork Consumption

• Inverse relationship between p.c. pork consumption and p.c. grain consumption

• Slow increase in rural and urban p.c. pork consumption

• Growing discrepancies between production and consumption of pork

• China’s official hog numbers and pork output were revised since 1996 based on the First Ag Census

• Away from home pork consumption needs to be closely studied

Per Capita Availability and Consumption Pork

Unit: kg

Year P.C. Availability P.C. Consumption (Prod/pop)(Urban)

1981 11.9 16.9 1985 15.6 16.7 1990 20.0 18.5 1995 30.1 17.2 2000 31.8 16.7 2004 36.2 19.2

Sources: China’s Statistical Yearbooks, various years

China’s Hog and Pork Trade

• Trade volume and value are low if compared with the total output or export value

• China’s hogs are mainly exported to Hong Kong, Live hog (and chicken) exports to other destinations are restricted by disease problems

• Frozen pork or cuts exported to Middle East and Russia periodically confronted sanitary standard issues

• Expansion of pork exports is difficult because of SPS concerns

China’s Hog and Pork Export

Year Live Hogs Frozen, Fresh Pork

(1,000 head) (1,000 tons)

1985 2,960 111

1990 3,000 124

1995 2,530 150

2000 2,030 50

2001 1,960 100

2002 1,880 160

2003 1,880 210

2004 1,970 290

Sources: China’s Customs Statistics, various years

Traditional Feed and Terminology

• Fine feed--Raw or energy grain (corn, rice, wheat, and tubers), bran, oilseed meals

• By-products/residues--processing residues from distilling, tofu, sugar

• Additives• Roughage--hay, husks, straw, water plants• Wastes--food waste, table scraps

China’s Manufactured Feed • China’s feed industry, world’s second largest,

produced a total of 93 million tons in 2004• Domestic and foreign investment in feed mills

began in the mid-1980s• Compound and mixed feed output grew rapidly

in earlier years, reaching 68 million tons in 2004• Concentrate feed production and use,

particularly in rural areas, rose markedly over the last decade

• Feed quality improved, such as use of soybean meal, and variety increased. China imported more than 26 million of soybeans in 2005

Manufactured Feed Output

Year Compound and

mixed feed

Concentrate feed

Feed additives

Million tons 1985 15.00 na na

1990 31.22 0.51 0.21

1995 48.58 3.50 0.64

2000 59.12 12.49 2.53

2004 68.22 20.80 3.64

Sources: China's Agricultural Statistical Yearbook, various issues National Feed Industry Statistics, various issues

Feed Efficiency by Type of Livestock(kg feed/kg output)

Sources: ERS calculations, based on China National Development and Reform Commission Cost of Production Surveys.

0123456789

RoughageOther feedGrain

Pork, Eggs, and Poultry Account for Most of Feed Grain Use (2004)

Note: Grain requirements estimated by feed efficiency multiplied by livestock output.Sources: Estimated by ERS using China National Bureau of Statistics and China NDRC

cost of production surveys.

Pork45%

Eggs26%

Poultry12%

Milk5%

Fish8%

Beef and mutton

4%

Sources of Livestock Data

• Production data -- Ministry of Agriculture (MOA), China’s First Agricultural Census (1996)

• Consumption data -- National Bureau of Statistics, RCRE/MOA (Surveys)

• Cost of Production -- National Development and Reform Commission (NDRC Surveys)

• Price Data -- National Bureau of Statistics, Price Bureau/NDRC

• Trade Data -- China’s Customs Statistics

• Feed Data -- Ministry of Agriculture

Policy Changes• Liberalization of livestock production and marketing

policies beginning in the mid-1980s have been critical to the growth of China’s livestock sector

• Policy changes in hog production include:--Eliminating government procurements of live hogs--Government encourages setting up more efficient hog production bases

• Policy changes in hog marketing include:--Eliminating procurement prices--Opening up rural and free trade markets

• Government paid attention to the establishment of feed industry since the mid-1980s and regulations on slaughtering houses and sanitary conditions since the 1990s

Summary and Conclusions

• China’s hog/livestock sector was one of the sectors liberalized the earliest along with oilseed sector)

• Policies encouraging hog production bases and development of feed industry were key factors to the growth of China’s hog/livestock industry

• Major challenges ahead include SPS related issues

• The pace of structural changes in coming years will determine China’s overall feed demand

ERS China hog/Pork Related Studies

• ERS studies on China’s livestock sector (Tuan, 1987)• Main features of China’s animal protein economy (China

Report, 1998)• ERS hog/pork balance sheet team to China in 1998

(China project)• ERS pork industry sector study team to China in 1999

(China project)• China’s emerging feed industry (China report, 2000)• Structural changes in China’s livestock and feed

production: Trade implications (Tuan and Peng, 2001)• China’s Hog Production Structure and Efficiency (Zhang,

Somwaru, and Tuan, 2003)

China’s First Balance Sheet Exercise :Demand and Supply of pork in 1998 (contents) Executive Summary• Overview: Balance Sheet of Hog-Inventory in 1998• The Hog-Breeding Industry

--The importance of hog raising to China’s livestock sector--Historical trade of China’s hog production--Geographical distribution of pork production--Estimation of hog production in 1998

3. Demand for Live Hogs--Slaughter

--Inventory--Trade

4. Pork Consumption--Changes in pork consumption--Factors hindering the increase of pork consumption--Estimation of the demand for pork in 1998

5. Export of Live Hogs and Pork6. Prices of Live Hogs

China’s swine industry:Commodity Yearbook (1999) under the China Project

1. Importance of Hog Production to China’s Livestock Industry

2. Hog Breeds and Commercialized Production System3. Structure of Hog Production4. Feed and Feeding5. Cost of Production and Prices6. Pork Output7. Pork Consumption8. Disease and Protection9. Markets and Marketing System10. Pork Processing System11. Pork Trade