Structural Changes in China

1
Structural Changes in Chinas Hog and Feed
Production

• Francis C. Tuan and John Dyck
• ERS/USDA

2
Overview

• Chinas Livestock Production
• Chinas Hog and Pork Sector
• - Production and Consumption
• - Trade
• Chinas Feed Industry
• Sources of Data
• Related Policy Changes

3
Chinas 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

4
Chinas Hog and Pork Sector

• - Hog slaughter totaled 618 million head in 2004
• - Pork output is the core of the Chinas
  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

5
Chinas Hog and Pork Sector- continued
6
Chinas Hog and Pork Sector- continued
Number of farms
Production
31-50 head
51-200 head
0.15
1.12
201-1000 head
11-30 head
201-1000 head
Over 1000 head
3
2.47
0.02
7
Over 1000 head
6-10 head
0.01
4.63
51-200 head
4
31-50 head
2
11-30 head
16
Under 6 head
59
Under 6 head
6-10 head
12
91.6
7
Hog Production Distribution by Region
8
Chinas 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
• Chinas 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

9
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 Chinas Statistical Yearbooks, various
  years

10
Chinas Hog and Pork Trade

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

11
Chinas 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 Chinas Customs Statistics, various
  years

12
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

13
Chinas Manufactured Feed

• Chinas feed industry, worlds 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

14
Manufactured Feed Output
15
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.

16
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.

17
Sources of Livestock Data

• Production data -- Ministry of Agriculture (MOA),
  Chinas 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 -- Chinas Customs Statistics
• Feed Data -- Ministry of Agriculture

18
Policy Changes

• Liberalization of livestock production and
  marketing policies beginning in the mid-1980s
  have been critical to the growth of Chinas
  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

19
Summary and Conclusions

• Chinas 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 Chinas hog/livestock industry
• Major challenges ahead include SPS related issues
• The pace of structural changes in coming years
  will determine Chinas overall feed demand

20
ERS China hog/Pork Related Studies

• ERS studies on Chinas livestock sector (Tuan,
  1987)
• Main features of Chinas 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)
• Chinas emerging feed industry (China report,
  2000)
• Structural changes in Chinas livestock and feed
  production Trade implications (Tuan and Peng,
  2001)
• Chinas Hog Production Structure and Efficiency
  (Zhang, Somwaru, and Tuan, 2003)

21
Chinas 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 Chinas
  livestock sector
• --Historical trade of Chinas hog production
• --Geographical distribution of pork production
• --Estimation of hog production in 1998
• Demand for Live Hogs
• --Slaughter
• --Inventory
• --Trade
• Pork Consumption
• --Changes in pork consumption
• --Factors hindering the increase of pork
  consumption
• --Estimation of the demand for pork in 1998
• Export of Live Hogs and Pork
• Prices of Live Hogs

22
Chinas swine industryCommodity Yearbook (1999)
under the China Project

1. Importance of Hog Production to Chinas Livestock
   Industry
2. Hog Breeds and Commercialized Production System
3. Structure of Hog Production
4. Feed and Feeding
5. Cost of Production and Prices
6. Pork Output
7. Pork Consumption
8. Disease and Protection
9. Markets and Marketing System
10. Pork Processing System
11. Pork Trade