1. Structural Changes in China’s Hog and Feed Production Francis C. Tuan and John Dyck ERS/USDA

2. 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

3. 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

4. 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

5. China’s Hog and Pork Sector - continued

6. Production Under 6 head 91.6% 6-10 head 4.63% 11-30 head 2.47% 31-50 head 0.15% 51-200 head 1.12% 201-1000 head 0.02% Over 1000 head 0.01% Number of farms Over 1000 head Under 6 head 59% 7% 201-1000 head 3% 51-200 head 4% 31-50 head 2% 11-30 head 16% 6-10 head 12%

7. Hog Production Distribution by Region

8. 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

9. Per Capita Availability and Consumption Pork Unit: kg Year P.C. AvailabilityP.C. Consumption (Prod/pop)(Urban) 198111.9 16.9 198515.6 16.7 199020.0 18.5 199530.1 17.2 200031.8 16.7 200436.2 19.2 Sources: China’s Statistical Yearbooks, various years

10. 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

11. China’s Hog and Pork Export Year Live HogsFrozen, Fresh Pork (1,000 head) (1,000 tons) 19852,960111 19903,000124 19952,530150 20002,030 50 20011,960100 20021,880160 20031,880210 20041,970290 Sources: China’s 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. 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

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), 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

18. 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

19. 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

20. 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)

21. 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 Pork 6.Prices of Live Hogs

22. 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 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