Looking at China…

Looking at China…

Blog by Jan Sallevelt, Director International A.I. & Business Development.

Due to the significant import of pork and organs by China, producers in Europe and the USA are experiencing a pleasantly higher price for their pigs. The import of organs and other special products by China could be structural, as the Chinese like to eat everything from the pig. If they could they would eat 6 legs and twice the available intestine of each pig. It will also take a while before all Chinese pigs will have the 4 ears needed to satisfy the market need.

But don’t be fooled. The national goal is to become self sufficient, just like big neighbor Russia that is close to becoming self sufficient and completely contrary to Japan that has a structural pork import.

China wants higher standards

China wants higher standards for hygiene and product quality. Vietnamese producers learned this the hard way recently when China stopped importing their pork because slaughterhouses no longer met Chinese standards.

Within China, the development towards higher quality is leading to the disappearance of small and backyard producers and the development of large-scale producers. These large-scale producers, similar to the large USA integrators, invest heavily in well-equipped, big modern farms. These companies are making their major investments in the north of China where there is a more moderate climate. This region is also close to grain production areas and far away from highly populated cities like Beijing, Shanghai, Guangzhou and Hong Kong.

A nice example was recently published in the media : the newest pig farm of Yangxiang with 30,000 sows. The farm has high standards of welfare and manure treatment. All air from the pig houses is processed and cleaned before it leaves the 9-story pig flat and SPF is standard with high levels of bio security.

Exporting markets can better invest in efficiency than in capacity

 

Somewhere in the future these big companies will efficiently produce enough high-standard pork to reduce imports and to fulfill the increasing national demand. However, nobody can say when the reduction of back-yard production and the increase of industrial supply will be in balance with the increasing demand. When this is in balance, China will either reduce imports or even stop importing. This might not happen for another ten years, but who knows?

All things being considered, I would say there is no reason to increase the American or European pig population by investing in new pig farms for the production of pork for China. Higher efficiency in China will decrease pig prices there and that will have an effect on the price exporters will get. Therefore in my opinion, the exporting markets can better invest in efficiency than in capacity.

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