Small hog farmers have helped destabilize pork prices and played havoc with feed demand forecasts, according to the chairman of China’s top corn buyer New Hope Group.
“Individual farmers, small in scale, have no plans in their breeding scale. Whenever the prices are good, they increase breeding and when prices are lower, they reduce pig numbers,” New Hope’s chairman Liu Yonghao told Reuters.
Leader of the drive to consolidate the fragmented pig-farming sector is state-owned trader COFCO Co. Ltd.
COFCO plans to set up integrated feed production, pig breeding, slaughterhouses and meat delivery in three to five years.
Last week it said its first such production chain would be in operation by the end of 2010, processing 500,000 pigs per year in the eastern province of Jiangsu, neighbouring Shanghai.
It is also starting to breed pigs at two farms in the northern port city of Tianjin, close to Beijing, with a goal of raising pig numbers at each farm to 100,000.
Last year COFCO expanded its production chain by taking over Maverick Food, a Chinese joint venture of Smithfield Foods Inc. and Belgium’s ARTAL Group. It also bought a stake of nearly five per cent in Smithfield, the top U. S. pork producer.
COFCO aims to build facilities with 10 million pigs in five years, agribusiness analysts said. China’s current market leader is Guangdong Wens, which sold 3.45 million head last year.
That is still a mere fraction of China’s market, which usually has stocks of about 450 million head. Small farms account for about one-fifth of that total, although a higher proportion in Sichuan, China’s top pig-producing province, which has about 60 million pigs in total.
Analysts say the province’s farms are at a disadvantage because they are so far inland, far from corn production or imports. Zhang said individual breeders have fallen to 50-60 per cent of the Sichuan market, from 70-80 per cent.
Small players have also lost ground in the last two years because of three billion yuan ($441 million) in government subsidies to large-scale farms, said Guo Huiyong at Beijing Orient Agribusiness Consultant Co. Ltd.
The subsidies, aimed at improving food safety, have helped big farms add 10 million head.