China Hog Industry News

[Mustang Sally Farm]

Wednesday, January 18, 2012
Farm Produce Prices Rise for 8th Straight Week
CHINA - Farm produce prices rose for an eighth consecutive week last week, while the prices of producer goods remained unchanged, the Ministry of Commerce said Tuesday.


Meat prices rose last week, with prices of pork, mutton and beef up 0.8 per cent, 0.6 per cent and 0.5 per cent, respectively. Chicken prices went up 0.4 per cent.

Prices of edible oil and aquatic products also gained slightly last week. But egg prices fell 0.3 per cent from one week earlier, the statement said.

Food prices have a one-third weighting in the calculation of China's consumer price index (CPI), a major gauge of inflation. The CPI eased to 4.1 per cent in December, the slowest rise in 15 months.

The ministry said prices of major producer goods remained unchanged or even slid last week. Prices of cement and other building raw materials fell as many construction projects have been suspended for the Spring Festival, which will fall on 23 January.

[Mustang Sally Farm]

Tuesday, January 24, 2012
FMD Breaks Out in Feeder Pigs
TAIWAN - The Taiwanese veterinary authorities have reported an outbreak of foot and mouth disease in feeder pigs in the Penghu Islands.


The World Organisation for Animal Health (OIE) received an immediate notification yesterday, 23 January. The outbreak was initially observed on 19 January and confirmed on 21 January. The outbreak took place at an animal quarantine house.

A total of 239 pigs were found susceptible to the outbreak, out of which 140 cases were reported. All 239 pigs were destroyed.

Some of the feeder pigs at the quarantine station, which were transported from Taiwan Island to Penghu Island, were found with vesicular lesions. The testing result of collected samples from National Laboratory showed positive reaction of RT-PCR tests confirming the serotype O of foot and mouth disease infection.

All the pigs were destroyed and cleaning and disinfection of the premises were completed. Clinical inspection and epidemiological investigation were conducted on the origin pig farm in Taiwan and surrounding farms that keep cloven-hoofed animals within 3-km radius of the index premise (a total of 1 cattle/goat/deer farm, 1 goat/pig farm, 1 deer farm, 5 goat farms and 7 cattle farms); the results showed the animals were in healthy condition and no clinical or epidemiological evidence of infection was found. Further tests of samples collected from the slaughtered feeder pigs are on-going.

The source of the outbreak remains inconclusive.

[Mustang Sally Farm]

Wednesday, February 01, 2012
Tönnies Focus: Better Welfare & China Expansion
ANALYSIS - One of the largest pig processing company in Germany, Tönnies, has announced plans to expand in China and at home in Europe, it aims to raise pig welfare standards, writes Jackie Linden, senior editor.

Last week, the German magazine, WirtschaftsWoche (Economics Weekly), carried at interview with Clemens Tönnies, board chief of Germany's largest pig slaughterhouse, which has an annual turnover of €4.3 billion.

Mr Tönnies highlighted two important issues for the future of his company's business: the need for pig producers at home to improve further the rearing conditions for their animals and its plans for expansion in China. (He also stressed the need for his local football club, Schalke 04 – of which he is chairman – to increase revenue and reduce its debt burden.)

Speaking on the need to raise pig welfare, Mr Tönnies explained that his company has established a new staff position, directly under the board, which is entirely focused on animal welfare. The appointee is responsible for defining the ideal housing conditions for breeding and growing pigs and the company will go to farmers with these specifications, Mr Tönnies explained.

He added that Tönnies has a commitment from all major retail chains that endorses the increased costs associated with these higher standards.

"Then we will all work together to increase the standards", said Mr Tönnies.

The initial aim is to develop the characteristics of a model for the ideal house, a process he expects to take two years and to add around €20 to the cost of producing each pig. This will make pig meat a little more expensive but he says the extra cost is justified by saying that pig meat in Germany is rather too inexpensive.

Expansion in China
Mr Tönnies described his company's intention to undergo massive expansion in China after establishing a joint venture there. He wants to establish a nationwide network of large cutting plants across the country, supplying some of the pork from Germany.

He explained that, with this in mind, the company is already building a new packaging and frozen logistics centre at its headquarters in Rheda.

The aim of Tönnies's involvement in China is to restructure the meat supply chain. Currently, meat is distributed right across the country, mostly unrefrigerated, by moped by middle men. Tönnies wants to make the conditions more hygienic.

For each of the new cutting plants, the Chinese partner is expected to invest the equivalent of €60 to €70 million. Mr Tönnies explained that his company is still in talks with the joint venture partner over the ownership structure.

Appeal lodged over acquisition of Tummel
Finally in the interview, Mr Tönnies confirmed his company's intention to take over Münsterland butcher, Tummel. The Bundeskartellamt (national monopolies authority) halted the acquisition late last year, citing concerns that it would give the company too dominant a market position.

Mr Tönnies commented that his company's lawyers hold the view that this decision was incorrect and an appeal has been lodged at the Higher Regional Court of Düsseldorf.


Jackie Linden, Senior Editor

[Mustang Sally Farm]

Friday, February 10, 2012
Third TOPIGS Import into China in Three Months
CHINA - TOPIGS has imported 550 more top breeding pigs into China. This is the third import in three months.

The pigs were imported from the TOPIGS high health SPF nucleus farms in Canada and were delivered to a feed company in Shanghai that has built a brand new breeding farm. These imported breeding pigs will become the top of an integrated pork production pyramid.

 TOPIGS is continuing to build up its presence in China, the world’s biggest market for breeding pigs. This third successful import in a row means that a total of 2050 TOPIGS breeding animals have been imported in three months.

The imported pigs came from SPF nucleus breeding farms in Europe and Canada and will provide China’s fast-growing professional pig industry with the genetics it needs to realise high-level production.

[Mustang Sally Farm]

Monday, February 13, 2012
Govt to Wipe Out Substandard Slaughtering
CHINA - China is vowing to eliminate substandard meat processing in the country within the next few months as part of a campaign to ensure food is safe, officials said on Friday.


"Some small and medium-sized slaughterhouses and processors that have the proper authorization now fail to meet the standards for meat processing, and that has raised great potential risks for the country's meat supply," Jiang Zengwei, deputy minister of commerce, said at a news conference held by nine government departments, including the Ministry of Commerce, the Ministry of Agriculture and the Ministry of Environmental Protection.

The departments will begin a four-month campaign in March to improve standards at plants where pigs are slaughtered and processed. They will work to ensure the conditions at such places are sanitary, that proper quarantine measures are being taken and that the environment is being protected.

The campaign will look at the 18,150 authorized slaughterhouses and processors in China. Its goal will be to prevent water-injected meat, meat from sick animals or other substandard products from reaching the market, he said.

Mr Zengwei called on the ministry's local branches to use the campaign to clean up substandard slaughterhouses and processors, saying "they are the biggest obstacles to ensuring the safety of meat".

Meat slaughtering and processing that has not received official approvals is illegal in China, the only exception being that rural residents are allowed to slaughter their own livestock.

Pork makes up more than 60 per cent of the meat the Chinese eat every year, according to official figures.

Many in the public became concerned about meat safety after reports came out alleging that the illegal feed additive clenbuterol had been used by farmers in Henan province in March 2011.

Clenbuterol, better known as "lean meat powder", can cause pigs to build muscle and burn fat faster, resulting in leaner pork.

The drug can cause dizziness and heart palpitations among people who eat meat that has been treated with it, and China prohibits its use as an additive in pigs feed.

The growth of the slaughtering industry, meanwhile, has led to environmental pollution.

To meet the demand for meat in 2011, about 210 million pigs were slaughtered, producing 100 million tons of wastewater along the way, Li Ganjie, deputy minister of environmental protection, said at the conference.

"Starting this year, the ministry will use its website to blacklist slaughterhouses and processors that have been found to be violating the law, and it will also regulate the approval of new slaughterhouses in the future," Mr Zengwei said.

Liang Haoyi, a senior researcher at the China Animal Agriculture Association, said on Friday that the pig-farming and meat-slaughtering industries in China must ever contend with greater and greater obstacles as they try to protect the public's health.

"Government authorities should take measures to prevent sick animals from being sold for slaughter," he said. "And there is a need for harsher punishment to be imposed on those who trade sick animals."

[Mustang Sally Farm]

Tuesday, February 14, 2012
VC, PE Firms Show Appetite for Food Industry
CHINA - As the Chinese become richer and pay more attention to the quality of food, venture-capital and private-equity companies have started to invest in the country's agricultural sector and cultivate food products' brands.


By the end of 2010, the average per capita consumption of pork by Chinese people came to 33.1 kg, an 85 per cent increase from 1990. The figure for dairy products, meanwhile, was 11.27 kg, 6.7 times greater than 10 years ago, according to a report by Southwest Securities Co Ltd.

The report said Chinese people are placing a greater priority on their health, which has directly influenced agriculture production and investment activities in the country.

Beijing Century Chestnut Ecological Agriculture Co Ltd, a company that provides eggs and chickens to large Chinese cities, raised 100 million yuan ($15.8 million) last year from a financial consortium led by DT Capital Partners and Tiantu Capital Co Ltd.

Chen Lihui, a financial consultant for the investment and a partner at SSG Capital Ltd, said institutional investors are putting money into Beijing Century Chestnut Ecological Agriculture because it has its own chicken breed and is setting up a comprehensive system to guarantee food safety, making it a brand that will be fairly easy to promote.

"Brands are now important because people are no longer satisfied with simply having enough to eat," Mr Lihui said. "More and more they want high-quality food. Having good brand recognition is also important if the company plans to raise money in the capital market."

He said the price of high-quality eggs is about 50 per cent more than ordinary ones, and he expressed confidence that such products will prove popular in the market.

He said Beijing Century Chestnut also plans to use the money raised to develop high-quality rice, grains and vegetables.

Kunwu Jiuding Capital Co Ltd, a domestic equity-investment company, is also putting 100 million yuan into a food company's rice business. Kunwu Jiuding said it plans to help build a strong brand for the company, which it declined to name.

"An increasing number of agricultural companies are setting up brands, but the costs of working with supermarkets and shops, as well as marketing activities can also be high," Liu Achang, an investment manager at Kunwu Jiuding, said.

He said he and his colleagues are discussing possible brands for the company Kunwu Jiuding has invested in.

A researcher at the strategic investment department of Beijing Xinfadi Agro Co Ltd, the largest wholesale market for farm produce in the capital city, said supermarkets and other retailers pay most attention to the branding of eggs, meat, and dairy products because such foods are more likely to give rise to troubles.

Recently the capital markets have witnessed a fairly large number of investments into the agriculture business. Since 2006, global investment firms such as KKR & Co LP, Carlyle Group and Blackstone Group have invested in the Chinese agriculture sector.

Blackstone led the pack, spending about $600 million on the China Shouguang Agricultural Product Logistic Park. Domestic investment institutions such as CDH Fund and Hony Capital have also made similar investments.

[Mustang Sally Farm]

Wednesday, February 15, 2012
ERS Report Highlights Volatility of China’s Pork Industry
ANALYSIS - Growth of China's domestic pig meat industry is being held back by rising costs, disease outbreaks, animal waste disposal challenges and food safety concerns as well as more competitively priced imports, according to a new report from the USDA Economic Research Service. Senior editor, Jackie Linden, highlights the main points of the report.

With China’s emergence as a new source of potential demand for US pork exports, it is important for American farmers, business leaders and policy–makers to understand the volatile nature of the Chinese pork industry, according to a new report from the USDA Economic Research Service entitled China’s Volatile Pork Industry.

One of the key factors, says the report's authors, is the volatility of the Chinese market in terms of prices, inventories and pork output as the result of a number of market factors.

Policy interventions by the Chinese government have helped to consolidation in the domestic pork industry but they have not achieved market stabilisation, they say.

The ERS report continues that when pork prices are high locally, China imports more pork. And pork prices have risen along with production costs, disease outbreaks, environmental threats and food safety concerns, all of which have held back the expansion of China's own pig meat industry recently.

Interestingly, the average hog price in China has been above that in the US (in US-dollar terms) since 2007, and last year, the prices of all pig meat types, both muscle and offals, were significantly higher for Chinese product than imported products from the US.

Like other countries, Chinese pig producers have been hit by higher production costs in recent years, a situation exacerbated by the movement of the population to the towns and cities. The shortage of labour in the countryside has meant that many small backyard farms have given up pig production and the larger commercial units that have replaced them tend to use more expensive maize and compound feeds, rather than by-products and wastes, and labour costs have also risen.

Diseases have also impacted the Chinese pig meat market, says the report. It cites outbreaks of ‘blue ear’ disease (PRRS), foot-and-mouth disease (FMD), classical swine fever, pneumonia, Streptococcus suis, circovirus, parasites and erysipelas as common in China’s pig industry. News reports indicate that large losses attributed to disease periodically restrict the supply of pork, contributing to price surge although the effects are hard to quantify with precision.

Producing large quantities of pork in China entails additional costs, such as the environmental impacts of pig manure waste and food safety incidents, continues the report.

The dense population of pigs in some provinces strains the capacity of the land to supply feed for the animals and to absorb their waste. Chinese officials have begun promoting ‘ecological’ modes of production that use pig waste to feed fish or fertilise crops and use bacteria to break down the manure.

Food safety is also a major concern for Chinese consumers of pork. The media there have frequently reported on the pig industry's use of illegal feed additives, the slaughter of sick hogs, the pumping of potentially contaminated water into hogs prior to slaughter and the contamination of feed with heavy metals. Furthermore, Chinese consumers are becoming more wary of pork products that contain food additives.

Food safety concerns are contributing to changes in purchasing patterns that may make consumers more receptive to imported pork, continues the report. Traditionally, Chinese consumers preferred to purchase freshly slaughtered pork from small wet market vendors but food safety concerns have encouraged them to shift purchases to supermarkets, where pork is believed to be more sanitary and free of illegal feed additives.

The ERS report concludes with a warning to its target US audience that volatility in China's domestic market may result in similar volatility in export sales but the warning also applies to other countries eyeing China as a potential export market for pig meat.

China’s Volatile Pork Industry was written by Fred Gale and Daniel Marti, agricultural economists with USDA's Economic Research Service and Dinghuan Hu, a professor with the Institute of Agricultural Economics and Development at the Chinese Academy of Agricultural Sciences.

[Mustang Sally Farm]

Wednesday, February 15, 2012
Chinese Pig Meat Imports up Sharply
CHINA - Imports of fresh and frozen pork were 134 per cent more last year than in 2010, reports AHDB in its European Market Survey, while pig offal imports were up 26 per cent. Increases were recorded for almost all the main exporting countries. Additional countries will have access to the Chinese market during 2012, including Brazil and more EU Member States.
 

China’s economy has grown at about eight per cent per year over the last two decades. Increasing incomes have led to a changing food consumption pattern, in particular, an increasing consumption of meat. Pork has historically been the primary animal protein source in Chinese diets, and its consumption level has increased significantly.


Similarly, Chinese pig production has increased over the past 20 years at an average rate of 2.1 per cent per year. However, at the same time, production costs have also risen, squeezing profit margins from many backyard producers despite relatively high pork prices. In 2011 pork production in China declined by three per cent as low prices through the first half of 2010 encouraged many smaller producers to exit the industry. In addition, producers were faced with unusually severe and persistent outbreaks of animal diseases, such as FMD, PRRS and pig epidemic diarrhoea in piglets in late 2010 and early 2011.

Imports of pig meat have risen dramatically to fill the resulting supply gap. Official trade figures indicate that Chinese imports of fresh and frozen pork were up 134 per cent compared with 2010. The average price of imports was up 65 per cent in renminbi terms due to a combination of rising prices and an increasing share of more expensive cuts.

In May 2010, the United States resumed exports to China following the lifting of trade restrictions on pig meat associated with A-H1N1 influenza. This enabled the US to account for over half of all pork imports in 2011, compared to just 15 per cent the year before. According to Chinese data, some of this rise came at the expense of Denmark, whose shipments declined by 17 per cent. However, this contradicts Danish trade figures which show increased shipments, albeit from a lower base. Other EU Member States shipped increased quantities, particularly Spain, France and Germany. Overall imports from the EU increased by 24 per cent compared with 2010 levels. Canada was the other major supplier of pork to China and its shipments increased by 27 per cent in 2011.

Similarly, the total volume of offal imports to China increased by 26 per cent compared with a year ago. This coincided with a 23 per cent increase in the renminbi unit price of offal imports. Again, the growth in offal imports was mainly made up of increased shipments from the US. This was partly offset by reduced volumes from Denmark and Canada, previously the two largest suppliers, although again this contradicts the trends recorded in those countries’ trade data.

Fuelled by increased prices, China’s pork producers have steadily expanded the herd size during 2011 and this will help boost pork output in 2012 according to the USDA forecast. In addition, production growth is also being supported by China’s decision in July 2011 to resume a 100 yuan (CNY; US$15.60) per sow subsidy and introduce other policies to encourage herd expansion. Nevertheless, imports are likely to continue to grow in 2012, fuelled by relatively strong economic growth and continued firm demand for pork. Additional countries will have access to the Chinese market during 2012, including Brazil and more EU Member States.

[Mustang Sally Farm]

China’s Rising Pork Imports Linked to Domestic Market Fluctuations
Prices, hog inventories and pork output in China fluctuate from year to year in response to various factors, according to Fred Gale, Daniel Marti and Dinghuan Hu in a report entitled China's Volatile Pork Markets from USDA's Economic Research Service.



Abstract
With China’s emergence as a new source of potential demand for US pork exports, it is important for US farmers, business leaders, and policymakers to understand the volatile nature of China’s pork industry. Prices, hog inventories and pork output in China fluctuate from year to year in response to various factors that influence the market, and China’s imports of pork tend to rise when Chinese hog prices are high.

Extensive policy intervention by the Chinese government has contributed to consolidation in the country’s pork industry but has not stabilized the market. Imported pork is becoming more competitive in China as Chinese pork production costs rise and animal disease outbreaks, environmental threats, and food safety concerns constrain growth of China’s hog industry.

Introduction
China’s potential as a major pork importer presents opportunities for hog farmers, business leaders, and investors around the world. Articles and newsletters examining China’s effects on the global marketplace reflect buoyant optimism: "The long-run potential for US pork in China is enormous" (Hayes, 2010), and "The potential for further Chinese importation of pork is almost incomprehensible" (a hog industry observer quoted by Dyson (2008)). Announcements of pork sales to China can affect the US market. For example, in October 2009, the Wall Street Journal reported "China’s pledge to lift a ban on US pork drove prices of lean hogs to a three-month high on expectations of increased exports to the world’s largest pork consumer" (Cui and Waters, 2009).

As China begins to play a larger role in the world pork market, it is important for industry analysts, business leaders, and policymakers to understand the complex factors driving the Chinese hog/pork sector. China’s pork industry is constantly buffeted by a range of influences, including disease epidemics, feed prices, policy interventions, seasonal consumption patterns, demand for other meats, and macroeconomic factors. While much attention is focused on the upward trend in commodity prices, pork prices in China tend to rise and fall in multi-year cycles as the industry expands and contracts. The degree of volatility appears to have increased after record-high pork prices in 2007 prompted extensive government intervention and a surge in private investment accelerated structural change in the industry. Following a period of depressed prices in 2010, Chinese pork prices rose to new highs in 2011. China’s imports of pork fluctuated in a similar cyclical manner.

This report provides information on volatility in the Chinese pork industry. It reviews recent trends in China-Hong Kong pork imports and fluctuations in Chinese pork prices. It also analyzes the influences of rising feed costs, policy interventions, structural change, and disease epidemics on China’s pork industry. As increases in production costs, animal disease epidemics, animal waste disposal challenges, and food safety concerns limit the expansion of China’s domestic pork industry, the outlook for pork exports to China is favourable. However, volatility in China’s domestic market may result in similar volatility in export sales.

China’s Rising Pork Imports Linked to Domestic Market Fluctuations
China’s potential to affect the world pork market derives from the size and volatility of its domestic pork market. China accounts for nearly half of the world’s pork production and consumption. Its annual pork output is four to five times that of the United States and more than double that of the European Union. According to official Chinese statistics, China slaughters over 600 million hogs annually – one hog for every 2.2 Chinese people.

Historically, China has been a mostly self-sufficient pork economy. Mainland China traditionally imported modest amounts of pork offal and muscle meats and exported a similar amount of pork and live hogs to Hong Kong (a separate customs territory from mainland China). Some pork shipments from other countries to Hong Kong are re-exported to mainland China through ‘gray’ market channels, but the amount is unknown. While Hong Kong is a short distance from the country producing half of the world’s pork, most of the territory’s imports come from Europe, the United States, and Brazil. From 2000 to 2006, China and Hong Kong combined to import between 500,000 and 600,000 metric tons of pork and pork products annually. These amounts were a significant share of world pork trade but equated to less than one per cent of annual pork consumption in China-Hong Kong.

China and Hong Kong pork imports surged in 2007 when a shortfall in Chinese pork production led to record Chinese pork prices. That year, Hong Kong-China pork imports nearly doubled to just over one million metric tons (mmt), then rose to over 1.9mmt in 2008 (figure 1). According to the US Meat Export Federation, the 2008 total far surpassed the previous pork-import record of 1mmt set by Japan in 2005. In 2009, China-Hong Kong pork imports fell to about 1.5mmt – still nearly three times the pace of imports earlier in the decade – but rebounded to 1.8mmt in 2010. The 2010 import volume was equivalent to 3.6 per cent of China’s domestic pork output. The United States supplied about 20 per cent of China-Hong Kong pork imports in recent years.


For the US pork industry, China-Hong Kong has been one of the leading export markets since 2007. During the peak import period of 2008, US sales to the region accounted for over 18 per cent of US pork exports, about double the annual share exported to China-Hong Kong during 2000-2006.

Monthly statistics on mainland China’s pork trade reveal a link between imports and domestic pork prices (figure 2). High domestic prices during 2007-08 reflected short supplies in the Chinese market and prompted a surge in pork imports. The average domestic hog price in China doubled from about $.52 per pound in the first four months of 2007 to a peak of $1.08 per pound in April 2008. Monthly imports by mainland China grew rapidly as prices rose, reaching a peak of 119,000mt in June 2008, up from 15,000 to 30,000mt during 2004-06. Imports were boosted by a temporary cut in the country’s pork tariff and a state-owned company’s contract to purchase US pork to build up reserves ahead of the Olympic Games held in Beijing in August 2008.


After peaking in April 2008, Chinese pork prices fell until early 2009. China’s monthly pork imports also fell to under 40,000 mt during the first half of 2009. The decline in prices reached a low of $0.61 per pound in May 2009, about a year after the peak. A combination of factors helped drive down prices during this period: a build-up in production capacity that increased the domestic supply and a temporary decrease in demand due to concerns among Chinese consumers that the H1N1 influenza virus (swine flu) could be transmitted by eating pork. While no link between pork consumption and H1N1 transmission was scientifically established, Chinese authorities still banned imports of pork from North America to prevent the spread of the disease to China. The ban remained in place for the remainder of 2009 and stopped direct imports of US pork for nearly a year until June 2010.

Chinese pork prices began another run of monthly increases in the second half of 2010 and reached new highs during 2011, three years after the sharp increase in prices during 2007-08. With domestic pork prices rising, less expensive foreign pork was more competitive in the Chinese market. Chinese customs statistics revealed that China’s monthly pork imports during late 2010 and 2011 surpassed the record pace set in 2008, rising as high as 150,000mt during September 2011 (see figure 2). Imports from the United States accounted for most of the import growth during 2011.

[Mustang Sally Farm]

Thursday, February 23, 2012
Pig Company Aims to Raise $300m from Local Bourse
HONG KONG - China Putian Food Holdings, a company engaged in pig farming, is seeking a listing in Hong Kong.


The Fujian-based firm is also a pork wholesaler and retailer. It raises 36,300 pigs annually, making up 20 per cent of the province's total output.

The Standard reports that next month, Putian aims to raise up to HK$300 million. The roadshow is scheduled next week.

Last year, companies in the staple food sector were the biggest beneficiaries of soaring inflation.

The price of pork surged by 45.5 per cent in August from the same period in 2010, easing from a 57 per cent gain in July.

Henan Chuying Agro-pastora Co, the first pig raiser to float shares in the mainland, forecast a 250 per cent jump in net profit last year.

Meanwhile, shares of bakery chain Christine International Holdings and Xiwang Special Steel start trading on the local bourse today. In the gray market, Christine closed at HK$1.63, slightly above the offer price of HK$1.6. Each investor may get one board lot of shares as the issue was 2.5 times oversubscribed.

But Xiwang was poorly received. In the gray market the shares traded 12.07 per cent below the offer price at HK$2.65. For each board lot of 2,000 shares, an investor would have made a paper loss of HK$320.

Separately, Canada's Sunshine Oilsands ends bookbuilding at noon today. It attracted HK$32.03 million margin orders, insufficient to cover its HK$469 million retail target.

But HSBC (0005) foresaw an upcoming warm IPO market as secondary volumes shows signs of a pick-up.

[Mustang Sally Farm]

Wednesday, February 29, 2012
Brasil Foods Ships Pork to China
BRAZIL - Tomorrow, 1 March, BRF is to send the first shipment of pork to China. The product, frozen boneless pork shoulder, was processed at the company’s unit in Rio Verde (State of Goias), one of only three Brazilian meat processing plants authorized to export to China.


The product is to be traded under a joint venture set up recently by BRF and the Chinese company, Dah Chong Hong Limited (DCH), for distributing products on the Chinese market, processing meat at local plants, developing the Sadia brand and operating on the retail and food service markets in Continental China, Hong Kong and Macau.

At present, BRF is authorized to export only boneless pork to China, but the company is working on licensing plants in the State of Santa Catarina, which is also authorized to ship boned pork, since the region is considered free of foot-and-mouth disease and requires no vaccination.

China is the world’s biggest producer of pork, but is unable to satisfy local demand. Access to the Chinese market is a milestone for both BRF and Brazil, providing a promising outlook for Brazilian agribusiness.

BRF and DCH were reported to be discussing a possible partnership last May. In its first year, the deal is expected to trade 140 thousand metric tons of product, with revenues of around US$ 450 million and investments in working capital.

In the first project phase, BRF is to provide production capacity, technical support and marketing for the products to be marketed under the joint venture. DCH will provide the supply and distribution chain and facilities for processing, packaging and general support services.

[Mustang Sally Farm]

Rising Prices and Costs for Chinese Pork
Rising prices in China’s domestic pork market were the main contributor to the country’s rising pork imports, write Fred Gale, Daniel Marti and Dinghuan Hu in a report entitled ‘China’s Volatile Pork Industry’ from the USDA Economic Research Service.



From 1991 to 2006, Chinese hog prices fluctuated within a relatively narrow range of $0.30 per pound to $0.50 per pound and were usually less than US prices (figure 3). After a sharp increase during 2007-08, however, Chinese hog prices have been significantly higher than US hog prices. While Chinese hog prices fell sharply after peaking in 2008, the average price during 2007-10 ($0.79 per pound) was more than double the average in 1991-2006 ($0.37 per pound). During 2011, prices rose as high as $1.40 per pound.

The shift in prices is an indication of the general improvement of prospects for US pork sales to China. To be cost-competitive in China, however, US pork must be comparable in cost or cheaper than Chinese pork after accounting for freight costs, tariffs (12-20 per cent), and value-added taxes (13-17 per cent). Overall, the authors estimate that prices in the Chinese market would have to be approximately 30 to 45 per cent higher than US prices for US pork to be cost–competitive in China.

US and Chinese consumers have complementary tastes that encourage pork trade between the two countries. US consumers prefer muscle meats, while Chinese consumers prefer offal and variety meats that have low value in the United States (Hayes and Clemens, 1997; Fabiosa et al., 2005). As a reflection of these differing preferences, price competitiveness varies for different cuts of pork. In 2011, the average US prices of livers, hearts, hocks, feet, kidneys and tails were less than half the prices of corresponding parts in a Beijing wholesale market (figure 4).

Prices of all cuts tend to rise and fall to reflect general changes in pork prices, and in 2011, the rise in Chinese hog prices drove the prices of both muscle meats and variety meats well above corresponding US prices. For example, the price of a lean carcass in Beijing was about $70 higher than the US carcass price of about $91 per 100lbs. A year earlier, carcass prices had been nearly equal in the two countries. In mid-2011, muscle meat prices were also relatively high in China. The Beijing price of hams was more than double the US price, the price of spare ribs was nearly 50 per cent higher, and the price of bellies was nearly 40 per cent higher. Variety meats constitute most of the US pork exported to China, but the widening difference in prices improves the prospects for US muscle meats to be competitive in China.

 


High pork prices in China likely stem from the rising costs of hog production in China. ERS analysis of data from China’s National Development and Reform Commission (NDRC) shows that average hog production costs, converted to US dollars, more than doubled from 2002 to 2009. Chinese hog production costs per pound of live weight rose from about $0.30 in 2002 to $0.71 in 2010 (figure 5). Feed is the largest of the hog production expenses in China, accounting for about 60 per cent of the total. Feed costs rose from $0.18 per pound in 2002 to $0.25 per pound in 2006. In 2010, the feed cost rose to $0.44 per pound, an increase of 77 per cent from 2006. The cost of a feeder pig more than doubled during 2002-10 as well.4 Estimates of hog production costs for 2011 were not available when this report was prepared but with corn prices rising, it is likely that feed costs rose further in 2011.

Labour and other expenses may have more of an impact on hog production costs than is indicated in figure 5. China’s vibrant labor market and an increase in school attendance have absorbed slack household labor that was traditionally used for small-scale ‘backyard’ hog production. According to industry reports, the number of rural households raising hogs has been in decline since 2007. And as these small-scale farms exit the industry, they are increasingly being replaced by larger commercial-scale farms operated by companies or farmers who specialize in raising hogs.5 Compared with small farms, commercial-scale farms have higher overhead costs for housing, equipment, and manure treatment; they purchase higher value breeds of feeder pigs; and they use paid laborers and technicians instead of relying on unpaid family labour. Commercial-scale farms purchase commercial feeds, while small-scale farms use inexpensive crop stalks, bran and hulls from grains, food scraps, and forages.


The increase in feed costs has pushed Chinese hog production costs above those of the United States. Based on data from China and US production cost surveys for 2009, US hog producers had significantly lower costs per pound of live hog weight ($0.57) than commercial-scale hog producers in China ($0.68) and ‘backyard’ producers in China ($0.70) (figure 6). The US cost advantage was mostly due to lower feed expenses and may be a reflection of a more efficient conversion of feed to meat as well as lower feed prices. Even the Chinese cost advantage in feeder pig prices observed in 2002 by Fabiosa et al. (2005) was reversed after the increase in feeder pig prices during 2007. The Chinese surveys may understate costs of commercial-scale producers by excluding very large 10,000-head farms that are becoming more common in China. These farms have overhead costs that may be comparable to the relatively high ‘other’ costs shown for US farms in figure 6.


Grain prices in China have been rising due to the scarcity of cropland and surging demand for grain by feed mills and industrial users. Chinese hog producers and feed mills pay much higher prices for corn than do their US counterparts, and in recent years, rising corn prices have pushed China’s feed expenses higher. Rising feed prices tend to push hog and pork prices upward as well.

While the Chinese pork industry still uses a wide variety of feeds, Chinese market analysts focus on the price of corn as an indicator of feed costs (see below, ‘Wide Variety of Feeds Used’). When high corn prices raise the cost of producing pork in China, industry members may take two approaches to alleviate the cost pressure on Chinese consumers: (1) import corn from the United States or other countries with lower corn prices to reduce the cost of producing pork in China, or (2) import pork produced in countries with lower feed costs. While pork production costs are also rising in the United States, US feed costs remain lower than in China because the United States has more abundant land, water and grain resources. Meeting Chinese demand for pork by producing hogs near sources of feed in the United States and then exporting pork to China is more cost-efficient than exporting large volumes of grain and oilseeds to produce pork in China (Hayes and Clemens, 1997).

The difference between corn costs in China and those in the United States varies from year to year. Corn prices have generally been rising and are higher in China, but surging US corn prices during 2007-08 and 2010-11 narrowed the gap. A comparison of the monthly average cash prices of corn in Guangdong Province and central Illinois during 2005-10 provides evidence of the cost differential (figure 7).6 The Guangdong corn price increased from about $150 per metric ton to over $300 in late 2010. The price of corn in central Illinois was consistently lower than the price in Guangdong, but the difference between the two fluctuated throughout the five-year period. In early 2010, the Illinois price was less than half the Guangdong price. The large price difference during mid-2010 stimulated China’s first significant corn imports from the United States since the 1990s. (As noted earlier, China’s pork imports were also robust during 2010.) US corn sales to China came to a standstill as US corn prices rose and the corn-price difference narrowed later in 2010. However, the Illinois corn price was still 20 percent below the Guangdong price in February 2011.


Wide Variety of Feeds Used
A standard Chinese hog feed ration includes about 60 per cent corn and 15 per cent soybean meal. However, the composition of feed can vary widely across farms. Moreover, feed formulations can vary dramatically by region, by farm size and over time. Chinese farmers have traditionally fed pigs locally available grains, wheat bran, rice hulls, crop residues, vines, potatoes, food scraps and byproducts from agricultural processors.

The composition of feed depends on the types of materials that are available locally at low cost. Farmers often mix these materials with commercial concentrate feeds that contain soymeal, other protein meals, amino acids, vitamins and trace elements. An increasing number of farmers use commercial formula feeds that include various combinations of the above items already mixed together. Based on interviews with farmers in Sichuan Province, the proportion of corn in hog feed ranges from 30 to 70 per cent, while the proportion of commercial concentrate feeds varies from 10 to 20 per cent. Commercial-scale farms account for an increasing share of hog production in China and tend to use a higher proportion of corn and commercial feeds than do smaller farms.

[Mustang Sally Farm]

Cycles in China’s Pork Market
The sharp increase in pork prices during 2007 drew attention to the Chinese market’s volatility and cycles, highlight Fred Gale, Daniel Marti and Dinghuan Hu in a report entitled ‘China’s Volatile Pork Industry’ from the USDA Economic Research Service.



Fluctuations in prices and production, however, are not new to the industry. Cyclical patterns in the hog market were recognized in the United States during the 19th century and studied extensively by agricultural economists beginning in the early 20th century (Haas and Ezekiel, 1926). Chinese scholars and analysts have observed similar cyclical fluctuations in China (Liu and Wang 2009; 2010). Zhang (2010a) identified six periods of pork-price increases (1985, 1988, 1994, 1997, 2004, 2007). Several Chinese studies identified a series of four three– to four–year cycles in the hog sector between 1996 and 2009 (Han and Qin, 2007; Liu and Wang, 2009; Nie et al., 2009). The price increase during 2007 prompted Chinese officials to intervene extensively in the pork market to stabilise prices, which is discussed later in this report.

The well-known ‘cobweb model’ was developed in the 1930s to show how cycles in pork prices can result from the biological lag in supply response (Ezekiel, 1938; Coase and Fowler, 1935). In China, it takes 18 to 20 months to raise a new generation of gilts to breeding age, produce a crop of pigs and then raise those pigs to slaughter weight (Zhou, 2010). Thus, when an increase in pork prices prompts farmers to expand production, the corresponding increase in pork supply may take more than a year to enter the market. Conversely, when farmers slaughter sows during a downturn in the market, the sector’s ability to expand supply is constrained in future months.

Seasonal fluctuations in demand that correspond to major holidays also affect China’s pork market. Hog inventories build up in anticipation of peak demand before the Chinese New Year (usually late January or early February) and the mid-Autumn festival and National Day (mid-September to 1 October). In the months following these festival/holiday periods, demand, hog slaughter and pork prices often decline.

Cycles are evident in the ratio of hog price to corn price, an indicator of short-term profitability in the hog sector. A high ratio indicates that the output price (for hogs) is high relative to the price of the chief input (corn), which typically induces farms to build up hog inventories to increase production. Conversely, a low ratio signals financial losses, which prompt farms to decrease hog inventories.

China’s hog-corn price ratio has generally fluctuated around 6:1 (figure 8; see section on The Hog-Corn Price Ratio below). A series of fluctuations in China’s pork industry are marked by peaks in the ratio early in 2005 and a much higher peak three years later in 2008. Periods of low prices and severe losses for hog producers occurred in mid–2006 and mid–2009, again three years apart.


The recent cycles resulted from a chain of events that began in 2004, when concerns over an outbreak of avian influenza drove Chinese consumers to substitute pork for poultry meat. The increased demand for pork increased hog prices and encouraged farmers to expand hog inventories. Hog prices peaked in 2005 but subsequently fell as the supply of pork surged. Prices reached a low in mid–2006, and many producers experienced losses and culled sows. In late 2006 and 2007, animal disease epidemics reduced the supply of pork, and pork prices again began to rise. The previous year’s cull of sows and continuing concerns over the effects of animal diseases constrained the industry’s ability to expand production in the short run. Demographic changes also affected the pork supply as off-farm employment and rising incomes encouraged many rural families to purchase pork instead of raising hogs in their backyards. The inelastic short–run supply contributed to a sharp increase in pork prices.

Rapidly rising pork prices became a national concern in China during 2007. China’s consumer price index for meat was up 40 per cent year–over–year, the highest increase among all categories. The jump in pork prices contributed to the country’s high inflation rate that year.7

An NDRC study of the factors behind rising pork prices during 2007 focused on the tight supply of feeder pigs. The report found that hog prices received by farmers were up 45 per cent year–on–year but that feeder pig prices were up 60 per cent. The feeder pig supply was reduced by the culling of sows and the effects of a disease epidemic that caused sows to abort.

High prices for hogs in 2007 and early 2008 attracted investment in large Chinese hog farms and pork processing. Investors included meat, feed and real estate companies; overseas investment banks; and a well-known Chinese software entrepreneur (Jiao and Kou, 2010). According to official statistics, China’s hog inventory grew five per cent during 2007, and it expanded at a similar pace in 2008. The hog inventory peaked at nearly 470 million head in late 2009, an increase of 51 million from the 2006 total. This marked China’s largest expansion of hog inventories since 1996-99.

During 2009 and 2010, two periods of losses and recovery occurred about a year apart, interrupting the pattern of three–year cycles. The hog-corn price ratio reached a low point in May 2009, about three years after the rapid increase in pork prices in 2007. During the second half of 2009, prices rebounded briefly but the hog-corn price ratio fell again during the first half of 2010, following outbreaks of animal disease epidemics that led to many animal deaths and early slaughter of sick hogs. Furthermore, low prices and economic losses prompted many farmers to cull sows or exit the industry, and China’s hog inventory declined during early 2010. Hog prices rebounded in July that year and continued rising during the second half of 2010 and into 2011. The sector returned to profitability during the second half of 2010 but rising corn prices slowed the increase in the hog-corn price ratio. In early 2011, hog prices neared the historical high reached in 2008 and the hog-corn price ratio was 7:1, slightly above ‘normal’. Due to high corn prices, however, the 2011 hog–corn price ratio did not rise as high as it did during the 2008 peak period.

By mid–2011, rising pork prices were again a major influence on China’s consumer price index, as they had been in 2007. The sow inventory had yet to recover from the losses and culls of the previous year, and the tight supply of piglets slowed the industry’s expansion. High feeder pig prices seemed to be consistent with a limited supply of feeder pigs, and Ministry of Agriculture statistics indicated that sow inventories were down two to three per cent from a year earlier. In one article, industry analysts expressed unease that the situation would be ‘a repeat of the 2008 roller coaster’ (Sun et al., 2011).

The Hog–Corn Price Ratio
The hog–corn price ratio became a valued resource for US commodity market analysts in the 19th century as it reflected the ratio of output price to the price of the main input. At that time, many Midwestern farmers used hogs as an alternative way of marketing corn. When corn prices were low, farmers fed the corn to hogs instead of selling it on the market.

The hog–corn price ratio is now widely used in China as an indicator of hog sector profitability. Market analysts and policy–makers in China often view 6:1 as a ‘normal’ level for the ratio. Higher values are considered an indicator of profitability and expansion, while lower values are an indicator of losses and contraction. The break–even level is often reported to be 5.5:1. The ratio is not as widely used in the US hog industry today because corn accounts for a smaller share of production costs than in years past. The ratio’s value as an indicator is also questionable in the Chinese hog industry because corn is only one of many kinds of feeds used by Chinese farmers.

In China, the hog–corn price ratio is computed using prices in yuan per kg. In the United States, the ratio is traditionally computed in dollars per cwt for hogs and dollars per bushel for corn. Because the units used by the two countries differ, the US ratio is typically quoted as a much larger number. Using data from the 1970s, Van Arsdall and Nelson (1984) calculated a break–even (cash basis) ratio of 15:1 to 16:1, which would be equivalent to 8.5:1 to 9.0:1 calculated using prices in dollars per kilo. In a study of historical patterns in the US hog–corn ratio, Holt and Craig (2006) surmised that an increasing trend in the ratio beginning in the 1940s reflected diversification of hog feedstuffs during the post–war period. Recently, US hog market analysts have quoted a higher reference level of 18:1 to 20:1.

Chinese officials regarded the fluctuations in hog prices and profitability beginning in 2007 as evidence of unusual volatility. This prompted extensive government intervention to stabilise the market. However, a comparison with historical US data for 1909 to 2010 shows that the recent cycles in the Chinese hog–corn price ratio are not unusual (see figure). Chinese fluctuations are similar to cycles that occurred in the United States during the early 20th century. Coase and Fowler’s (1935) description of hog cycles in Great Britain during 1920 to 1933 is also remarkably similar to that of recent cycles in China.

[Mustang Sally Farm]

Cycles in China’s Pork Market
The sharp increase in pork prices during 2007 drew attention to the Chinese market’s volatility and cycles, highlight Fred Gale, Daniel Marti and Dinghuan Hu in a report entitled ‘China’s Volatile Pork Industry’ from the USDA Economic Research Service.



Fluctuations in prices and production, however, are not new to the industry. Cyclical patterns in the hog market were recognized in the United States during the 19th century and studied extensively by agricultural economists beginning in the early 20th century (Haas and Ezekiel, 1926). Chinese scholars and analysts have observed similar cyclical fluctuations in China (Liu and Wang 2009; 2010). Zhang (2010a) identified six periods of pork-price increases (1985, 1988, 1994, 1997, 2004, 2007). Several Chinese studies identified a series of four three– to four–year cycles in the hog sector between 1996 and 2009 (Han and Qin, 2007; Liu and Wang, 2009; Nie et al., 2009). The price increase during 2007 prompted Chinese officials to intervene extensively in the pork market to stabilise prices, which is discussed later in this report.

The well-known ‘cobweb model’ was developed in the 1930s to show how cycles in pork prices can result from the biological lag in supply response (Ezekiel, 1938; Coase and Fowler, 1935). In China, it takes 18 to 20 months to raise a new generation of gilts to breeding age, produce a crop of pigs and then raise those pigs to slaughter weight (Zhou, 2010). Thus, when an increase in pork prices prompts farmers to expand production, the corresponding increase in pork supply may take more than a year to enter the market. Conversely, when farmers slaughter sows during a downturn in the market, the sector’s ability to expand supply is constrained in future months.

Seasonal fluctuations in demand that correspond to major holidays also affect China’s pork market. Hog inventories build up in anticipation of peak demand before the Chinese New Year (usually late January or early February) and the mid-Autumn festival and National Day (mid-September to 1 October). In the months following these festival/holiday periods, demand, hog slaughter and pork prices often decline.

Cycles are evident in the ratio of hog price to corn price, an indicator of short-term profitability in the hog sector. A high ratio indicates that the output price (for hogs) is high relative to the price of the chief input (corn), which typically induces farms to build up hog inventories to increase production. Conversely, a low ratio signals financial losses, which prompt farms to decrease hog inventories.

China’s hog-corn price ratio has generally fluctuated around 6:1 (figure 8; see section on The Hog-Corn Price Ratio below). A series of fluctuations in China’s pork industry are marked by peaks in the ratio early in 2005 and a much higher peak three years later in 2008. Periods of low prices and severe losses for hog producers occurred in mid–2006 and mid–2009, again three years apart.


The recent cycles resulted from a chain of events that began in 2004, when concerns over an outbreak of avian influenza drove Chinese consumers to substitute pork for poultry meat. The increased demand for pork increased hog prices and encouraged farmers to expand hog inventories. Hog prices peaked in 2005 but subsequently fell as the supply of pork surged. Prices reached a low in mid–2006, and many producers experienced losses and culled sows. In late 2006 and 2007, animal disease epidemics reduced the supply of pork, and pork prices again began to rise. The previous year’s cull of sows and continuing concerns over the effects of animal diseases constrained the industry’s ability to expand production in the short run. Demographic changes also affected the pork supply as off-farm employment and rising incomes encouraged many rural families to purchase pork instead of raising hogs in their backyards. The inelastic short–run supply contributed to a sharp increase in pork prices.

Rapidly rising pork prices became a national concern in China during 2007. China’s consumer price index for meat was up 40 per cent year–over–year, the highest increase among all categories. The jump in pork prices contributed to the country’s high inflation rate that year.7

An NDRC study of the factors behind rising pork prices during 2007 focused on the tight supply of feeder pigs. The report found that hog prices received by farmers were up 45 per cent year–on–year but that feeder pig prices were up 60 per cent. The feeder pig supply was reduced by the culling of sows and the effects of a disease epidemic that caused sows to abort.

High prices for hogs in 2007 and early 2008 attracted investment in large Chinese hog farms and pork processing. Investors included meat, feed and real estate companies; overseas investment banks; and a well-known Chinese software entrepreneur (Jiao and Kou, 2010). According to official statistics, China’s hog inventory grew five per cent during 2007, and it expanded at a similar pace in 2008. The hog inventory peaked at nearly 470 million head in late 2009, an increase of 51 million from the 2006 total. This marked China’s largest expansion of hog inventories since 1996-99.

During 2009 and 2010, two periods of losses and recovery occurred about a year apart, interrupting the pattern of three–year cycles. The hog-corn price ratio reached a low point in May 2009, about three years after the rapid increase in pork prices in 2007. During the second half of 2009, prices rebounded briefly but the hog-corn price ratio fell again during the first half of 2010, following outbreaks of animal disease epidemics that led to many animal deaths and early slaughter of sick hogs. Furthermore, low prices and economic losses prompted many farmers to cull sows or exit the industry, and China’s hog inventory declined during early 2010. Hog prices rebounded in July that year and continued rising during the second half of 2010 and into 2011. The sector returned to profitability during the second half of 2010 but rising corn prices slowed the increase in the hog-corn price ratio. In early 2011, hog prices neared the historical high reached in 2008 and the hog-corn price ratio was 7:1, slightly above ‘normal’. Due to high corn prices, however, the 2011 hog–corn price ratio did not rise as high as it did during the 2008 peak period.

By mid–2011, rising pork prices were again a major influence on China’s consumer price index, as they had been in 2007. The sow inventory had yet to recover from the losses and culls of the previous year, and the tight supply of piglets slowed the industry’s expansion. High feeder pig prices seemed to be consistent with a limited supply of feeder pigs, and Ministry of Agriculture statistics indicated that sow inventories were down two to three per cent from a year earlier. In one article, industry analysts expressed unease that the situation would be ‘a repeat of the 2008 roller coaster’ (Sun et al., 2011).

The Hog–Corn Price Ratio
The hog–corn price ratio became a valued resource for US commodity market analysts in the 19th century as it reflected the ratio of output price to the price of the main input. At that time, many Midwestern farmers used hogs as an alternative way of marketing corn. When corn prices were low, farmers fed the corn to hogs instead of selling it on the market.

The hog–corn price ratio is now widely used in China as an indicator of hog sector profitability. Market analysts and policy–makers in China often view 6:1 as a ‘normal’ level for the ratio. Higher values are considered an indicator of profitability and expansion, while lower values are an indicator of losses and contraction. The break–even level is often reported to be 5.5:1. The ratio is not as widely used in the US hog industry today because corn accounts for a smaller share of production costs than in years past. The ratio’s value as an indicator is also questionable in the Chinese hog industry because corn is only one of many kinds of feeds used by Chinese farmers.

In China, the hog–corn price ratio is computed using prices in yuan per kg. In the United States, the ratio is traditionally computed in dollars per cwt for hogs and dollars per bushel for corn. Because the units used by the two countries differ, the US ratio is typically quoted as a much larger number. Using data from the 1970s, Van Arsdall and Nelson (1984) calculated a break–even (cash basis) ratio of 15:1 to 16:1, which would be equivalent to 8.5:1 to 9.0:1 calculated using prices in dollars per kilo. In a study of historical patterns in the US hog–corn ratio, Holt and Craig (2006) surmised that an increasing trend in the ratio beginning in the 1940s reflected diversification of hog feedstuffs during the post–war period. Recently, US hog market analysts have quoted a higher reference level of 18:1 to 20:1.

Chinese officials regarded the fluctuations in hog prices and profitability beginning in 2007 as evidence of unusual volatility. This prompted extensive government intervention to stabilise the market. However, a comparison with historical US data for 1909 to 2010 shows that the recent cycles in the Chinese hog–corn price ratio are not unusual (see figure). Chinese fluctuations are similar to cycles that occurred in the United States during the early 20th century. Coase and Fowler’s (1935) description of hog cycles in Great Britain during 1920 to 1933 is also remarkably similar to that of recent cycles in China.


Footnote
7The increase in China’s consumer price index was 12 per cent for all food and 4.8 per cent for all items during 2007.

[Mustang Sally Farm]

Monday, March 12, 2012
Chinese Steelmaker Invests in Pig Farm
CHINA - China's steelmakers, battling to stop their profit margins from narrowing further, are diversifying into unrelated sectors, including wine production, vegetable planting, and even raising pigs.


Deng Qilin, a deputy at the National People's Congress and general manager of Wuhan Iron and Steel (Group) Corp, a leading Chinese steelmaker, revealed that the company's latest goal is to build a farm that can hold 10,000 pigs.

The project is one of the company's investment programs at more than 39 billion yuan ($6.2 billion). It will also build vegetable bases to tap the food market and is ready to enter the logistics business by providing services to urban residents.

While steel production in China has increased over recent years, steelmakers' profits have slumped to less than 3 per cent, far below the 6 per cent registered by the industrial sector.