China Hog Industry News

[Mustang Sally Farm]

Tuesday, March 13, 2012
Yurun Group Sees Profits Down
CHINA - Chinese integrated meat processor China Yurun Food Group has reported a turnover of HK$32,315 million last year compared to HK$21 in 2010 - an increase of 50.5 per cent.


The Group's gross profit was HK$2,785 million compared to HK$3 in 2010, which was a drop of 10.1 per cent.

The Group's overall gross profit margin reached 8.6 per cent during the year.

The company said the decrease in gross profit margin was mainly due to the significant increase in raw material costs, in particular hog prices, together with weakened market confidence in the group's products and the increasing difficulty in transferring the group's increased operation costs to its customers.

The decrease has also ben attricuted to product promotion activities conducted by the group in the fourth quarter of 2011, which were targeted at retaining market share.

The board of directors of the Company has not recommended the payment of final dividend for the year of 2011.

Zhu Yicai, Chairman of Yurun Food said: "In 2011, the pork product and hog slaughtering industries in China faced unprecedented challenges. It has been a short term turmoil experienced by the highly fragmented hog slaughtering and meat processing industries in China.

"For Yurun Food, this crisis allowed us to better recognise the challenges and opportunities of the Group's development in all aspects.

"The possible insufficient communication with the market during our development led to misunderstandings on the Group's quality management processes, which triggered a crisis of trust.

"Having experienced this setback, Yurun Food will remain committed to the realization of its long-term development strategies, optimize the communication channels between the Company and consumers, so as to rebuild the brand and regain the trust of consumers of the Group, as well as to bring returns to shareholders."

Mr Zhu added: "The management believes that the Group's business has reached the light at the end of the tunnel.

"We are confident that our business will progressively return to normal and realise a long-term steady growth.

"Looking ahead, the Group will be fully committed to our motto of 'you trust because we care', continue to implement internationally recognized internal quality control measures, strive to realise its nationwide marketing and production capacity development, so as to capture the business opportunities brought by industry consolidation, and to strengthen its leading market position."

As at 31 December 2011, slaughtering capacity of the Group was 46.05 million heads per year, representing an increase of 10.45 million heads as compared to 35.60 million heads at the end of 2010, while the group's annual capacity of downstream meat processing was 304,000 tons. The Group will continue to expand its capacity, accelerate the enhancement of its nationwide production capacity in the coming years and aim to reach a slaughtering capacity of 70 million heads per year, as well as a downstream capacity of 600,000 tons per year by 2015, so as to further strengthen its leading position in the industry and capture the tremendous business opportunities in both upstream and downstream markets.

[Mustang Sally Farm]

Wednesday, March 14, 2012
Rise in Rvenue and Income for Zhongpin
CHINA - Chinese meat and food processing company, Zhongpin, has reported higher revenues, net income, and diluted earnings per share for 2011.


Revenues increased 54 per cent to $1,456.2 million in 2011 from $946.7 million in 2010, while net income increased by 10 per cent to $64.2 million in 2011 from $58.3 million in 2010.

Basic earnings per share decreased 0.6 per cent to $1.66 in 2011 from $1.67 in 2010 on average basic shares outstanding that were 10.5 per cent higher than 2010, but diluted earnings per share increased 0.6 per cent to $1.66 in 2011 from $1.65 in 2010 on average diluted shares outstanding that were 9.3 per cent higher than 2010.

Over the coming year, Zhongpin expects that sales revenues should be within a range of US$1.55 billion to $1.72 billion for 2012.

Gross profit margin is expected to be within the range of 8.6 per cent to 10.2 per cent. Net profit margin is expected to be within the range of 3.3 per cent to 4.2 per cent.

The resulting diluted earnings per share for the year 2012 is expected to be within the range of $1.36 to $1.92 per share, assuming average diluted common shares outstanding of about 37.5 million shares in 2012.

Zhongpin added 201,000 metric tons of annual capacity for pork and pork products during 2011 to bring total capacity at year-end 2011 to 904,760 metric tons.

Zhongpin said it will be investing about $10.5 million in a by-product processing plant in Changge, Henan province, to product sausage casings and the raw material used to make heparin sodium.

Annual production capacity will be 100 million metres of casings and 300 billion units of the raw material for heparin sodium. The construction is scheduled to start in the first quarter of 2012 and operations should begin in fourth quarter of 2012.

Xianfu Zhu, Chairman and Chief Executive Officer for Zhongpin, said: "We continued to deepen our penetration in our current markets and aggressively increase our geographic markets, sales locations, customers, and operations in 2011 to support higher sales, profits, and operating cash flow in the years ahead, so the year was good in operations.

"Our financial results in 2011 reflected new aggressive price competition in the markets and our higher expenses in operations, promotion, marketing, and sales to build our market share in 2011 and prepare the Company for increasing success in the future.

"Most of our 54 per cent increase in sales revenues in 2011 came from our pork products prices for which rose an average of 44 per cent for the year, on tonnage that was up 7 per cent. With the prices of both hogs and pork expected to decline from 15 per cent to 20 per cent in 2012, it will be difficult to report higher results in 2012 compared with 2011.

"In 2012, we will slow the rate of our capacity expansions and focus on greater use of existing facilities, which we believe should help our financial results.

"As of today, China expects its economy to grow at a good rate in 2012, with its gross domestic product continuing to increase but perhaps at a slower rate of growth.

"Despite challenging competition that is likely to continue in the marketplace in 2012, and given the good outlook for the China's economy, we expect to report somewhat higher revenues in 2012 than 2011, a somewhat lower gross profit margin and a somewhat lower net profit margin than in 2011, and diluted earnings per share within the range of $1.36 to $1.92 per share in 2012. The lower margins are expected because we are facing tough competition in the markets and must simultaneously prepare the Company for improved operating and financial performance that we expect will create substantial additional value for shareholders in the years ahead.

"As you know, we believe that the number one reason for our continuing success is that Zhongpin provides outstanding, flavorful, and increasingly convenient pork products with the highest product quality and safely, from farm to fork.

"We developed and launched 79 new products in 2011, most of which focus on regional flavors and convenient preparation methods that should be very attractive in China. As of December 31, 2011, we offered more than 410 types of pork products and more than 25 different categories of vegetables and fresh fruits. In addition, we had more than 90 new products under development at yearend 2011.

"Our fundamental strategy has proven its effectiveness in the past several years, including 2011. Our major objectives, which are designed to create additional long-term value for our shareholders, include increasing our brand recognition and sales, expanding our market presence, increasing our production capacity, expanding and optimizing our product lines, and maintaining our technological superiority.

"We plan to continue building a leading national brand by gaining higher market share and prudently increasing our markets, processing plants, and cold-chain distribution networks to satisfy the increasing demand for our high quality products. The result should be growing value created over the years to benefit our shareholders."

[Mustang Sally Farm]

Thursday, March 15, 2012
Tianli Agritech Reports Increased Market Hog Sales
CHINA - Tianli Agritech yesterday announced that the company's revenue increased 49 per cent year-over-year to $8.7 million due to higher selling prices, increased unit sales of Tianli market hogs plus retail sales of "Tianli AnPuluo" hog meat.


Tianli's Chairwoman and CEO, Hanying Li, said, "We completed another successful year, which included the acquisition of our 11th hog farm and the launch of our Tianli-branded retail pork products through our partnership with An Puluo Foods. While our fourth quarter results were negatively impacted by complications resulting from contaminated feed at a few of our farms, we responded quickly to contain the impact. Having implemented a series of additional safeguards, we expect the negative drag on our financials to subside in the first half of 2012."

Revenue for the fourth quarter of 2011 increased 49 per cent to $8.7 million from same period a year ago. The Company sold 25,472 hogs, down 1 per cent from the prior year reflecting the stronger demand for market hogs offset by the weaker demand for breeder hogs. Sales of market hogs increased 68 per cent to $5.3 million as high retail pork prices drove strong demand for market hogs. Breeder hog sales fell 38 per cent to $1.6 million, representing 19 per cent of total sales in the fourth quarter of 2011.

Through its cooperation with An Puluo Food, Tianli's retail division generated $1.7 million in sales in the fourth quarter after launching in the third quarter of 2011. Tianli provides and co-brands hog meat cuts, packaged and sold in refrigerated food cases under the Tianli AnPuluo brand in over 50 major retail outlets in great Wuhan, including Wal-Mart, Zon 100 and RT Mart.

Gross profit in the fourth quarter of 2011 was $2.0 million, a 20 per cent decrease from the same period last year. Gross margin was approximately 23 per cent and 43 per cent for the fourth quarter of 2011 and 2010, respectively. The year-over-year margin decline was attributable to $1.3 million in costs related to the disposal of a shipment of contaminated hog feed and the treatment and disposal of hogs which became ill as a result of eating the contaminated feed.

Selling, general and administrative expenses were $0.9 million in the fourth quarter of 2011, an increase of approximately $0.5 million. Approximately $0.1 million of the increase was related to higher public company expenses and $0.4 million related to the Company's retail business and marketing costs not present in the year ago period.

Net income attributable to Tianli common stockholders was approximately $0.8 million, down 61 per cent from $2.2 million in the three months ended December 31, 2010. Earnings per fully diluted share were $0.09 compared to $0.12 the previous year.

[Mustang Sally Farm]

Chinese Policies Attempt to Smooth the Cycle
Chinese officials use a variety of policy measures that are intended to reduce cyclical fluctuations in pork production, explain Fred Gale, Daniel Marti and Dinghuan Hu in a report entitled ‘China’s Volatile Pork Industry’ from the USDA Economic Research Service.



Measures include subsidies, tax breaks, and market interventions in hog farming and pork processing. Government officials often play a coordinating role by recruiting farmers as suppliers, arranging access to land and bank loans, and brokering deals with investors or final customers.

In response to the steep increase in pork prices during 2007, the government announced a package of hog-sector subsidies just two months after rising pork prices became a subject of public concern (see Zhu, 2007). A series of additional grants, subsidies and tax breaks aimed at the pork industry followed later in 2007 and in succeeding years. A programme introduced in 2009 sought to stabilise pork prices by buying and selling pork for government reserves. The government renewed its emphasis on pork policies in mid–2011 when pork prices surged again.

Pork Industry Subsidies
China’s pork policies are part of an ongoing effort to transform the traditional structure of ‘backyard’ farms, small butchers and pork vendors into a ‘modern’ livestock sector (see box, “Policy Priorities: Modernisation and Stability”). Since the 1980s, efforts to modernise the industry have included standardising hog breeds, feeds and veterinary medicines; regulating the use of feed additives; enforcing animal health regulations; and shifting toward modern slaughter, processing, and retail markets.

Efforts to modernise China’s pork industry were revisited in 2007, a period marked by soaring prices and widespread animal disease epidemics. Officials viewed the prevalence of small–scale backyard farmers as a source of instability because these operations are said to more readily slaughter sows during a market downturn and are more susceptible to animal disease epidemics than larger operations.8 Officials believe a modernized industry chain will bring stability to the market while also addressing food safety and disease issues.

China’s pork policies emphasise improvements in the breeding and farrowing stages of production, upgrading or refurbishing structures and equipment for farms raising slaughter hogs, and attracting investment to the sector.9 The main policy measures include the following (values converted to US$ at the official exchange rate in 2010):

A subsidy payment for each breedable sow set at 50 yuan per head in 2007, raised to 100 yuan ($14.60) in 2008. The sow subsidy was withdrawn in many areas in 2009 but was restored in 2011.


Subsidised insurance for sows against losses from disease and natural disasters. The premium (paid to a designated insurance company) is 60 yuan ($8.78) per head, of which 12 yuan is paid by farmers and 48 yuan is paid by central and local governments. Initially, the program only covered breedable sows, but it was extended to include gilts in 2011. Pilot programmes in some areas insure hogs raised for slaughter.


Free mandatory immunisations against Porcine Reproductive and Respiratory Syndrome (PRRS, called ‘blue ear disease’ in China), foot-and-mouth disease and classical swine fever. Vaccines are procured from companies through a bidding process with costs split between central and local government. Vaccines are distributed to farms by veterinary officials.

A ‘fine breed’ subsidy for artificial insemination using semen from boars of approved breeds, such as Duroc, Landrace and Yorkshire. The subsidy is 10 yuan ($1.46) for each insemination, for up to four attempts per year for each sow.


Financial awards (grants) of approximately $1 million each to local governments of 362 major pork–supplying counties for financing investments in hog housing, manure handling, immunisation and veterinary work.


Financial awards to large farms holding at least 500 sows ($146,000) and to standardised farms and village ‘production zones’ where at least 500 hogs are slaughtered annually – from $30,000 to $117,000, according to farm size and province.


Subsidies of $146,000 were given to each of 300 key breeding farms and provincial hog–breeding centres.


A waiver of the 25 per cent corporate income tax for companies that engage in livestock and poultry production took effect in January 2008 (Petry and Zhang, 2009).
Spending on these programmes is only reported on a piecemeal basis by Chinese authorities. The total is difficult to ascertain since there are so many programmes, and many are financed jointly by central and local government funds. Central government funds for the ‘fine breed’ subsidy increased from $26 million in 2007 to $95 million in 2010. Pork surplus county awards totalled three billion yuan ($450 million) in 2010. Financial awards for large–scale farms totalled $367 million in 2010. Most subsidies are targeted to 362 important pork–producing counties that account for over 40 per cent of China’s hog production.10 The award funds are distributed by local authorities to farms, companies, and local officials for refurbishment of hog housing, acquisition of breeding hogs, vaccination programmes, manure management, subsidised loans and support of pork processing, breeding, feed companies and other segments of the industry supply chain.

Various measures are carried out at the local level as experimental pilot programmes. These include subsidies for village methane digesters to produce natural gas from hog waste, ‘ecological’ hog-farming projects, subsidised insurance for finishing hogs, funds to pay for disposal of carcasses of diseased hogs and small cash grants to encourage migrant workers to return to their home villages and set up hog farms.11 Some of these are extensions of an existing web of local subsidies, model farms, pork reserves, wholesale markets and supply chain linkages supported by the ‘vegetable basket responsibility system’ in which municipal leaders use various measures to ensure adequate supplies of meat and vegetables for their cities. Pork reserves (both frozen pork and hogs kept in reserve) are held at three levels: central, provincial and city. In 2011, China’s state council ordered large and medium cities in coastal provinces to hold pork reserves to meet 10 days of consumption; other cities were ordered to hold a seven–day reserve.

The implementation of hog sector support varies from year to year and place to place. Local government and bank officials make extra efforts to implement policies when orders are issued from national officials. In 2007, the China Bank Regulatory Commission issued a document ordering banks to make loans to expand pork production capacity. Commercial banks were instructed to lend to companies that raise or slaughter hogs; rural credit cooperatives were instructed to lend to individual hog farmers; and village banks and rural lending companies were instructed to offer production credit. An account by journalists described how local officials in a county of Sichuan Province organised a meeting in 2007 to urge farmers to raise hogs and offer them subsidies while bank officials went door to door to offer loans secured by personal property like ceiling fans and washing machines.

In coastal provinces, hog production is increasingly dominated by large–scale farms operated by companies. In some cities, hog production is banned due to environmental concerns. In western provinces, slaughter hogs are usually raised by individual small–scale farmers but officials encourage companies to invest in large breeding and farrowing farms that supply feeder pigs. In 2007 and subsequent years, Ministry of Agriculture officials accelerated implementation of a plan to subsidise construction of ‘livestock production zones’ (‘yang zhi xiao qu’) where individual farmers may concentrate their animals in facilities that simulate large–scale farms. In 2011, China’s State Council announced a plan to allocate 2.5 billion yuan ($385 million) annually over five years for construction of large–scale hog farms.

In 2007, the combination of policies and high prices attracted investment in new farms, slaughter and processing plants, and imported breeding animals. The build–up of production capacity stimulated by policies helped drive prices down during 2008–09 nearly as fast as they had risen during 2007. Meat sector analysts attributed falling prices to excess supply of pork, with some citing the influx of investment due to government policies as a chief cause (Yi Zhang, 2010, Feng, 2004; Xiao and Wang, 2009).

Policy Priorities: Modernisation and Stability
In 2006, China’s vice minister of agriculture gave a speech at a ‘Modern Livestock Industry Summit’ that typifies the government’s approach to livestock industry policy. In his remarks, the vice minister stressed the importance of the hog sector’s transformation to a modern industry, citing special instructions issued by the country’s top leaders. According to the speech, President Hu Jintao had instructed officials to design policy measures to ensure the stable development of the industry, and Premier Wen Jiabao had called for policies that would stabilise hog prices and prevent large fluctuations in pork production.

Promoting a ‘modern’ livestock sector was emphasised in the government’s five–year plan for 2006–10. Modernisation includes the related strategies of ‘industrialisation’ (chan ye hua), ‘standardisation’ (biao zhun hua) and increased scale of production (gui mo hua). These strategies entail concentrating livestock on larger–scale farms, making capital investments in farms and processing facilities, disseminating new technologies and equipment, and integrating farms with processors, breeders and feed mills. The vice minister’s speech emphasised the need to nurture strong pork processing companies that would establish well-known brands, play a leadership role in the industry, and improve the industry’s competitiveness on the international market. He also encouraged farmers to unite in cooperative organisations. The speech called for livestock industry support measures, including subsidies, tax waivers, earmarked bank loans and other methods. It also said that the government would experiment with methods for attracting private investment to the pork industry.

The vice minister stated that the livestock industry had experienced unprecedented price fluctuations in recent years, and that the hog industry was recovering from a period of very low prices. He emphasised the importance of improving vaccinations and disease resistance. The speech took place about six months before the spread of ‘blue ear’ disease and sharp increases in pork prices in 2007. Many of these policies were implemented during 2008–09 but they failed to prevent an even steeper increase in pork prices during 2010–11.
 

‘Price Alert’ Market Stabilisation
In 2009, Chinese policy–makers introduced a ‘hog price alert’ market intervention program aimed at reducing the cyclical variation in hog prices. The programme’s main function is to buy up pork for reserves to increase demand when prices are low and sell pork to augment supply when prices are high. The programme intends to stabilise hog inventories by preventing extended periods of low prices that might prompt large culls of sows.12

According to documents describing the programme, movements in the hog-corn price ratio and several other designated market indicators trigger purchases and sales of pork reserves. The programme specifies the ‘normal’ range for the ratio as 6:1 to 9:1 and authorities may take measures to prevent the hog–corn price ratio from falling below 5.5:1.13 When the ratio falls in various ranges below 6:1, authorities can order designated meat companies to purchase frozen pork to hold in reserve (table 1)14 When the ratio is 5.5:1 to 6:1, provincial documents specify that cities should maintain a 7-day reserve of pork (based on average consumption of 100 grams/person/day).15 When the ratio falls below 5.5:1, the central government can subsidise interest on loans to slaughter and processing companies to encourage them to increase inventories of pork and increase output of processed pork products.

Also, the government can authorise an increase in central meat reserves and local reserves in large cities. At ‘abnormally low’ levels below 5:1, the programme calls for large increases in reserves, and officials can authorise one–time subsidies per sow for farmers in major pork–producing counties to prevent slaughter of sows. The document also calls for limits on pork imports ‘to reduce market supply’ and increases in pork exports by raising food safety standards and providing technical, information and policy support.16 When the hog–grain price ratio exceeds 9:1, the government can sell frozen pork reserves to bring down prices, and it may issue subsidies to low–income consumers.

Since the programme’s inception, China’s NDRC has published weekly average prices and monthly hog inventory and slaughter on a web site. However, little information about purchases and sales of pork under the programme is revealed. News media reports reveal that purchases and sales have taken place but details on amounts or locations of the transactions are seldom announced.

Table 1. China’s pork market intervention guidelines
Hog–grain price ratio1 Color code Government action
Over 9:1   Sell frozen pork reserves into the market; issue subsidies to low–income consumers.
6:1 to 9:1 Green (‘normal’) Monitor markets and price fluctuations; issue information. Pork reserves mainly used for emergencies and disasters.
5.5:1 to 6:1 Blue Add to central and local pork reserves when ratio is in this range for 4 consecutive weeks.
5:1 to 5.5:1 Yellow Subsidise interest on loans to large meat processing companies to encourage them to add to commercial reserves and increase pork processing.
Under 5:1 Red Increase central reserves and require large and medium cities to increase local reserves of frozen pork when the ratio is in this range for 4 consecutive weeks. The number of live hogs kept in reserve may be increased. If the ratio is still in this range after reserve purchases, a temporary subsidy of 100 yuan per sow may be given to farms in main hog-producing counties when sow inventory is down 5 per cent year-on-year. Appropriately limit pork imports to reduce the market supply; ‘improve’ the food safety system to encourage pork exports.
1Some provinces set a higher threshold for the hog-grain price ratio.

Source: USDA, Economic Research Service using National Development and Reform Commission, Regulatory plan for controlling excessive hog price declines, Bulletin No. 1, January 9, 2009, and provincial guidelines for implementation.

The first intervention under the stabilization programme occurred in May 2009, less than six months after its introduction (figure 9). The hog–grain price ratio fell below 6:1, and the government began purchasing pork for reserves in mid–June 2009. During April–June 2010, the government conducted five rounds of pork purchases before prices rebounded in July. Official reports said the hog–grain price ratio fell from 5.07 in mid-April to 4.81 by May 26, well into the ‘red’ region specified by the programme. It was still in the red region when the fifth round of purchases was carried out at the end of June 2010. NDRC reported that the hog–grain price ratio reached the 6:1 normal level in late July.


Later in 2010, the government ordered sales of pork reserves when pork prices began to rise rapidly. Hog prices rose more than 20 per cent during July–November 2010. A round of frozen pork sales was ordered to prevent excessive price increases ahead of the October 1 National Day holiday, and a second round was ordered in November. Some local authorities sold pork reserves in mid–2011 as pork prices reached record levels. These sales occurred when the hog–corn price was far below the 9:1 ratio specified for triggering such sales.

During 2011, as pork prices again became a national concern, there were scattered reports of pork reserve sales by some local authorities but no coordinated national campaign to sell pork reserves. Instead, the State Council issued a new directive ordering local authorities to increase their pork reserves. Large and medium cities and cities in coastal areas were directed to maintain a reserve equivalent to 10 days of pork consumption and other cities were directed to maintain a seven–day reserve.

The influence of the price alert programme on pork prices is hard to discern, especially since the amount, timing and location of pork reserve purchases and sales are not announced. The programme’s ability to affect the market is limited because frozen pork purchases constitute a tiny portion of a huge, scattered market. Zhang and Nie (2010) reported that reserve purchases in 2009 totalled 110,000 metric tons, equivalent to just 0.26 per cent of China’s annual pork output. The Agricultural Development Bank of China reported that it financed meat-reserve purchases of 250,000 metric tons in 2010, about 0.5 per cent of annual pork production.17 Frozen pork itself constitutes a relatively small part of the market because Chinese consumers have a strong preference for freshly slaughtered meat.18

Officials credited the first round of purchases in 2009 for bringing about a recovery of pork prices that year but this seems unlikely since authorities were still recruiting companies to hold reserves and many provinces had not even released their implementation regulations at that time. Some market reports again credited reserve purchases for the rebound in hog prices in July 2010 but the rebound was more likely due to a 5.7 per cent decrease in hog slaughter that month.

The weakness of the hog price alert programme was revealed by the sharp increase in pork prices during 2010–11. During this period, rising food prices were a major policy concern in China and officials ordered sales of pork in the fall of 2010, yet hog prices rose 40 to 50 per cent and by June 2011, pork prices reached the record level set in early 2008. Market reports ascribed the surge in prices to short supplies of pork, which resulted from widespread animal disease, culls of sows and exits from the industry during the period of low prices and losses in 2010. The supply of feeder pigs in 2011 was limited by the cull of sows a year earlier, while rapid income growth created robust demand (Woolsey and Zhang, 2011). The wide swing in prices and hog inventories during 2010-11 was remarkably similar to that of 2006–07 – exactly the type of phenomenon that the price alert policy was intended to prevent.

[Mustang Sally Farm]

Tuesday, March 20, 2012
Large Scale Meat Safety Tests Underway
TAIWAN - The Department of Health (DOH) and local health authorities will conduct its largest scale tests to date from March 20-22 to check for the leanness enhancing drug ractopamine in 1,000 products, including samples obtained from beef, pork, and geese, officials from the DOH's Food and Drug Administration (FDA) has said.


According to Focus Taiwan, a food safety crisis task force working under the Executive Yuan decided to expand the tests, and central and local health authorities will be testing 500 beef, 400 pork, and 100 geese samples, and will include products sold at malls, supermarkets, traditional markets and restaurants.

Product labels on imported meat will also be checked for accuracy, including whether the items are from the actual country claimed on labels, and distributors will be counseled to implement self-management, the DOH added.

The last nationwide inspection was carried out on March 5, in which 219 beef samples were tested for the meat additive ractopamine.

The decision was made after Health Minister Chiu Wen-ta met with top health officials from various cities and counties on Friday for an urgent meeting to lay out how the DOH will work with local governments to step up checks on leanness enhancers in meat products sold in shopping malls, supermarkets, traditional markets and restaurants.

Importers having past violations will have all their beef inspected, while the current system of a five per cent check will be maintained for those who have no such record.

From January 2012 to March 11, DOH tests found 36 ractopamine-tainted beef samples, out of a total sample of 219, and local health authorities have now destroyed 7,000 Kg of tainted beef.

In addition, the DOH has tested 98 pork products, but have not found any traces of ractopamine, and the department is still trying to confirm whether meat products sold by a food company contained traces of ractopamine.

[Mustang Sally Farm]

Wednesday, March 21, 2012
Farm Produce Prices Rise on Reduced Supplies
CHINA - Prices of major farm produce monitored by the government rose last week as snow falls interrupted supplies, the Ministry of Commerce said Tuesday.


The wholesale prices of eight staple aquatic products gained 0.3 per cent last week, with the price of grass carp up 2.1 per cent.

Meanwhile, the price of pork, which was the main driver of the nation's inflation last year, fell for seventh consecutive weeks last week, down 1.3 per cent. Egg prices dropped 0.1 per cent during the period.

Food prices have a one-third weighting in the calculation of China's consumer price index (CPI), a major gauge of inflation. The country's CPI eased to 3.2 per cent last month, down from 4.5 per cent in January.

[Mustang Sally Farm]

Swine Epidemics Affect the Chinese Pork Market
Outbreaks of ‘blue ear’ disease (PRRS), foot-and-mouth disease (FMD), classical swine fever, pneumonia, Streptococcus suis, circovirus, parasites and erysipelas are common in China’s pig industry, according to Fred Gale, Daniel Marti and Dinghuan Hu in a report entitled ‘China’s Volatile Pork Industry’ from the USDA Economic Research Service.
 

News reports indicate that large losses attributed to disease periodically restrict the supply of pork, contributing to price surges. Chinese news media periodically report illegal sale of pork from diseased hogs, pork that is discolored or bearing lesions, and discovery of large numbers of hog carcasses in rivers and canals.

The impact of disease on the pork market is impossible to assess with any precision. When disease affects sows and young pigs, impacts on the market may occur several months after an outbreak. The frequency and incidence of disease is hard to measure accurately, and outbreaks are often regional. While the Ministry of Agriculture reports on disease outbreaks, these figures likely understate the actual incidence of disease because farmers and merchants have little incentive to report diseased animals to authorities (Woolsey et al., 2010).

Rising pork prices in 2007 and 2011 were attributed in part to disease outbreaks. During 2006-07, the supply of feeder pigs was reduced in part because blue ear disease (also known as porcine reproductive & respiratory syndrome, PRRS) caused sows to abort. This restricted the supply of finished hogs and led to high prices during 2007-08. During 2010, another round of disease outbreaks induced many farmers to slaughter hogs early, and many diseased carcasses were illegally sold to slaughterhouses. The increased supply of slaughtered hogs and the prevalence of tainted pork led to a period of depressed prices during 2010 (Woolsey et al., 2010). The disease–related decline in hog inventories during 2010 led to tight supplies of feeder pigs and another surge in pork prices during 2011 (Woolsey and Zhang, 2011; Sun et al., 2011).

Chinese agricultural officials have taken steps to reduce the effects of animal disease epidemics. Immunisations for PRRS, classical swine fever and foot and mouth disease (FMD) are compulsory and subsidised. Farmers are compensated for culling animals to prevent epidemics, and local officials must bear the cost of sanitary disposal of dead animals. Agricultural officials have made it a priority to improve veterinary services, biosafety and monitoring and control of farms, slaughterhouses, transportation and markets. Chinese pigs are required to have ear tags recording seven to eight mandatory immunisations. Slaughterhouses are required to ensure that hogs have ear tags and vaccination certificates. Inspectors are required to conduct ante– and post–mortem inspections of slaughtered hogs, and tissue samples are to be examined for parasites at slaughterhouses.

However, government programmes and regulations are not uniformly implemented, and problems with animal health persist. Vaccines may not be effective against multiple strains of PRRS that exist in China’s hog herds. Wang (2009) reported that ear tags (that record immunisations) and animal quarantine certificates can be easily falsified or purchased; farmers often miss vaccinations; syringes are often used on multiple animals; and veterinary personnel needed to carry out vaccinations are in short supply. In a small survey of farmers, Liu et al. (2007) found most farmers whose sick pigs did not respond to treatment sold the animals before they died or improperly discarded the carcasses of dead animals; only one farmer said he buried dead pigs as required by regulations. Liu et al. found that most farmers did not use ear tags or only attached them at the time the pigs were sold; pigs without ear tags were sold to unlicensed butchers or neighbouring farmers.

The high density of animal populations, rudimentary facilities, lack of technical knowledge among farm personnel and lack of resistance among ‘foreign’ breeds of pigs may contribute to vulnerability to disease. One article in a Chinese veterinary publication warned farmers that changes in feed, poor nutrition, neglect of immunisations and other animal stress–inducing factors that are more common on small–scale farms may heighten risk of classical swine fever outbreaks (Ren, 2010). According to Feng (2010), periods of extreme weather or flooding can trigger an epidemic among farms characterised by stressed animals and neglect of immunisations. 19 As evidence of farmers’ cost-cutting, Feng noted that many feed and veterinary drug companies reported sales declines of as much as 30 per cent during the period of losses in 2010. Feng also suggested that periods of losses by farmers may leave local governments short of cash to pay veterinary technicians and dispose of carcasses.

Feng (2010) hypothesised that disease outbreaks may actually be linked to the hog cycle itself. Writing in an industry newsletter, he observed that extended periods of losses for small– and medium–scale hog farmers may leave them short of cash. Farmers may then cut costs by switching to lower quality, less nutritious feeds and neglect vaccinations. Less nutritious diets leave animals in a weakened state and vulnerable to disease. Jiao and Kou (2010) reported that farmers in Sichuan cut costs during a period of depressed prices by increasing the proportion of rapeseed stalks in hog rations. Sun et al. (2011) observed that the substitution of cheaper feed substitutes contributed to chronic disease problems in the industry.

Chinese officials introduced subsidised insurance for producers of sows to reduce the risk of financial losses attributed to animal deaths, but some market reports indicate that this programme encountered moral hazard problems. Liu (2010) reported heavy losses incurred by companies offering sow insurance in Henan Province, citing large numbers of claims, high costs and fraud.20 In July 2010, a Yangzhou newspaper reported that the insurance company’s pay–outs for sow death losses had doubled from the previous year and reached 25 per cent in one county (Yang, 2010). According to an insurance worker quoted in the article, some farmers neglected to treat sows for diseases during periods of low hog prices because the insurance indemnity exceeded the animal’s salvage value if it were culled and sold.

[Mustang Sally Farm]

Tuesday, March 27, 2012
Police Raids Uncover Pork from Sick, Dead Pigs
CHINA - Police in southeast China's Fujian Province raided several unlicensed butcheries and underground workshops that processed pork of sick and dead pigs into meat products and sold them to other places.


Liu Yonghe was detained last July for illegally purchasing dead pigs from pig farms and butchering them in his workshop in Fuzhou City, reports ShanghaiDaily.com, citing Xinhua news agency.

He sold the meat to Ling Jianjun who processed it into salt-cured pork and sausages. Ling is also in police custody.

The contaminated pork products had been sold to wholesale markets in Fuzhou as well as in Wenzhou and Ningbo in neighboring Zhejiang Province.

Dead pigs were sold to illegal butchers at less than 2 yuan per kilo. The price tripled after they were cut up. When the meat was processed into pork products, the price would jump to more than 20 yuan per kilo.

The lucrative business has prompted some pig farms to sell sick and dead pigs to illegal butchers instead of cremating them as ordered by the law, the report said.

Fujian police have confiscated more than 1,300 tons of dead pigs and 480 tons of processed meat, the report said.

[Mustang Sally Farm]

Wednesday, March 28, 2012
Taiwanese Pig Farmers Anxious About Bankruptcy
TAIWAN - Hog industry representatives yesterday voiced their worries about how 50 per cent of hog farmers are likely to face bankruptcy by October as a result of the country's falling pork prices.


According to Focus Taiwan News Channel, the COA's (Council of Agriculture) move to control hog numbers auctioned in markets can only raise future hog prices, said Chang Wen-Shan, chairman of the Pingtung County Hog Farmers Association.

According to Mr Wen-shan, due to the slow cycle of the hog industry, it will take at least 14 months before hog prices start picking up.

His comments came after Agricultural Minister Chen Bao-ji said last Tuesday at a legislative session that the COA will help return the hog price to a base level of NT$6,500 (US$219) per 100 kilograms. Chen also said the agency will immediately increase the hog inventory to 9,000 heads and inspect pig farms across the country to control hog supply.

Yen Chen-tou, chairman of the Tainan City Hog Farmers Association, said domestic auction price for hogs currently stands at NT$5,000 per 100 kilograms, while in China, price is NT$7,000 per 100 kilograms.

He urged the government to promote exports of pork to China to help offset a glut of pork in the domestic market.

Kang Fu-hu, chairman of the Yunlin County Hog Farmers Association, suggested the government inspect the overall number of hogs in the country regularly to monitor hog supply.

[Mustang Sally Farm]

Monday, April 02, 2012
Pork Imports to Increase on Strong Demand
CHINA - Pork imports have already hit the nadir and there seems to be no letup in demand, considering that domestic supplies are likely to remain constrained for some time.


"The gap between supply and demand is bound to increase within the next few years, despite an expected recovery from diseases and the reduction of small-scale pork farmers," said Wang Xiaoyue, a senior analyst at Beijing Orient Agribusiness Consultant Ltd.

"China's pork imports will continue to rise due to strong demand and competitive pricing on imports," he said.

The sharp decline in pork production last year led to record imports. China's imports of pork and pork offal reached 1.35 million tons, up 50 per cent over 2010, with the US being the largest exporter, accounting for more than half of the total volume, according to the General Administration of Customs.

At the same time, China has also become a top lure for meat exporters as demand has been climbing steadily. Most of the major pork exporting nations from Europe, North and South America are knocking on China's doors.

China's imports of pork and pork offal reached their peak in 2008 with a volume of 910,000 tons. In 2010, the country imported 900,000 tons of pork, with Denmark being the major supplier, followed by the United States, Canada and France.

"As a country develops economically, the first quality of life aspect that improves at the household level is the carbohydrate to protein ratio on the daily diet. Greater economic prosperity among consumers on the mainland has directly translated into higher shares of animal protein such as pork," said Jorge Sanchez, director of agricultural trade office at the US consulate in Guangzhou.

"An increase in pork consumption creates opportunities for US pork farmers, because the unit price increases are fueled by consumer demand."

Ma Chuang, deputy secretary-general of the China Animal Agriculture Association, said that the country's surging demand for pork and pork offal implies an optimal export scenario because Chinese consumers tend to place higher value on pork offal, which is not eaten in Western countries. As a result, overseas farmers can profit considerably from pork offal exports.

Pork imports stood at 467,000 tons last year, and pork offal stood at 882,200 tons. Pork offal such as pig's heads, knuckles and haslet (a form of meatloaf), accounted for 65 percent of the total volume.

[Mustang Sally Farm]

Tuesday, April 03, 2012
Pig Farmers Expect Mass Bankruptcy by October
TAIWAN - Despite assurances of support from the government, the country's pig farmers, worrying that pork prices might remain low until mid-2013, on Sunday expressed their belief that about half of them may go bankrupt within seven months.


It takes the prices of pigs at least 14 months to rebound back to the normal level, Chang Wen-shan, chairman of the Pingtung County Pig Farmers Association board of directors said yesterday, adding about 50 to 60 per cent of the country's pig farmers may go bankrupt.

Pingtung, with its 1.5 million pigs, is the country's number-one pig farming county, according to AsiaOne.

"The rest will likely suffer heavy financial losses," he said.

The price-stabilizing measures announced by the Council of Agriculture may work in the future, but are incapable of raising prices now, he continued, adding "even if the price of pigs can be raised from over NT$5,000 (S$213) per 100 kilogram to more than NT$6,000, pig farmers will still lose money."

During an interpellation session at the Legislature a few days ago, COA Minister Chen Bao-ji vowed to revert pig prices to the basic level at NT$6,500 per kilogram.

Mr Wen-Shan also immediately committed 9,000 slaughtered hogs to cold storage and ordered an end to above-quota raising by large pig farms.

According to Mr Wen-Shan, price stabilization must begin from scratch, and the total number of pigs must be kept under control.

[Mustang Sally Farm]

Thursday, April 05, 2012
H1N1 Detected in Hong Kong Slaughterhouse
HONG KONG - H1N1 was detected in Hong Kong’s slaughterhouse during regular influenza virus surveillance for pigs in Hong Kong’s slaughterhouse. Despite the detection of pandemic H1N1 in pigs in Hong Kong, it is unlikely that Hong Kong will impose any import suspension of pork or pigs in the future on the grounds of H1N1 concerns.


The Hong Kong government did not take any trade action against pig or pork imports in 2009 when there existed the threat of H1N1. The report did not identify the origin of the infected hogs as either imported from China or raised locally.

To monitor influenza virus activity in pigs, the University of Hong Kong has conducted a regular influenza surveillance program for over a decade. The Center for Food Safety, the food safety authority in Hong Kong, assists the program by collecting blood and tracheal and nasal swabs from pigs in the major slaughterhouse twice a month. (This is the only major slaughterhouse in Hong Kong slaughtering over 3,000 pigs each day and accounting for over 80 per cent of the daily production in the territory. The other two slaughterhouses slaughter less than 20 per cent of Hong Kong’s daily pig supplies. Hong Kong has a daily consumption of about 4,500 pigs. Imports from China account for over 95 per cent while the rest is supplied by local pig farms).

According to the latest surveillance report, 1,500 samples were collected and tested from mid-October 2011 to January 2012, one sample tested positive for the human swine influenza virus (pandemic H1N1). A total of 27 samples were found to contain viruses that were essentially swine influenza viruses but had picked up some genes of human swine influenza virus. Among them, two samples were detected with swine influenza, H3N2, while the remaining 25 samples had H1N2.

The University of Hong Kong has been monitoring swine influenza over a decade and pandemic H1N1 was first detected in samples obtained in the slaughterhouse in October 2009. The human swine influenza virus then has been occasionally found in the regular surveillance exercise.

The University professor who is in charge of the surveillance commented that with the wide transmission of the pandemic H1N1 virus in humans, detection of the virus in pigs is no surprise. He added that positive findings might continue to appear from time to time in future. The government’s announcement also relayed the professor’s comments that “there have been similar reports from many parts of the world showing that swine influenza viruses carried the genes of the human swine influenza virus. Such viruses are unlikely to pose any major human health risk or cause problems in food safety."

Unlike China, Hong Kong did not ban any pork imports from the U.S. in 2009 because of H1N1 outbreak. Given the findings of pandemic H1N1 virus in Hong Kong and the government’s relaying the expert’s message that the viruses are unlikely to cause problems in food safety, the Hong Kong government is unlikely to impose ban on pork imports from places where there are H1N1 cases.

The Hong Kong government has assured the public about food safety in pork by relaying the message from the World Health Organization that “human swine influenza will not be contracted by consuming pork and pork products that are handled properly and thoroughly cooked.” The Hong Kong Center for Food Safety advises the public that it is safe to eat pork and pork products that are cooked to an internal temperature of 70 degrees Celsius or above.

To further assure the public of food safety in pork, the Hong Kong Center for Food Safety, alongside the announcement of the detection of pandemic H1N1, reminded the public that all imported live pigs from China come from registered farms and are accompanied with animal health certificates issued by the Mainland Chinese authorities. Furthermore, Hong Kong officers from the Center inspect the certificates and health of the imported pigs at the boundary control points. Both imported and local pigs have to go through ante-mortem and post-mortem inspections in slaughterhouses. Only pigs that pass the inspections can be supplied to the market and sold for consumption.

[Mustang Sally Farm]

Environmental and Food Safety Pressures on China’s Pig Industry
Producing large quantities of pork in China entails additional costs related to the environment and food safety that are not factored into the market price of pork, explain Fred Gale, Daniel Marti and Dinghuan Hu in a report entitled ‘China’s Volatile Pork Industry’ from the USDA Economic Research Service.


According to Wang et al (2006), one Chinese hog produces 5.3kg of waste daily, which contains large amounts of nutrients not absorbed by the animal as well as heavy metals and pharmaceutical residues. During the 1950s and 1960s, Chinese officials encouraged individual households to raise hogs as a means of producing organic fertiliser to spread on fields to raise grain yields. In later decades, chemical fertiliser became available and the rising demand for meat prompted a large increase in the number of hogs. Consequently, the production of manure exceeded the capacity of the surrounding farmland to absorb its nutrients.

Small farms rarely treat manure but large farms are usually required to invest in treatment facilities. Gao et al. (2006) estimated that 80 per cent of commercial–scale farms lack equipment and facilities to dispose of waste properly, which causes ‘serious pollution of water, soil, and air and threatens the health of animals and humans.’ Waste often washes into streams and rivers, fouling drinking water and contributing to eutrophication (nutrient enrichment) of major bodies of water.

Several Chinese studies estimated that pollution from livestock farms totalled roughly three billion metric tons annually, about three times the pollution emitted from industrial sources (Gao et al., 2006; Liu, 2009; and Wang et al., 2006). Gao et al. estimated China’s hog waste at 1.29 billion metric tons annually, 47 per cent of the total livestock and poultry waste generated. A census of pollution sources released in 2009 found that livestock waste was a chief cause of water pollution in China (China Ministry of Environmental Protection, 2010).

While Chinese officials are taking steps to address these problems, the dense population of hogs strains the capacity of the land to supply feed for hogs and absorb their waste and also makes it difficult to control and prevent animal diseases (FAO, 2006). China has many regions with high hog population densities. ERS calculations using provincial– and state–level data on hog inventories and crop–land for China and the United States show that China had 94 hogs for every 100 acres of crop–land nationwide at year–end in 2008, more than four times the US ratio of 20 hogs per 100 acres.

In many of China’s leading hog–producing provinces, the density exceeded 100 hogs per 100 acres, and the density exceeded 200 in Sichuan, Hunan and Guangdong Provinces. North Carolina was the only US State with over 200 hogs per 100 acres (similar to the density in Sichuan), and Iowa had 82 (slightly below the China average and similar to the density in Hebei and Jiangsu Provinces). Other US States had densities of fewer than 40 hogs per 100 acres, far less than in China. With an already–high density of hogs, the environmental impact of hog production and tight supplies of feed may constrain growth of China’s hog industry.


Chinese officials are promoting ‘ecological’ modes of hog production that use hog waste to feed fish or fertilise crops and use bacteria to break down hog waste. China’s 2011-2015 five–year plan will emphasise the importance of controlling livestock waste (Zhang, 2010b). However, a number of cities and provinces in China have introduced regulations that ban hog farms and slaughterhouses from operating near residential areas and waterways. Draft regulations prepared by Shandong Province in 2010 banned new livestock farms in urban areas, near sources of drinking water, in scenic areas and in places where toxic substances exceed prescribed limits.

Food safety is also a major concern for Chinese consumers of pork. The news media in China has frequently reported on the hog industry’s use of clenbuterol and other 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. Chinese consumers are also becoming more wary of pork products that contain dyes, preservatives, and other food additives.

In March 2011, a widely publicised report that a subsidiary of China’s largest processed pork manufacturer purchased hogs raised with illegal feed additives had little direct impact on the pork market (Woolsey and Zhang, 2011). However, industry reports claim that the incident helped drive the trend toward consolidation of hog farms discussed earlier in this report. For example, the company implicated in the incident pledged to open a 10,000–head company–operated farm to supply each slaughterhouse it builds to gain more control over the production process .

Food safety concerns are also contributing to changes in purchase patterns that may make consumers more receptive to imported pork. 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. Government plans to consolidate slaughterhouses by 2015 entail an increase in inter–regional trade in chilled or frozen pork.

The diminishing role of localised wet markets and the development of modern market channels with cold–chain facilities may create more opportunities for imported pork to reach Chinese consumers. Many Chinese consumers responded to the dairy industry’s melamine adulteration crisis by purchasing imported milk products, and demand for imported pork could similarly be boosted by domestic food safety concerns

[Mustang Sally Farm]

Tuesday, April 10, 2012
Pork Tests Confirm Serious Steroid Problem
VIET NAM - Husbandry authorities announced last week that many samples taken from pork, pigs and their feed nationwide tested positive for banned steroids.


The results came from nine Ministry of Agriculture and Rural Development laboratories as part of a large-scale investigation following a 29 February Thanh Nien report which said that illegal growth-promoting beta-agonist agents were being used by many pig farmers in Dong Nai Province, a major pig and pork supplier in southern Viet Nam.

According to the ministry, 4.8 per cent of the animal feed samples taken from the southern region showed traces of the agents - ractopamine and salbutamol, as did 11 percent of animal drug samples and 4.4 per cent of pork and pig livers.

“4.4 per cent of pork and livers testing positive for the chemical is serious,” Cao Duc Phat, minister of Agriculture and Rural Development, said at the Thursday meeting.
Beta-agonist agents, popular with body builders, can cause increased heart rates, indigestion and various other harmful side effects.

In northern Viet Nam, more than 150 samples have been taken and the chemical was found in one liver sample in Bac Ninh Province, and two animal feed samples in Hoa Binh and Hai Duong Provinces.

Mr Phat said, “I request related agencies work closely with local governments to continue tracking down the banned substances to determine the persons supplying them.”

Hoang Van Nam, head of the Animal Health Department at the ministry, also said the test figures revealed an alarming situation.

“If we fail to keep up the strong inspections, the situation will become complicated and impossible to control,” Mr Nam said at the meeting.

Investigations since early March have led to two pig farms in Binh Duong Province in the south being fined VND25 million each for using the chemical.

Eleven other farms in Dong Nai await punishment, while animal feed stores known to sell the chemical in the province and elsewhere in the north are being investigated by the police, Duong said.

The National Assembly has demanded that a full report be issued by the ministry on the steroid use in pig breeding by 17 April.

[Mustang Sally Farm]

China’s Pork Industry: Looking Forward
China’s status as a major pork importer will likely continue to grow, forecast Fred Gale, Daniel Marti and Dinghuan Hu in the final part of their report entitled ‘China’s Volatile Pork Industry’ from the USDA Economic Research Service.



China’s tradition of self-sufficiency in pork will be hard to maintain as feed costs rise and as land for expanding farms and processing facilities becomes scarce and expensive. The environmental and food safety impacts of producing large numbers of hogs in China will become more apparent. Interregional shipments of pork within China are limited by lack of reliable transportation and temperature-controlled storage.

Stricter regulatory enforcement in the United States, greater investments in animal housing and manure handling, wider dissemination of technical expertise, and closer coordination between producers and processing companies help US farmers produce pork with less of an impact on the environment, fewer food safety incidents, and fewer disease outbreaks than in China. Demand from China raises the value of variety meats and offal that are not widely used as food in the US market.

Chinese restaurant chains, hotels, and other buyers who demand pork with high and consistent quality are important potential customers for imported pork (Fabiosa et al., 2005). With diversifying consumer tastes and growing segmentation in the market, imported pork can coexist in the Chinese market with domestic grain-fed pork and meat from local pig breeds.21

Strong resistance to pork imports in China can disrupt trade and affect exporters. China lowered tariffs on pork after its accession to the World Trade Organization, but pork imports still face resistance similar to that described by Hayes and Clemens (1997). Evidence of this can be seen among the policy responses listed in the Chinese ‘hog price alert’ programme, which include unspecified ‘limits’ on imported pork to reduce the market supply and ‘encouragement’ of pork exports. When Chinese pork prices were soaring in 2007, officials made announcements to assure the public that China would not import large amounts of pork (Xinhua, 2007).22

In June 2010 (after China lifted its H1N1-related ban on US pork), an article entitled Be on Guard! American Pork’s ’Soybean Appetite’ warned that imports could eat up China’s pork industry if the industry was not protected (Li, 2009). An analyst quoted in the article cautioned readers to ‘Be careful of the trap set by the Americans’” warning that if US pork imports are not limited, the pork industry ‘is likely to repeat the mistakes of the soybean industry with disastrous consequences’.23

Similarly, Liu (2010) reported that Chinese officials were wary of foreign investment in the pork industry because officials feared losing “guidance power” over the industry.