Pork-barrel politics

China’s hog herd is changing

Talk of the need for self-sufficiency in China’s economy has centred on semiconductors, where an embargo on sales of key components from American vendors has squeezed Chinese firms in desperate need of supply.

But what about the scarcity of another commodity that worries China’s leaders: a shortage of pork?

At the annual gathering of the Rural Work Conference in Beijing last month, Xi Jinping highlighted the effort that was needed to “turn the tables” in China’s seed industry to improve the nation’s food security (see WiC514). However, that directive has also prompted a response from officials and entrepreneurs in another part of the farming world, with self-sufficiency in pig-breeding now being added to the mix.

Pork prices are important as a major contributor towards Chinese consumer inflation. A devastating outbreak of African swine fever in 2018-19 pushed prices up dramatically – by decimating the domestic herd. Last November prices then fell after a partial recovery in pig numbers, heralding unexpected deflation in consumer prices as a whole. But they rebounded the following month as wholesalers stocked up in advance of the Chinese New Year, a busy holiday season.

China is the world’s largest consumer of pork and it accounts for half of global pork production annually. Yet the country is increasingly relying on pork imports from the likes of WH Group (a Chinese firm that operates a major US hoggery) and it has been sourcing a much larger share of its breeding stock from overseas.

“Just like [semiconductor] chips, a majority of our breeding pigs are imported. That’s why people have been describing them as ‘microchips of the hog farming industry’,” Liu Yonghao, the chairman of agribusiness giant New Hope, told China Business Journal last week.

According to the same newspaper, China imported about 2,000 breeding sows a year before 2007. Numbers surpassed 20,000 last year, a historical high. At least 80% of the pork on Chinese tables is now derived from overseas breeding stock, it has been claimed.

Piglets born from foreign breeds grow more quickly, typically taking only six months to be ready for slaughter. Domestic hogs would need almost 12 months, 21CN Business Herald calculated. Moreover, domestic pigs typically carry less lean meat (35%) than their foreign counterparts (75%).

But 21CN also pointed out that the quality of hogs reproduced from foreign breeds tends to deteriorate after several generations. This too plays into the hands of foreign exporters, who can then sell ‘replacement’ breeding stock to the Chinese.

There are still 88 types of local breeds found across China, although more than 30 are close to extinction or in practical terms already extinct, Chen Yaosheng, a professor at the Sun Yat-sen University’s School of Life Science, told 21CN.

Chen says the preservation of domestic breeding stock could be vastly improved with the introduction of new know-how, such as genetic editing. Chen – who built the country’s first breeding stock gene bank – already sells local breeds and pig semen through Alibaba’s agricultural sector platform, 1688. His team has also trained “pig farming PhDs” to promote more advanced technology in local farming.

In another move to keep pork prices more stable, the Chinese government has approved the launch of hog futures on the Dalian Commodity Exchange. Three products are available for the time being, with contract maturities that respectively expire in September, November and January next year.

If the new futures are indicative, economists don’t need to lose sleep over some of the inflationary pressures in China over the remainder of 2021. The prices of all three contracts slumped more than 10% in their trading debuts, pointing to an expectation that pork prices are likely to go down this year.

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