Stop pork from becoming easy meat

Pork is an important part of the Chinese diet and economy and is likely to remain so in the foreseeable future given the increasing demand for meat because of rising incomes and urbanization. As the largest producer and consumer of pork, China accounts for half of the world's pork production and consumption.

In the coming decade, China's total pork production and consumption is projected to increase by a little over 20 percent based on new figures from the United States Department of Agriculture. While the increasing appetite for other meats, especially poultry, in China is expected to slow down the growth in pork consumption, its dominant position in the Chinese diet will remain intact for some time to come. In per person terms, the consumption of pork is projected to rise three times more than that of poultry and seven times more than that of beef.

The structure of pig farming in China has been changing rapidly as part of the larger transformation of agriculture. There is a growing shift away from small-scale backyard farming to specialized and large-scale commercial farming. Rising production costs (due mainly to higher feed costs), greater demand for food safety (due to more outbreaks of animal disease and use of unsafe feed additives), shrinking farm workforce (due to faster rural-urban migration) and government policies to promote large commercial farms are some of the key factors responsible for the rapidly vanishing small pig farms.

Since 2007, government policy has favored large-scale pig production as a way of improving food safety and quality by providing grants and subsidies to large pig farms. These policies need to be re-evaluated. Many of these changes have led to increasing volatility of supply and prices in China's pork industry.

In the last few years, rising pork prices have been a major driver of food inflation in the country. But now a declining price trend has begun to emerge. Based on official data, pork prices in March 2014 fell by close to 7 percent year-on-year, though food price inflation rose by about 4 percent. The recent fall in prices has been widely attributed to consolidation in China's pork industry leading to cycles of rapid expansion in pork production. This periodic excess supply of pork can lead to a vicious cycle of reduced employment, production and profitability in the industry.

The transition from small to large pig farms should be a natural economic process. Small farms still have an important role to play in stabilizing China's pork production, and equally importantly in providing employment and income for many poor people in rural areas who will not be able to move out of the agricultural sector, at least not in the near future. This is especially true of farms in the central and western regions of China.

Small farmers have greater flexibility in allocation of labor, and enjoy an advantage in production costs because they use inexpensive, locally available materials and utilize animal waste as manure for their crops. But they need support and fair treatment to overcome challenges, move to commercially oriented production systems, operate at an efficient scale and increase profits. Such policy support for the development of productive small farms will also help facilitate the transformation of China's pork industry.

Moving forward, innovative products that boost small farmers' demand for pig production insurance are needed. For example, an International Food Policy Research Institute study shows that a small change in the schedule of the premium paid by farmers can help them increase investments, including riskier, higher-return investments.

In addition to loss recovery, measures to assist small farmers in disease prevention and control measures, such as appropriate on-farm biosecurity practices and vaccination, are equally important. Pig farms with better sanitary conditions and waste management are critical to minimize animal health and environmental problems.

It is time to take stronger steps toward curtailing the increasing volatility in China's pork market. Inefficient price support measures, including subsidies, which distort the market must be eliminated and avoided. Stronger industry regulation will also be required to reduce supply and price fluctuations.

To expand market access and promote coordination among actors in the supply chain, small-scale pork producers should be linked to large-scale commercialized producers through institutional arrangements such as contract farming with self-enforcing agreements. These types of linkages also help small farmers to more easily access food safety and quality assurance standards, such as certification schemes, which would have otherwise been inaccessible.

Ultimately, the extent of small farmers' participation in the pork supply chain will depend on their ability to strengthen their voices and capacities. Accelerated growth of producer cooperatives or farmers' associations in China's pork industry is important for giving farmers greater access to information and raising their bargaining power in price negotiations.