ASIA – Inflation Tough to Digest for Asia as Costs Climb

Asian cuisine may be too much of a good thing for some of the region’s central banks as policy makers grapple with the challenge of responding to spikes in the cost of staples from rice and pork to onions and chilies.

Pork prices jumped 57 percent in June in China, leading Premier Wen Jiabao to vow to curb inflation even as growth slows. India had to buy onions from arch-rival Pakistan this year for curries and Indonesia told spice lovers to grow their own chili as shortages stoked prices. A wider variety of diet and greater purchasing power for non-food items leave wealthier nations less vulnerable to food-cost spikes.

Food makes up more than 30 percent of inflation indexes on average in Asia, compared with about 15 percent in Europe and less than 10 percent in the U.S., according to Rabobank Groep NV. The sensitivity of their economies to swings in meat and vegetable costs means emerging-market policy makers need to raise interest rates more to stem inflation when global agriculture prices soar.

“People can’t change their diets overnight,” said Song Seng Wun, an economist at CIMB Research Pte in Singapore who has analyzed Asian economies for more than two decades. “All monetary policy can do is to try to contain what is perhaps a supply disruption issue from broadening to the wider economy.”

Rice, the staple food for about half of the global population, has surged 69 percent in the past year according to futures traded on the Chicago Board of Trade. The export price of rice from Thailand, the world’s biggest exporter of the grain, has jumped 23 percent.

Share of Prices

Within Asia, home to 60 percent of the world population, food’s weighting in consumer-price indexes varies from about 45 percent in the Philippines and India, to more than 30 percent in China and about 10 percent in South Korea, Rabobank says.

“For low-income countries, food expenditures normally account for a larger share of the consumption basket,” said Yao Xianbin, director general for the Regional and Sustainable Development Department at the Asian Development Bank in Manila. “As countries get wealthier, food expenditure will account for a declining share of total expenditure.”

Outside of Asia, Mexico has also seen challenges from reliance on a relatively limited diet — an increase in the cost of tortillas, a staple of the nation’s diet since the Maya ruled 1,000 years ago, in 2007 stoked a slump in Mexican bonds and the peso. President Felipe Calderon arranged a price freeze with tortilla makers and the central bank boosted rates into 2008 even as the global financial crisis took hold.

Companies to Buy

Higher food costs have benefited some Asian food companies. Bloomberg’s Asia Pacific Food Index of 50 stocks is up about 8 percent in 2011, while the MSCI AC Asia Pacific (MXAP) index is down 0.6 percent. Pork prices have boosted producers such as Henan Chuying Agro-pastoral Co., which has risen 17 percent this year. Twelve of 13 analysts rate Henan, China-based Chuying a buy, data compiled by Bloomberg shows.

In China, the rise in pork prices made up more than a fifth of June’s overall inflation rate. An average Chinese will eat an estimated 38.8 kilograms of pork in 2011, compared with 9.6 kilograms of chicken and 4 kilograms of beef, according to the U.S. Department of Agriculture.

Inflation has breached the Chinese government’s 4 percent target for 2011 every month this year, with consumer prices rising 6.4 percent in June from a year earlier, the most in three years. The nation has raised lending rates five times since mid-October.

Hog Research

The nation should invest in research for hog producers to help steady costs, Shenggen Fan, director general of the Washington-based International Food Policy Research Institute, said in an e-mail.

World food prices held near a record in June as the cost of sugar, meat and dairy increased. An index of 55 food commodities rose to 233.8 points from 231.4 points in May, the United Nations’ Food and Agriculture Organization said July 7. The gauge climbed to an all-time high of 237.7 in February.

A fivefold jump in Indonesian chili prices last year made the spice costlier than beef, the Jakarta Globe reported in January. Indonesian’s Agriculture Minister Suswono said at the beginning of 2011 that the government will distribute chili seeds to 100,000 households, the paper said. Bank Indonesia, while trailing counterparts from Thailand to Malaysia this year, raised rates in February.

India’s Onions

In India, where the price of onions has at times become an election issue, the central bank has raised rates 10 times since the start of 2010. The world’s second-biggest onion grower said in December it would buy the vegetable from abroad and banned exports after excess rainfall damaged crops and stoked prices.

About 42 percent of Indian households are vegetarian and rely on pulses — edible seeds of leguminous plants — for protein, according to a report submitted to the FAO by the International Food Policy Research Institute. The country accounts for 73 percent of the world’s production of tur dal, one of its staple seeds.

“Some part of food inflation is due to higher prices of staple pulses which are very specific to India,” said Shubhada Rao, chief economist at Mumbai-based Yes Bank Ltd. “It is very specific consumption and there is no adequate supply of these commodities in the global market.”

Indian food-price inflation quickened to a three-week high of 8.31 percent in the week ended July 2. The nation’s benchmark wholesale-price index climbed 9.44 percent last month from a year earlier, after a 9.06 percent pace in May. Montek Singh Ahluwalia, an adviser to Prime Minister Manmohan Singh, said this week it will take “several months” to bring inflation to an acceptable level.

 

Source: Bloomberg

CHINA – Melamine-Tainted Feeds Used at Chinese Pig Farms

CHINA – Chinese authorities have reportedly caught some farmers in China giving their pigs melamine-tainted feed.

Citing Xinhua News Agency, Arirang reports that a broker named Tang bought roughly 7 tons of melamine-tainted formula in Hebei, a northern province of China, and sold 2 tons of it to pig farmers in Chungqing and Chengdu.

The amount of melamine detected in the feed was over 5-hundred times the legal limit.

The farmers say that they stopped using the contaminated formula after their pigs became ill but Chinese consumers are still worried that melamine-contaminated pigs may have entered the country’s food supply.

In 2008, several Chinese companies were implicated in a scandal involving milk and infant formula that had been adulterated with melamine from which six babies died and some 300-thousand others were sickened.

Source: ThePigSite News Desk

GLOBAL – French animal feed company attracts takeover bids – 29 Jun 2011

Provimi SA, a French animal feed company has received several takeover bids from US agricultural giant Cargill, China’s New Hope Group, Dutch animal feed company Nutreco plus Dutch life science company DSM.

Provimi was bought by Permira Advisers in 2007 from private equity rivals CVC Capital partners and PAI Partners. The eventual sale of the company is expected to fetch more than €1.8 billion.

Some market experts say the animal feed business worldwide is fragmented and a candidate for consolidation. Only a third of the industry is owned by large international companies; the rest is owned by smaller firms, many of them family owned.

A second round of bidding is expected in about 6 weeks.

Information Intellasia.net

NEW ZEALAND – No Antimicrobial Resistance Fears in NZ – June 23, 2011

NEW ZEALAND – A new Ministry of Agriculture and Forestry (MAF) survey has shown no human health implications from antimicrobial resistance in the country’s food-producing animals and fresh produce. Antibiotic sales have also risen in the latest data (for 2008/09).

Antimicrobial resistant (AMR) bacteria – which do not respond to antibiotics – are increasingly associated with human illness and death. While the large majority of cases are due to antimicrobial use in human medicine, there is also a potential for transmission via the food chain.

The year-long baseline survey carried out in 2009-2010 focused on antimicrobial resistance to important and commonly used antibiotics among E. coli, Enterococcus, Campylobacter and Salmonella bacteria found in freshly dressed carcasses of calves, pigs and broiler poultry from New Zealand abattoirs and processing plants. It also included samples of Salmonella and E. coli isolated during a survey of fresh produce in 2008-2009.

MAF public health principal adviser, Donald Campbell, says the survey indicates that our farming community is using antibiotics responsibly in compliance with veterinarian advice, and the little resistance found has no direct implications for human health.

He said: “Although the survey detected some resistance to certain antimicrobials from particular bacteria found in the targeted foods, it is pleasing to see that the resistance has no direct implications for human health.”

Dr Campbell says that comparing results from this survey with the limited data available from earlier New Zealand studies on bacteria isolated from animals suggests there has been no increase in resistance in food-producing animals in New Zealand.

Compared with 2009 data from the Danish DANMAP surveillance system, which uses a similar methodology to that used in this survey, resistance among bacteria from New Zealand pigs and poultry was either lower or not significantly different.

Dr Campbell added: “Denmark is seen as a world leader in controlling antimicrobial resistance so that’s a good benchmark to measure ourselves against.”

MAF’s baseline survey was carried out to determine the current status and whether there is a need in New Zealand to implement an ongoing surveillance programme for antibiotic resistance in food-producing animals.

As part of the management of antibiotic resistance, registrants of restricted veterinary medicines containing antibiotics must provide an annual report of sales by month to MAF. Along with the antimicrobial resistance survey, MAF has released an overview of antibiotic sales and use from 2004-2009. This report shows that total antibiotic sales decreased from a peak of 62,883kg in 2005/6 to 53,031kg in 2007/8. Sales increased by five per cent between 2007/8 and 2008/9.

A report containing a review and update on New Zealand’s regulatory control of antimicrobial agricultural compounds with regard to antimicrobial resistance has also been released this week.

To see the full reports, click on the links below:

• A baseline survey of antimicrobial resistance in bacteria from selected New Zealand foods, 2009-2010

• Antibiotic Sales and Use Overview 2004-2009

• Antimicrobial resistance: Review and update on New Zealand regulatory control of antimicrobial agricultural compounds with regard to antimicrobial resistance

Information ThePigSite News Desk

JAPAN – Iowa Pork Producers Continue Half-Century of Aid – June 23, 2011

JAPAN – The people of Iowa have a special connection with Japan dating back more than 50 years. When two typhoons devastated the Japanese prefecture of Yamanashi in 1959, Iowans stepped forward to help rebuild the region’s hog industry by donating 35 hogs and 1,500 tons of corn to feed them.

This spring after a destructive earthquake and tsunami rocked northeastern Japan, the Iowa Pork Producers Association (IPPA) once again stepped to the fore, contributing $100,000 to the US Meat Export Federation (USMEF) Relief and Recovery Effort designed to help those most in need by providing displaced people with a hot, nutritious meal containing US pork.

887 meals of US pork yakiniku (Korean style BBQ) were served to the evacuees

Evacuees line up for a hot meal of US pork

USMEF provided a packed house of IPPA members with an update last week on relief efforts in Japan funded by their contribution. John Hinners, USMEF’s assistant vice president of industry relations, told the gathering that IPPA contributions over the course of the spring and summer will provide hot meals for an estimated 30,000 people in the region most affected by the natural disaster.

The IPPA contributions are supporting a number of different activities throughout the Tohoku region, including several collaborative efforts with the Japanese Itoham Foods Company which will provide an estimated 8,200 meals. Similar collaborative efforts are being facilitated by USMEF with Takizawa Ham Company, restaurant chain Skylark, Minami Soma Schools and others. In one setting, USMEF partnered with Prima Ham and the 29ers non-profit organization to serve about 900 meals of US pork yakiniku (Korean-style barbecue) to evacuees in Iwate Prefecture who have been without hot meals with meat since the earthquake.

For three days in May, USMEF supported the distribution of 1,600 meals of ginger pork and pork miso soup to people at three junior high schools in Miyagi Prefecture. And earlier this month, Iowa Pork’s contribution provided 500 meals of steamed pork to evacuees at a shelter in Kesennuma through a non-profit organization established by prominent Japanese television personality Kuniaki Shimizu.

“As the nation’s leader in pork production, we are proud to contribute to this relief effort,” said Leon Sheets, IPPA president and a pork producer from Ionia, Iowa. “The Japanese love Iowa pork, and the island nation is both a long-time trading partner and our largest customer based on value. We firmly believe that it is incumbent upon Iowa’s pork producers to help those in need.”

IPPA is not the only American producer organization to offer its support to the people of Japan through the USMEF effort. National Pork Board also has committed $100,000, National Pork Producers Council donated $25,000, Minnesota Pork Producers Association has given $50,000, Indiana Pork has contributed $10,000 and Kentucky Pork Producers Association has given $1,000.

Cattlemen’s Beef Board and the Federation of State Beef Councils each have contributed $100,000 while the Washington Cattlemen’s Association auctioned off a heifer raising $18,000. In addition, individuals have contributed from $100 to $500 each.

Information ThePigSite News Desk

AUSTRALIA – New Board for New Pork CRC – June 22, 2011

AUSTRALIA – Ensuring Australian pork is a high integrity meat that is welfare optimal, environmentally responsible, safe and nutritious is the focus of the CRC for High Integrity Australian Pork.

Pork CRC Board Chairman, Dr John Keniry

Commencing on 1 July, the new Pork Cooperative Research Centre (CRC) will also have a new Board, with Andrew Spencer, Dr Hugh Wirth and Kenton Shaw appointed as Directors.

Replacing Paul Pattison, Associate Professor Wayne Pitchford and Andrew Maughan from 1 July, they will join existing Board members, Dr John Keniry (Chairman), Professor Simon Maddocks, Professor John Pluske, Dr Rob Van Barneveld, Rod Hamann, Sam McIvor, Brian Halstead and Nigel Smith.

Announcing the new Board, Dr Keniry said it was vital that Australia’s pork industry maintain local production of reasonably priced, high quality pork, produced at an acceptable return on capital invested, while improving pig welfare, the environment and consumer health.

He thanked the outgoing Directors for their outstanding contributions to the success of the inaugural Pork CRC and said he was confident their replacements, Andrew Spencer, Dr Hugh Wirth and Kenton Shaw, would build on the work of their predecessors, while bringing fresh ideas and new skills to the Board.

Mr Spencer is CEO of Australian Pork Limited, Dr Wirth, a veterinarian, is a former RSPCA Australia President and Kenton Shaw is General Manager, Production, of Rivalea Australia.

Australia’s pork industry has an annual farm-gate value of $1 billion, contributes $3 billion annually to the national economy and generates 8000 jobs.

Late last year the industry welcomed the announcement by Senator Kim Carr, Minister for Innovation, Industry, Science and Research, to fund the CRC for High Integrity Australian Pork for $20 million over eight years.

The Pork CRC’s 40 participants have committed $18 million in cash and $94 million in-kind, to complement the Federal Government’s support.

The four research programmes of the CRC for High Integrity Australian Pork are:

1. Confinement free sow and piglet management
2. New generation health management and antibiotic reduction
3. Healthy pork consumption
4. Carbon-conscious inputs and outputs

Information ThePigSite News Desk

CHINA – NDRC: Inflation Under Control Despite Concern – June 24, 2011

CHINA – Inflation in June may exceed last month’s 34-month high but will be under control in the second half of the year, the nation’s top planning agency said, despite concern over rising pork prices and a drop in grain production following drought and flooding.

* “If the pork supply does not increase, the situation may even become worse”

Yuan Mingsong, deputy director at the department of market supervision with the Ministry of Commerce

The National Development and Reform Commission (NDRC) said on Wednesday that the consumer price index (CPI), a major gauge for inflation, could reach a new high in June, after it hit 5.5 per cent in May.

However, in the second half of the year the CPI is likely to taper off from its peak, the NDRC said in a statement released on its website.

The government set an inflation target of 4 per cent for this year. But after the CPI rose, on average, by 5.2 per cent in the first five months, there were concerns over whether the target could be met and if the world’s second-largest economy could avoid a hard landing.

According to the NDRC, the high inflation rate in 2011 was mainly due to the rapid increase in consumer prices in the second half of 2010.

The CPI figure might rise to 6 per cent in June, mainly pushed up by soaring pork prices, Ba Shusong, a senior economist at the State Council Development Research Center, which advises the government, said.

Sun Chi, an economist at Nomura Securities, said that retail pork prices are likely to rise sharply this month, and it is possible that the CPI might exceed 6 per cent year-on-year in June.

In the second week of June, average pork prices in 34 major cities increased 80 per cent year-on-year to 17.62 yuan ($2.73) per kilogram. The price surge pushed up food prices in general, which account for about 30 per cent of the CPI basket, the NDRC said.

Pork prices are likely to rise throughout the year, Yuan Mingsong, deputy director at the department of market supervision with the Ministry of Commerce, told China Daily.

If the pork supply does not increase, the situation may even become worse, he said.

Relatively lower pork prices at the beginning of this year led many farms to reduce the number of pigs being raised, which decreased supply. An increase in the price of animal feed also put upward pressure on pork prices, according to Zhu Wenzhao, director of the Shanghai Agricultural Products Central Wholesale Market Management Co Ltd, which provides 30 per cent of wholesale pork in Shanghai.

The drought earlier this year and the ongoing floods in southern China may also affect agricultural production, the NDRC said.

Because of bad weather, wheat production in Shandong province is predicted to decrease by 30 per cent this year, Zhao Kang, a government official from the Shandong Administration of Grain, said.

Shandong is a key wheat producer and accounts for more than 30 per cent of the national crop.

The government has introduced a number of measures to combat inflation.

The People’s Bank of China, the central bank, raised the reserve requirement ratio for commercial banks, the amount they have to set aside, by 50 basis points on 14 June. The hike was the sixth this year.

Although the economy slowed down slightly recently, economists said there is no evidence of a possible hard landing.

“We expect price pressures will ease later in the year, but in the very near term headline measures of inflation are above Beijing’s comfort level, with risks skewed to the upside,” Brian Jackson, a senior economist with the Royal Bank of Canada, said.

A report from UBS Securities also said that the latest economic figures don’t support a hard landing.

“We don’t think there are enough valid economic reasons to suspend interest rate hikes at this juncture, and therefore, continue to expect a rate hike of 25 basis points in June, and another one in July or August,” the report said.

Reconstruction in Japan after the earthquake and tsunami is expected to increase the country’s imports from China, which will contribute to the growth of China’s GDP, said Jing Ulrich, JP Morgan’s managing director and chairman of global markets for China.

Information ThePigSite News Desk

CHINA – China to Import More US Soybeans – June 23, 2011

CHINA – Soybean imports are expected to rise by five per cent this year, increasing the attraction of the country to US soybean farmers.

The statement was made by Alan Kemper, president of the American Soybean Association, report official sources in China.

The increase in the soybean trade may help promote China-US relationships, indicating a way to balance bilateral trade, Chinese experts said.

Mr Kemper said: “China is the most important market for US soybeans, and the soybean trade will play a large role in improving the balance of China-US trade.”

China is the largest importer of US soybeans. It imported a quarter of the country’s domestic production last year, according to the association.

Zhang Monan, a researcher at the Economic Forecast Department of the State Information Center, said soybean trade between the two countries will help maintain a stable development in bilateral relations.

The US has heavily subsidised its agricultural sector so it is important for the country to ensure profit margins in the global food market, Mr Zhang said.

Given constraints over land and water resources, it is difficult for China to meet growing demand for agricultural products such as soybeans domestically. It can buy agricultural products with its bulky foreign reserves, she added.

If imports are to increase, it is not because of a decline in domestic production but because of growing demand, said Liu Denggao, vice-president of the China Soybean Industry Association.

Mr Liu said: “The size of the area where China’s soybeans are grown remains largely unchanged from last year.”

Even with the fresh demand in China’s market, the competition is growing fiercer in the international market, as imports from South American countries such as Brazil and Argentina have also increased in recent years.

To consolidate its position, the US soybean industry will invest more than $2 million this year in China’s market, Mr Kemper said.

The investment will finance programmes teaching Chinese farmers efficient ways of using soybeans to improve the production of swine, poultry, dairy and other agricultural sectors, according to the association.

Marc Curtis, chairman of the United Soybean Board, said: “These programmes have been carried out for the last 30 years since we arrived in China. We will continue our efforts to serve China’s market.”

China imported a historic 54.8 million tons of soybeans in 2010, compared with 15.2 million tons of domestic production, General Administration of Customs data showed. The country’s self-sufficiency rate currently stands at 22 per cent.

The imported soybeans are all genetically modified and mainly used as animal feed or for oil crushing.

Imports of soybeans to China declined by one per cent year-on-year to 4.56 million tons in May. China’s soybean imports during the first five months of this year remain largely the same compared with the same period last year.

Information ThePigSite News Desk

CHINA – Increase in Pork Prices Breeds Hopes and Worries – June 23, 2011

CHINA – Shortage of pigs and rising costs of feed and labor fuel the momentum, report Hu Yongqi in Shandong province and Li Jiabao in Beijing.

Wang Yugui, a farmer in Zibo, Shandong province, has not seen pork prices this high since he started raising pigs in 2001.

When pork hit a record 18.4 yuan ($2.83) a kilogram this month, nearly twice the March 2010 price, Wang decided to sell the 10 pigs he had that weighed more than 100 kg, the market minimum.

However, 60 of his pigs are still underweight. Like more than 1,000 other pig farmers in Zibo, the 50-year-old must wait and risk missing out on turning a profit.

“I hope all our pigs grow to 100 kg so I can sell them at peak price.”

There’s no way to speed the fattening-up process, but Wang’s luck might just hold. Some experts expect pork prices will keep going up for the rest of the year. Good news for those who raise pigs, not for those who buy pork at the grocery store.

“The price increase is a reflection of the pig growth period,” said Zhu Baoliang, deputy director of the economic forecasting department at the State Information Center. “It takes about a year and a half for the price to reach the peak from the bottom.

“The price touched bottom in July and then began to pick up. It will keep going up before the next pigs are fattened in six or eight months.”

Li Yongqiang is more patient about selling his pigs. He is 62 and has been farming pigs for 21 years. “If I stock the pigs for one more week, each pig will bring me another 100 yuan.”

Li sold more than 400 pigs last Thursday. Then he learned that the price has edged up 0.1 yuan a day since early June. A one-week delay in selling his pigs could bring Li 1 or 1.2 yuan more for each kilogram.

Li keeps about 6,000 pigs in his breeding farm in Dasungezhuang village in Beijing’s Shunyi district.

Numbers down

A shortage of stock and rising feed and labor costs are chiefly responsible for the increase in the market price for pigs.

Shandong farmers raised 40 million pigs last year, 1 million of them in Zibo. This year, however, the number of pigs in the city has dropped to about 950,000, said Xue Lequan, deputy director of the city livestock bureau’s production division.

Farmers reckon the cost of raising a pig to market is 8 yuan a kg. When the price dropped from 13 yuan in 2009 to 9.6 last year, many growers stopped breeding pigs and sought city jobs.

In Zibo, Shandong province, 17 families left pig breeding behind last year. Only seven are still in business.

They are raising 1,200 pigs this year, which is 1,700 fewer than last year, Wang Shunlin said. He owns the biggest pigpen in the village, accommodating 600 heads.

Farmers fear disease most. Last winter was warmer than normal, and more bacteria survived. Many sows fell ill and fewer piglets were born. Five of the 10 sows in Wang Yugui’s pen failed to get pregnant because of disease, and he lost 40 piglets.

Food and keepers

“Corn accounts for 60 per cent of pig feed” and its price is up 30 per cent from April 2008, said Feng Yonghui, chief analyst of Soozhu.com, an online pig market monitoring and analysis service. “It reached a record high in March this year before the price of pigs and pork did.”

Li, the Beijing pig farmer, thinks that in the background of inflation, the price of corn is acceptable if it stays below 3 yuan a kg. Still, even if farmers are getting more for their pigs at market, the extra they spend on fodder narrows their profit margin.

Each pig consumes 250 kg of corn in the six months or so from birth to market. Corn, which sold for 1.6 yuan a kg in 2005, now costs 2.3 yuan a kg. It means Wang Yugui spends 12,250 yuan more on corn.

Labor costs are up too, “by at least 20 per cent from last year”, Feng said. “Migrant workers now earn 2,500 yuan or 3,000 yuan a month and their monthly wage was about 2,000 yuan last year.”

And it’s not just the wages that are a problem, Li said.

“I now pay the keepers 100 yuan a day, though I paid them 5 yuan a day in the past years. But if I were to offer 100,000 yuan a year, I would still have trouble hiring a breeding technician because few college graduates are willing to work in the hot, dirty pigsties with no breaks.”

Swings, stability

Pig farmers said the market is basically self-regulating, which means there can be wide price fluctuations. The central government does maintain a livestock reserve so it can provide more pork when the retail price is very high. It also provides occasional subsidies to farmers, such as one last year when the market price dropped so low.

Wang Yugui received 1,500 yuan, which eased the strain a bit, but he said it made just a small dent in his loss of 10,000 yuan.

Wang Shunlin said, “We farmers prefer a stable price for pigs as we will suffer less loss when the price undergoes a dramatic drop.”

Meanwhile, pig production continues at a stable pace. A female pig, called a gilt, reaches maturity at about 8 months, but farmers usually wait two months more before letting her mate because she will produce bigger litters. Gestation takes about 114 days, four months, and once the piglets arrive, the gilt is called a sow. Piglets need six to eight months to reach market weight, Li said.

The farmer will lose money when the price of pigs for slaughter is below 14 yuan a kg, because the cost of raising a pig runs about 1,500 yuan. If the price hits 19.8 yuan a kg, the farmer can profit about 500 yuan on a 100-kg pig.

Advantages of scale

As in most businesses, the bigger producers are better able than small ones to weather price fluctuations and setbacks, such as illness. Xue, at Zibo’s livestock bureau, said, “Small farm owners do not have enough money to buy sanitary facilities and they usually cure sick pigs themselves.”

Usually, they must sell their market-size pigs before they can buy what they need for the smaller animals. A pen large enough for 100 pigs costs about 300,000 yuan in Wang Yugui’s village, and farmers cannot afford to resume the business if they quit. If prices drop year after year, they must sell off their stock, even at a loss.

Large pig farms also are better able to recover from financial losses, so local authorities followed the central government’s stipulation to support farms that raise at least 500 pigs. Now, Xue said, more than 100 farms in Zibo keep at least 1,000 pigs.

He thinks there is little room left for the price to increase because millions of pigs will be put up for sale in late August or early September, the busy trading season. Li, the Beijing pig farmer, agrees.

“The price will begin to fall next June when the next pigs are supplied into the market,” Li said. “It takes at least one year because many pig farmers slaughtered even their stud boars and sows when they suffered from low prices last June and diseases at the end of last year.

“Small pig farms can do well when the price is increasing,” Li said, “but a single loss could drive them to bankruptcy. This is a business of high risk and high reward. Their hearts are broken after suffering from the price fluctuations in the past years.”

Li’s village had about 100 pig farmers 10 years ago, and now has about 20. Fewer than five of them keep more than 50 sows.

“The price of piglets was 16 yuan a kg at the end of 2010 and it is now 36 yuan, while a piglet weighs about 25 or 30 kg,” Li said. “A piglet costs about 1,000 yuan now.”

Add the costs of corn and vaccinations, and consider how many piglets will not make it to market. Their death rate is as high as 70 per cent because of diseases, he said. “A sow bears twice a year and bears about 13 or 14 piglets when the farmer is lucky. But the farmer starts to profit when a sow bears 15 piglets.”

Slaughter slowdown

Pork processors also are feeling the effects of increased costs to farmers and higher market prices.

“It has become difficult to buy grown pigs now,” said Zhang Youtang, general manager of Qimeisi Pork, the biggest pork processor in Linzi district. The factory produces 15 tons of pork each day.

“Though pig and pork prices increased, the profit my factory earns dropped by 20 per cent because much less pork is produced,” Zhang said.

Every morning, seven employees called collectors are sent to villages to find and buy pigs, but most bring back fewer than 20, half of the number last year. And half the usual number are run through the production line, where agile butchers can handle three pigs in one minute.

With fewer pigs to process, butchers are working fewer hours, but at their full pay rate, said Yang Yandong, who is in charge of production in the factory.

Grocery bills

Grocery shoppers have already noticed. Compared with a year ago, the price of pork was up 41.5 per cent in May and 45.5 per cent in June. On Wednesday, the average price was 25.46 yuan a kg, which was 1.55 yuan a kg higher than on Tuesday.

Analyst Feng Yonghui said to expect the prices of corn and other vegetables to rise as well. “About 70 per cent of China’s corn is used as feed. The growing demand for pig will further tighten the corn supply.”

Feng also noted that about 65 per cent of China’s meat is pork. If consumers find it too expensive, they “may end up turning to vegetables for alternatives, and that would raise their prices. The flooding in the South could further raise vegetable prices.”

It also could raise the consumer price index (CPI), because it’s “an important factor in the calculation”, said the information center’s Zhu. “A price increase of 40 per cent could add 1.2 per centage points to the CPI.”

China’s CPI surged by 5.5 per cent in May from a year earlier, with food price contributing about 11.1 per cent to the increase, according to National Bureau of Statistics.

Information ThePigSite News Desk

CHINA – Mitsubishi Invests in Meat and Livestock in China – June 23, 2011

CHINA – Mitsubishi Corporation (MC), ITOHAM FOODS INC. (ITOHAM) and YONEKYU CORPORATION (YONEKYU) are to invest livestock and poultry breeding, slaughtering, processing and meat products trading and importing business of COFCO in China.

Mitsubishi, ITOHAM and YONEKYU will acquire 33 per cent of the shares issued by COFCO’s subsidiary, which is a holding company of COFCO’s meat business through MIY Corporation (MIY), an investment vehicle jointly established by them, by July.

COFCO, Mitsubishi, ITOHAM and YONEKYU will expand meat products and processed foods business in China by spending a total of 10 billion Chinese Yuan (approximately 125 billion Japanese Yen) by 2017.

With regard to meat products business, there are plans to open seven new plants, giving a combined total of 12 plants, which will increase slaughter capacity from 50 million to 300 million birds for poultry and from 0.5 to 5 million pigs a year.

As for processed foods (including processed pork and poultry products), the number of plants will be increased from four to 11, which in turn will lead to an increase in production capacity from 20,000 tons to 210,000 tons.

When combined with meats, such as beef, pork and chicken, imported from overseas, annual sales will increase to 18.1 billion Chinese Yuan (approximately 226.3 billion Japanese Yen) from 2.3 billion Chinese Yuan (approximately 28.8 billion Japanese Yen).

MIY will subscribe for the capital increase needed for business expansion of the Holding Company in proportion to its shareholdings to maintain its 33 per cent shareholding ratio and then MIY’s total investment is expected to be approximately 3.3 billion Chinese Yuan (approximately 41.3 billion Japanese Yen) by 2017.

Mitsubishi said that consumption of meat products and processed foods in China has increased following China’s economic expansion and is expected to continue to increase for the foreseeable future.

Despite the fact that the Chinese livestock and meat market is one of the biggest in the world, that industry is currently operated by small and medium sized players.

With growing demand for stable supplies of high quality and safe products COFCO’s mission, as a corporation owned by State-owned Assets Supervision and Administration Commission of the State Council (SASAC), is to establish a system to ensure supply of more high quality meat products and processed foods.

Under a Business Alliance Agreement formulated in 2009, Mitsubishi, ITOHAM and YONEKYU have been investigating opportunities to jointly strengthen their respective businesses. In particular there have been many discussions focusing on the participation of COFCO’s meat business in China.

Mitsubishi, ITOHAM, YONEKYU and COFCO have agreed to work together to achieve each company’s objective and to establish a stable supply of high quality and safe meat products and processed foods in China.

In order to achieve this, Mitsubishi, ITOHAM, and YONEKYU will look to combine the skills and know-how that they have developed in these industries with COFCO’s strong business foundations in China.

We hope this project will effectively promote each company’s growth strategy while also contributing to the development of China’s meat industry and the stable supply of food products.

In July 2010 Mitsubishi released its Midterm Corporate Strategy 2012 in which it designates China as one of its strategic regions for investment.

Mitsubishi and COFCO have enjoyed a strategic alliance since 2004 and will look to strengthen their ties through the forthcoming project.

Mitsubishi will also be looking for opportunities both to expand its business in the rapidly growing Chinese market and to develop new businesses in food-related and other fields.

“To be one of the most reliable meat processors in Asia’ is the key vision on ITOHAM’s midterm corporate strategy, CNV2015, which was announced in January 2011. One of ITOHAM’s growth strategies is to expand sales in growing Asian markets. The forthcoming project in China is an example of this strategy being put into action,” a spokesman said.

One of the key growth strategies of YONEKYU’s fifth midterm corporate strategy which was announced in April 2011 is re-entering the overseas market. Following this project, YONEKYU will seek opportunities to expand business in other regions.

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