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Economy

Fred Gale -- Pork demand challenges China cleanup plan

In May, a truck carried away the last group of pigs from Beizhen Village in eastern China. Local news reports say village and town officials had worked relentlessly putting up banners and going house to house convincing families to sign agreements to quit raising pigs. After months of work, Beizhen village was declared the second pig-free village in Xinfeng township.

Across China there is a quiet campaign to banish pig farms from places that are near to sources of drinking water, residential communities and scenic areas. Officials are pushing ahead with the campaign despite tight supplies of pork that have pushed prices to record-high levels in China.

Chinese environmental regulations issued since 2013 have ordered local officials to delineate pig-free zones and close or move farms by the end of next year. The farm evictions come in response to complaints about fouled water, smell and noise as the sprawl of Chinese cities collides with pig farming.

The plan calls for moving farms out of populated and environmentally sensitive areas, and concentrating pigs and other livestock in regions best suited for raising them. Farmers who continue raising pigs will be required to invest in facilities to collect and treat the manure. Officials hope farms will utilize most of the pig poop to produce biogas and organic fertilizer to spread on fields.

News reports say officials in different provinces are at various stages of implementing the ban. Photos show large farms being demolished, while other stories warn farmers that some of their peers have been jailed or fined for operating pig farms illegally.

Shutting down pig farms is a challenge in a country where pigs and people have lived side-by-side for generations. Twenty years ago, China's first farm census found that 70% of rural families raised pigs. Since then, most families have voluntarily quit raising pigs as members spent more time at jobs in factories and construction sites.

Nevertheless, officials implementing this year's pig ban say it took a lot of effort to convince stragglers to empty their pig pens once and for all. One woman in Zhenbei village reportedly threatened to divorce her husband if he agreed to quit pig-raising, but officials say they eventually convinced her to do her part for the environment.

Imports growing

China has traditionally been a self-contained pork giant, producing and consuming roughly half the world's pigs. The country's love of pork came about because pigs can eat just about anything, they reproduce rapidly, and their manure is a good fertilizer for crops -- a winning combination for a densely-populated country.

However, the calculus has changed as grain-based feeds have replaced wastes and slop, rural people have moved off farms, and chemical fertilizers have replaced manure. Now supply is falling short of demand and pork imports are swelling as pigs are banished to the hinterland.

The inventory of pigs on farms in China peaked at over 475 million in 2012 and declined to about 450 million by the end of 2015. China's pork output fell about 4% last year and is down again this year. It is unclear how big a role environmental regulations played in the shrinking pork supply, but the pig ban is likely preventing farmers from expanding their herds to take advantage of high prices this year.

With tighter supplies, Chinese retail pork prices are up between 30% and 40% from a year ago. Prices are still on the rise despite the onset of summer, traditionally the low season for pork consumption in China, and recently revised government guidelines on meat eating, which slightly reduced recommended levels of consumption. If prices keep rising, the campaign against pig farms could get some pushback from consumers.

Exporters in Europe and North America are eager to fill the gap between China's demand and its supply. China's imports of pork were up 50% during the first four months of the year. This year, China is likely to surpass Japan to become the world's leading pork importer for the first time. Leading suppliers include Germany, the United States, Denmark, Spain, Canada, the Netherlands, and France. Demand from China is welcomed by these countries, which currently have pork surpluses.

China could shake up the global pork market if officials follow through with more local pig bans. Major expansions by producers overseas to meet a growing Chinese deficit would need to address environmental, biosecurity, and animal welfare concerns in those countries as well. They would also need steady, predictable demand from China to justify the required investments.

Fred Gale is senior China economist for the U.S. Department of Agriculture's Economic Research Service. The views expressed here are the author's and do not represent those of the USDA.

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