China looks back and forward at year of the pig
Posted: Monday, February 11, 2008 11:44 AM
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Beijing, China
By Ed Flanagan, NBC News Researcher
China may have run in the year of the rat this week, but the nation's heart is still hungrily set on the pig.
With pork prices having jumped over 50 percent in the past year, national attention has shifted to the ever escalating prices for basic foodstuffs. Pork is a staple in the Chinese diet – 65 percent of the 110 lbs of meat the average Chinese eat each year is pork – and the near daily increases in price here have become a banner issue for poor and middle-class Chinese. Now with some of the most severe rates in years, government officials here are quietly wondering if unchecked inflation could potentially lead to a repeat of the public incident that followed the last period of economic hardship.
The pork price hikes have come as a result of factors arising both domestically and abroad. In China last year, blue ear disease ravaged the pig population during what was an already poor production year due to low 2006 prices. Meanwhile, the demand for corn and maize for ethanol production raised global prices for livestock feed, making it far costlier to raise porkers fit for the market. Most recently, the severe cold weather and storms that have hit central and southern China – traditionally regarded as the nation’s breadbasket – have destroyed much of the season’s crop across the board and wrought further havoc on prices nationally.
The biggest contributor to the inflation rate though is the booming Chinese economy and the rapidly growing incomes that it has brought. To the government’s credit, the nation has pulled millions of people above the poverty line in the past decade. However, with this new economic flexibility has come a greater consumption of meat as the population increasingly shifts to a western style diet that features more meat.
The consequences of this swine shortage and the public’s affinity for pork on their dinner plates are now playing out in China’s markets. During a recent visit to the Pifa Wholesale Market in Beijing for another story, one butcher noted that because of pork’s reputation in China as being the affordable meat, the runaway inflation has irked customers and caused them to go out in search of a better deal.
"When pork prices went up, people started buying chicken. When chicken prices went up they switched to fish," he said. "People remember how cheap pork used to be, so it’s hard for them to understand why it’s so expensive today."
It is that question that has become a source of serious concern for the Chinese government, which has the unenviable task of having to somehow explain to its outraged populace how even with a pig population of 500 million (compared to a US population of just 100 million), it has been largely unsuccessful to curb runaway prices.
While the government has made use of price freezes in the past to temporarily halt rising inflation, the government’s other key mechanism for controlling prices is the much vaunted "strategic pork reserve" – a network of government warehouses full of frozen pork. Much like the US government in certain situations will use its own strategic petroleum reserve to help control domestic prices, China has injected pork into the market during moments of rapid inflation or politically sensitive times to ensure a steady supply and reasonable prices.
The pork reserve has been a critical component of the Chinese government’s battle with inflation as it has allowed officials to create positive publicity around their attempts to manage the inflation. Without question, the potential for civil unrest that might follow continued inflation is a source of considerable concern for a government that is always weary of the many millions of Chinese who have not prospered under China’s economic miracle. The 30,000 tons of pork the government pumped into the market last September and the thousands more it injected just this past month in anticipation of the Chinese New Year festivities was as much a nod of deference to the hundreds of millions quietly toiling in the countryside as it was a move to placate the far more vocal urban population.
As distant as China’s pork problem may seem in the United States, Americans should be concerned about the ramifications of a nation of 1.3 billion people unable to raise enough pigs to satiate its enormous appetite. Outside of China, there is a great deal of concern over the side effects of the Chinese pig industries’ rapid transformation into a US style system of consolidated farms. Eager to improve production with new farms that boast populations of over 1,000 pigs in close quarters, new strains of the blue ear disease that ravaged the population last year are popping up, creating the potential for new super viruses that could inhibit continued growth in the pork industry.
China has already started to import U.S. pork to supplement its poor production last year, striking a deal with American pork producer, Smithfield Foods Inc. in September of last year to export 60 million pounds of pork. While some believe that the relatively small Smithfield deal will pave the way for greater U.S. penetration into the Chinese pork market, should there be another mass culling of Chinese pigs due to illnesses like blue ear disease, Americans can expect higher pork prices as China looks to the U.S. to meet its own market demand.
Perhaps of greater concern to Americans though is the fear that China could eventually respond to the increasing cost of producing domestic corn and livestock feed by beginning to import more from abroad. Should China elbow its way into the world grain trade, the combined effects of more corn being siphoned off for ethanol production and feeding China’s 500 million pigs could lead to soaring global grain prices.
Whether global grain prices rise substantially or not, should pig prices continue to skyrocket in China, expect this researcher to drop everything and follow in the footsteps of Wang Chao, a 22-year-old college junior here in China who last April dropped out of school to take up pig farming and cash in on what is quickly becoming a proverbial golden trough.
