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Pig farmers struggling amid price diving

(Xinhua)
Updated: 2009-05-15 19:39

TAIYUAN -- For the second time in three years, China's pig farmers are struggling to make ends meet.

The country has an overabundance of pigs. Combine that with fear over the A(H1N1) flu, formerly commonly referred to as "swine flu," and farmers find themselves unable to make a profit when they go to market.

Lan Yushun sold 60 pigs at 8.2 yuan (US$1.2) per kilogram two days ago, losing about 6,000 yuan.

"It is better than losing more if the price keeps plummeting," said Lan, whose 1-hectare barn in Shanxi Province produces more than 2,000 pigs a year.

The National Development and Reform Commission (NDRC) issued a warning on Tuesday that the sector began to lose money as the average rate between the prices of pigs and feed in 36 big cities was 0.1 point lower than the break-even point as of May 6.

Deputy director of the NDRC pricing department Zhou Wangjun also pointed out supply had surpassed demand and the gap could widen as consumption of pork usually dropped in summer.

The government would decide whether to start buy large quantities of pork as of next week based on market conditions in an effort to stabilize prices, said Zhou.

He said he was uncertain about the planned program's effect in stopping the price from falling.

Following the warning, Lan decided to cut production by 1,500 head this year, equal to about 15,000 yuan in total.

"I lost 260,000 yuan in 2006 when the prices plunged drastically due to enormous supply and sluggish demand. I just don't want it to happen again," said Lan, who began to raise pigs in 1994.

"The flu, which has no connection to pigs other than containing swine flu genetic sequences, was another disaster for us. People stopped buying, driving the price down further."

In Jinzhong City, Lan's hometown, pigs sold at about 9.6 yuan per kg before the second half of last month, when the flu broke out. The price dived to 6.2 yuan per kg during the May Day holiday.

The fortunes of China's hog industry have fluctuated drastically since 2006. The serious price fall prompted the central government to launch stimulus policies in 2007, which prompted enthusiastic investment in the sector.

Production greatly expanded in the following two years, slashing prices in the second half of last year as the consumption grew weakly.

Under the stimulus policy, Lan received a subsidy of 48 yuan per year per pig breeding sow and every pig in his barn was insured for 1,000 yuan.

However, Pan Yun, vice president of the Academy of Social Sciences of Shanxi, said the policy focused on the temporary market situation rather than the industry's long-term development.

The policy had been in effect for three years, much longer than necessary. It had become a channel for farmers to get money, but its original purpose of regulating the market was not well realized, Pan said.

"The stimulus measures actually sharpened market fluctuation," Pan said.

The government should work out a long-term plan based on the sector's development, covering industrial goals, competitive capacity, production and processing chains, backup policies, and an early warning mechanism covering market demand, price movement and break-even point, Pan said.

Priorities should be given to large pig farms that could withstand risks and were more adaptable to market changes than small farms, Pan added.

The Kunxing Farm in Jiangsu Province employs more than 100 pig raisers, producing about 30,000 pigs every year.

Cost advantages and the brand reputation allowed the farm to earn 0.7 yuan per kg more than independent producers even during this hard time, said owner Du Xiaokun.

Independent producers should pay more attention to breed selection and disease prevention to reduce death rates, Du said.