It’s the Pork Price, Stupid!

It’s kind of like the running of the bulls in Spain, but much more exciting. Central authorities in China are gearing up to open the gate on the strategic pork reserve. Considering that in 2010, Chinese people ate, on average, 4.2 million metric tons of pork each and every month, the 200,000 metric tons of meat from the reserve doesn’t quite amount to a stampede. Still, the hope is that this flood of flesh will help reduce soaring pork prices, and cool the rampant inflation that’s causing many households in China to go without, while worrying authorities who are determined to head off social unrest at the pass. Will it work? Doubtful. But that doesn’t mean that food reserves like this are any less of a good idea.

In the meantime, it’s worth discussing why pork prices are rising to such a degree, and what these increases mean for Chinese farmers.

Recall for a moment the so-called “world food price crisis” from 2007-2008. Many analysts at that time chalked the rapid rise in food price up to “a perfect storm” of drought- and weather-induced crop shortfalls, increased demand for meat products in Asia, and declining grain stocks worldwide. Others added to this mix the impacts associated with diverting cropland to biofuel production, commodity speculation, legacies of agricultural trade liberalization in poor countries, and the political and economic power that a handful of transnational agribusiness firms wield in controlling the particularities of the global food system (working in conjunction with the WTO, various state governments, banks, the IMF, etc.). Let’s not forget that those agribusiness giants reigned in RECORD PROFITS during 2007-2008, at the same time that number of hungry in the world surpassed one billion. The food crisis, which never went away, is a systemic crisis inherent in the way that food and agriculture are organized, legislated, controlled, and experienced…and some of these mechanisms are at play in the “pork price crisis” happening in China today.

Food price is a complex beast, described only partially by basic economic theory. Yes, Chinese people on average are eating more pork than at any other time in the country’s history, and yes, national annual consumption accounts for half of all the pork in the world. These trends are labeled as “demand.” At the same time, the pork industry in China is a new frontier for both domestic and international investors, increasing the supply of pigs and pork, and spurring the development of an increasingly industrialized hog sector. Vertically integrated pork packers and retailers are bringing meat to China’s urban middle and upper class consumers in quantities that make the strategic pork reserve seem ridiculous. Increased supply, coupled with the hangover from decades of meat rationing and unfulfilled pork dreams certainly play important roles in the cultural drive for more regular pork dinners. But it isn’t the case that high pork prices are solely the result of supply not keeping up with demand, even if we factor in production shortfalls, rising costs of labour, urbanization, and overall rising production and living costs.

A quick and dirty way of looking at some of the other factors at play in this pork price crisis is to look at rising feed costs[1], and how they are experienced by different kinds of farmers in China. Regardless of production scale, feed is generally the highest production cost for pig farmers. To analyze rising pork prices, then, we have to also have a basic understanding of the dynamics of feed markets. My recent report on Feeding China’s Pigs includes a historical look at the co-development of China’s feed and hog industries, and some of the implications of this “joint venture”. What’s most important here is that we begin to think of pork in China today as “corn on the hoof,” (and “soy on the hoof”), so that meat is properly analyzed as a complex commodity, which embodies the costs (economic and otherwise) and processes involved in producing it. Including globally traded grain in the calculus of pork price means that we’re back to the CBOT, commodity speculation, powerful grain traders, deforestation, smallholder dispossession, massive greenhouse gas emissions, agribusiness profits, and on and on and on. Pork price and grain price are intimately linked, and are not just a matter of more people in China eating more pork, while supplies fall for a number reasons. There’s a politics to it all…

My concerns tend to center on how these kinds of issues affect the lives of the world’s most vulnerable populations, who, more often than not, are rural smallholder farmers. What does the pork price crisis look like for smallholders in China? Recent headlines tell us that farmers are doing well, capitalizing on high consumer prices. We heard that in 2007 and 2008 too. But who are these farmers who are making it big while everyone else complains and suffers from inflation?

Consider again rising feed costs, which increase the most important cost of pig production. There are “farmers” who can weather this storm, provided their operation is big enough to take advantage of economies of scale. If they run a vertically integrated firm that has its hands in feed production and animal husbandry at the same time, even better. These big dogs, who are becoming increasingly common and powerful in China, will likely be able to take advantage of high pork prices. They’ll make it. They might even profit handsomely. They’ll be supported by investment, technology, policy, and subsidies. If clenbuterol didn’t ruin Shuanghui (Shineway), high feed costs won’t make a dent.

On the other hand, most of the smallholder farmers I met in China in 2010 (and the millions I didn’t meet) won’t be faring so well. Even the smallest “backyard” farmer who raises only two pigs each year struggle to afford feed when the price increases as it has this year. These farmers are already excluded from cashing in on the booming pork market in a number of ways. They’re often far-removed from urban markets and contractors, and they can’t meet changing industry standards for lean pork. As retail standards in China start to look more like those in the US and elsewhere, fatty pork, though it’s preferred by most Chinese people and lends itself to Chinese cooking, is being replaced by pork with a lower fat-to-lean ratio. This kind of meat can only be achieved by raising pigs on grain, or at the very least, by feeding grain at the right point in the production cycle. For smallholders, if they have to feed grain to meet market standards, and if the price of grain increases even a little bit, they are left out. The central government has been promoting cooperation among small farmers in an effort to help them realize economies of scale, but even these “specialized household farmers” (who raise pigs exclusively) are challenged by rising feed prices and fluctuations in pork price.

In this context, many smallholders give up raising pigs altogether, which can indeed strain pork supplies (today backyard farmers produce about 27% of China’s pigs, specialized household farmers produce 51%, and commercial operations 22%. These numbers are shifting dramatically as we speak, in the direction of larger-scale operations). The real crisis, however, comes when small farmers, who not incidentally account for about half of China’s population (depending in part on how we count migrant workers), give up raising pigs for household consumption and for sale, can’t afford to buy pork in the market even infrequently, struggle to buy other high priced foods, and have nothing to eat but greens and a few other vegetables from their ½ acre farm plots. This is where the idea of food security moves from being an abstract, state-centered political concept to a real life matter of whether or not households having enough food to eat. As one farmer put it, “The things pigs eat now cost more than what people eat.”

We don’t need to worry about whether or not China can produce enough pork to meet domestic demand (demand understood, of course, as a highly unequal construct). We do need to worry about whether that demand, and the supply of food (and feed) diverted to fulfill it, means that hundreds of millions of people are going to struggle to meet even basic dietary and livelihood needs. Income from family members working in factories and on construction sites in cities can help rural households with their food bills, but this is not a sustainable solution.

I shudder when I read this quote from a Financial Times article.

“With pork prices so high, today all we can afford to eat is this stuff,” she says, gesturing to green weeds growing among the debris in her yard.

All I can think of is the image of Haitians eating mud and grass patties in 2008 because rice was too expensive. It’s not the same story, but it’s not as different as we might think.

[1] I’m not arguing that feed cost is THE cause of rising pork prices. I don’t think there is a single cause. For me, it’s primarily a structural problem, but looking at the feed industry in relation to the livestock industry is useful way in to thinking about the problem.

This entry was posted in Agribusiness, Food Crisis. Bookmark the permalink.

One Response to It’s the Pork Price, Stupid!

  1. Jay says:

    Hi there,

    It would be great to speak about your work and some of the work we are planning going forward.

    All the best, Jay

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