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SICHUAN, CHINA, Sept. 11, 2002 - A delegation of 25 Michigan farmers got a firsthand look at why China is the world's largest hog producer, and why it looks like that title will remain in Chinese hands for at least the foreseeable future.
Much to the surprise of many Michigan farmers on a 14-day study tour, China's hog industry has made extensive use of U.S. genetics and production management practices to now produce nearly 50 percent of the world's pork.
Vertical integration is taking hold in China's hog industry as well. The Sichan Jingyan Food Co., Ltd., formerly a government owned entity, was purchased by the Lanyan Co. about three years ago to produce, process, and market pork products in China and for the export market.
According to Liu Wei, president of Sichan Jingyan Food, the processing facility employs 300 local workers, processing 1,000 hogs during a daily five-hour shift. With an average 70 percent slaughter yield, the company provides frozen pork products for domestic and foreign markets. Wei estimates that pork exports to Singapore, Russia, Brazil, and Egypt account for 50 percent of the plant's total annual output. The processing plant also has 3,000 metric tons of cold storage capacity.
The Michigan delegation also toured the company's 300-head farrowing facility, which employs six full-time employees. Using genetics developed through Pig Improvement Co., a U.S.-based company commonly known throughout the world as PIC, the company utilizes a three-way cross of Duroc, York, and Chengbai, a local breed. The facility makes extensive use of artificial insemination and farrows twice a year, averaging 11.5 pigs per litter, according to Wei.
Following a three-site production system similar to the U.S. production model, the farrowing facility weans pigs at 28 days, moving them to another offsite nursery facility where they're held to either four months with an average weight of 50 pounds or five months with an average weight of 60 pounds, before being moved to contract finish facilities which specify a 220-pound finished weight.
In an effort to provide a consistent finished product and minimize risk of antibiotic residue and hormones, the company also sells the feed to producers, says Wei. Under terms of the company contract, producers must pay cash for 70 percent of the cost of feeder pigs as determined by current market prices and feed costs, with the remaining 30 percent settled at the time of delivery for slaughter.
On average, producers receive 33 cents per pound, based on live weight. Producers are also paid a premium based on grade standards, which are calculated on leanness and fat grades of finished hogs. While the company has one major producer who contract-feeds up to 10,000 head, most of the contract-feeding takes place on relatively small "household farms," which typically have very limited capacity.
According to Wei, the company plans to form a joint venture in October with the Chinese government. Although Wei declined to comment on expansion plans, if any, Ottawa County hog producer Harley Sietsema speculates the investment may be a way for the Chinese government to control the amount of product being exported, adding he was surprised to learn the company was exporting pork products to Brazil.
"That may explain the Chinese government's interest in buying back into the plant - they simply don't want to export too much of their food supply," Sietsema said. "Mr. Wei made it clear to us that a portion of his product, up to 50 percent, has to be made available to the Chinese government, if needed."
Gratiot County hog producer Kris Duflo was impressed with what he saw of the operation, but was not convinced the plant was operating at 100 percent capacity, noting the processing facility has the capacity to at least double production. "I really don't think they've developed their end-market yet," Duflo said. "You wouldn't normally let that capital investment sit idle 19 hours a day. But, all in all, they've got it figured out. They've got the technical support and the environment to get the job done."
According to Duflo, the number of pigs born per litter, a 90 percent conception rate, and feed conversion rates are very close to U.S. hog industry averages, despite vast differences in the Chinese production facilities, which are considerably smaller and outdated compared to U.S. facilities.
One other major exception noted by the study group was manure management. The farrowing operation separated solids and liquid wastes, utilizing solids as fish feed, while the liquids were sent to a "treatment pond" for a two-day period before being released on a down slope to rice paddies and eventually a nearby river.
Is the Chinese government cracking down on the manure management practices? "No," said Wei. "The Chinese government is very supportive of what we're trying to do here."