At one end, small family farms are buckling under the weight of volatile prices, disease and rising costs.

At the other end, industrial-scale farms are becoming part of the landscape. But between these two options is a new cooperative venture that combines the personal attention of the family farm with the economic advantages of a corporation.

Yang Zhongxi, 44, of Qinyang, Henan province, has had to change his farming methods recently.

He used to raise more than 100 pigs at a time, making him the most prolific pig farmer in his village. In May 2010, he spent 100,000 yuan ($15,700) building a new barn capable of holding 200 pigs, plus hundreds of ducks and chickens.

But higher costs and lower returns took their toll and he quit the pig business earlier this year. Only the birds inhabit the big new barn.

“The cost of raising hogs has soared this year,” he said. “Four or five years ago, a baby pig cost 300 yuan. It is double that now.”

It has always been a high-risk business, but local farmers welcomed it, Yang said. “Generally, we could still make money.” Ten years ago, 15 or 16 small-scale breeders lived in his village. Now only two are left.

Yang said the price of feed, usually field corn, increased in his village by 0.4 yuan a kilogram early this year. A pig usually requires 300 kg of feed during its five-month growth period, so feeding each pig suddenly cost an extra 120 yuan. Five years ago, Yang said, the cost of raising a hog totaled about 1,000 yuan; now it’s about 1,500 yuan. The selling price, 2,500 yuan, hasn’t changed.

“Doing city jobs only paid 10 to 20 yuan a day years ago, and people would rather raise hogs,” Yang said. “But now, people make 100 yuan a day by doing city jobs. Who would choose breeding pigs?”

Too much work

Ten miles away, Li Qinying barely maintains her hog barn. Twenty pigs live in what used to hold nearly 150, and they are the last she will raise.

“It’s too tiring,” said Li, 54. “People say the more plowing and weeding, the better the crop. It doesn’t make sense in this industry.

“Epidemic prevention is a big problem,” Li said. Early last year, dozens of young pigs got sick and died overnight. The cause remains a mystery. “It is hard to accept because I took them as my babies and sometimes didn’t step out of the pig house for months.”

The wildly fluctuating price also is killing Li’s passion for raising pigs.

A couple of weeks ago, she heard that the market price had hit 20.4 yuan a kg, and she planned to sell some pigs. But the price dropped to 19.2 yuan the next day. “The final deal was just 18.2 yuan. That hurt me badly.”

More reason

Li is among many family breeders across the country who have chosen to leave the business since an outbreak of H1N1 flu in 2008. Steadily rising costs have deterred them, too, and one result was a near 60 percent jump in pork prices early this year.

Jin Yingfu, director of Qinyang husbandry bureau, said Henan has produced 50 million hogs on average every year, accounting for nearly 10 percent of the country’s total. Qinyang’s average production is more than 200,000, ranking it in the middle range.

The production has come from nearly 26,000 family breeders in Qinyang. Ninety percent of them have fewer than 1,000 pigs. Fewer than 25 have 1,000 to 4,000 pigs.

That is changing. “Many small-scale breeders withdrew from the market early this year in view of the rising breeding costs as well as the epidemics,” Jin said.

From January through March, the market price for hogs in some cities in Henan held at 14 to 15 yuan a kilogram, according to the Henan Statistics Bureau. It climbed in the second quarter, and peaked near 19 yuan a kg.

However, Jin said the rising price didn’t inspire farmers to buy many more piglets. “Farmers worried about another sharp drop in meat prices due to oversupply.”

To drive down pork prices and avert fluctuations longer term, the central government invested heavily in the industry to feed its growing middle class, which is consuming more meat. The government decided in July to resume a 2.5 billion yuan (about $389 million) subsidy to spur pig breeding and prevent future supply shocks.

The subsidies are based on production. The minimum is 200,000 yuan for producers of 500 to 900 hogs, and the maximum is 800,000 yuan for producers with more than 3,000 hogs. Small family pig farmers, then, are left out.
Fewer family raisers

China, the world’s largest pork consumer, also is the largest producer, with about 50 million tons of meat each year to feed its 1.3 billion people and 55 percent of global production. However, production is increasingly concentrated.

Through the mid-1990s, more than 90 percent of the country’s pig breeders were those small family farms, each producing 40 to 50 hogs a year. Then farmers began to reduce their risk by cooperating with big companies.

In neighboring Hunan province, the number of breeders with fewer than 50 pigs dropped 30 percent in recent years, Zhou Xiaorong, president of the Hunan Meat Association, told Xinhua News Agency in July. In East China’s Shandong province, an estimated 90 percent of breeders raise at least 50 pigs, according to the Shandong Hog Raising and Selling Association.

The Ministry of Agriculture said that in 2007, half of China’s hogs were produced by 2.2 million breeders raising more than 50 hogs at a time. The next year, those breeders provided 62 percent of the hogs.

Better option

About half an hour’s drive from downtown Zhengzhou, 35-year-old Zhou Hui is taking care of 40 pregnant hogs. She and her husband live in a small white house that connects two hog barns. The couple are not family breeders, but work for a large-scale company, Chuying.

The company, based in Henan, sold about 660,000 hogs last year. It developed a “staging” breed mode that has attracted thousands of participating farmers.

Chuying divided the traditional raising process into four stages – pregnancy, delivery, care of baby pigs, and raising them to market size. The farmers are guided by trained technicians and are involved in just a single process, which can prevent the spread of disease.

To get into Chuying’s No 1 Breeding Base, a car passes twice through sanitation showers about 300 meters away. Technician Liu Qingfeng said visitors cannot enter unless two days have elapsed since they visited another farm, and they must wear protective clothing.

“Pigs are easily susceptible to illness,” he said. “For safety’s sake, even the breeders do not go out of the base before they finish a single breeding process.”

Liu said family pig farmers lose 17 to 20 percent of their pigs to illness, but the rate in Chuying’s system is 5 to 6 percent.

The No 1 Breeding Base covers 133 hectares and has more than 400 barns, each holding about 40 pigs. The young ones arrive weighing 25 to 30 kg and will reach 100 to 160 kg over three months.

Chuying has 80 other breeding bases in the province, each with a single stage. The workers, who are independent contractors, are paid according to how much work is required, not the specific job or stage they are involved in. The stages vary in length, from about 40 days to 90.

Breeders take 10 to 15 days off after finishing a stage, and the work provides steady income without the fears associated with unstable meat prices.

Zhou and her husband earned 120,000 yuan last year, taking in twice the number of hogs than most people. “This job is easy and gives me more freedom,” Zhou said. “At least we don’t need to punch a time card, like white-collar workers.”

Zhou and her husband started to work with Chuying in 2003. Last year they bought a two-floor apartment in Xinzheng, a 10-minute drive from the farm.

“Our life doesn’t sound like a traditional hog breeding family, right? Group working gives us confidence and safety that we could hardly imagine before,” Zhou said.
Bigger map

Of the 609 million hogs China raised in 2008, only 1 percent came from hog producers raising more than 50,000 pigs every year. US-based Smithfield Foods has about 900,000 sows producing 14 million market hogs annually, making it the world’s largest producer of hogs.

China is on its way toward large scale. A growing number of companies have laid out plans to build massive industrial-scale pig farms. Chuying is investing 4 billion yuan to build a 400,000-hectare organic pig-breeding farm in Henan that would have an annual capacity of 1 million hogs.

Sichuan-based New Hope Group, China’s top animal feed producer, plans to expand its own hog production by 3 million in the next three years to tap growing domestic demand.

Thailand’s CP Group has started construction of a 500,000 hogs-a-year farm in Shandong province. The company is also building two farms to produce 1 million pigs a year, one each in Guangdong and Henan provinces.

Li Minghui, a research fellow with the Chinese Academy of Agricultural Sciences, said that more family pig farmers have signed up with larger scale companies. “Small breeders have very limited capability to withstand market risks,” he said. “The structure change will benefit both raisers and consumers.”

Increasing exports

The US Department of Agriculture recently published a report, “US pork exports to China are increasing”. It cited China’s strong economic growth, market demand for pork and declines in China’s pork production.

US exports to the Chinese mainland reached 192,500 metric tons (valued at $169 million) in the eight months ending in February 2011. Exports to Hong Kong (most of which are re-exported to the mainland) added 63,600 tons ($92 million) to this total.

According to the US Meat Export Federation, US pork exports to the mainland jumped 1,492 percent in the first half of 2011.

“We cannot simply say that increasing imports will hurt Chinese raisers. It takes time for us large-scale companies to hold a bigger share of the market,” said Wu Yide, Chuying’s board secretary.

“Imported meat or foreign investment will not shake an industry that has existed in China for thousands of years.”

According to the international potash fertilizer price negotiation disclosed on June 30, the CIF (cost insurance and freight) price of potash fertilizer for import into China was set at $470 per ton for the second half of this year. The price has risen $70 per ton compared to that of the first half of this year, a price increase of 17.5 percent, the newspaper reported.

According to Li Qiang, a spokesperson for Sinochem Group, the international price rise of potash fertilizer is partly caused by the international price rise of raw materials and resources. “However, the most important and fundamental reason is the intensified monopoly of the international suppliers in this field”, the newspaper cited Li as saying.

Feng Mingwei, the deputy general manager of Sinofert Holdings Limited, the largest fertilizer importer in China, said “Our dependence on imported potash fertilizer is at a rate of above 50 percent averagely. It is a threat to our national food security.”

In a bid to cope with the price rises and potash fertilizer shortages, China needed to establish a strategic fertilizer reserve system for the off-season as well as strengthen the “negotiation mechanism of potash fertilizer import”, Feng told the reporter.

During the week June 13 – 19, meat prices rose from the previous week with pork up 4.8 percent, beef up 0.6 percent, chicken up 0.5 percent and mutton up 0.4 percent.

Prices of eight aquatic products rose 1.2 percent mostly due to higher costs for transportation in summer.

Prices of flour and rice both climbed 0.2 percent from the previous week. Egg prices gained 0.8 percent week-on-week, but the growth rate was down 0.7 percentage points.

The prices of 18 staple vegetables dropped 1.9 percent for the fourth week running due to plentiful supply.

Producer goods including minerals, construction materials and rubber gained with minerals up 0.6 percent, construction materials up 0.3 percent and rubber up 0.1 percent. Prices of chemical products, non-ferrous metals and steel fell.

Food prices have a key weighting in the calculation of the consumer price index (CPI), a major gauge of inflation, which hit a 34-month high of 5.5 percent year-on-year in May.

Farmers harvest potatoes in Dabu township, Guilin city, South China’s Guangxi Zhuang autonomous region, on Thursday. As the local acquisition price of potatoes dropped by 60 percent to 0.8 yuan (12 cents) per kilogram compared to last year, many farmers are increasingly worried about their income. [Photo/China Daily]

The country will invest 4 trillion yuan (US$608 billion) into projects during the next decade to improve water conservation, Chen Xiwen, director of the office for the Communist Party of China (CPC) Central Committee’s Leading Group on Rural Work, said on Sunday.

He made the remarks at a news conference held by the State Council Information Office on Sunday, a day after the CPC central authorities issued their first document of the year on Saturday.

The country aims to double its average annual spending on water conservation over the next 10 years compared to the 200 billion yuan investment in 2010, according to the document, also known as the No 1 document.

The government will also encourage loans to, and private investment in, the water sector to ensure funding for conservation, it said.

The CPC Central Committee and the State Council regularly release the No 1 document at the beginning of each year to address government priorities.

This is the eighth consecutive year that the No 1 document has addressed rural issues, but it is the first to focus on water conservation.

“Floods and drought in recent years have exposed weaknesses in water conservancy infrastructures,” the document said, citing severe drought in Southwest China as well as severe flooding and mud-rock flows in many regions last year.

The document also said more efforts would be made to improve water quality and farmland irrigation, such as increasing areas under irrigation by 2.7 million hectares over the next five years.

Consequently, up to 10 percent of local land transaction fees should go to farmland irrigation projects, the document said.

Based on last year’s total land transaction fees, this figure is expected to be about 60 to 80 billion yuan, Chen Lei, Minister of Water Resources, told the news conference on Sunday.

Li Maosong, a researcher who specializes in disaster-reduction work at the Chinese Academy of Agriculture Science, said the development of water conservation is a long-term goal.

He said the primary task is to fully assess farmland in the country to identify specific irrigation needs.

Other points addressed in the document include:

The country aims to build effective flood control and drought relief systems by the end of 2020.

The harnessing of major medium- and small-sized rivers will be completed during the 12th Five-Year Plan (2011-2015).

The country aims to maintain annual water consumption at below 670 billion cubic meters in the next five years.

The central government will subsidize the maintenance of public benefit water projects in western regions and poverty-stricken areas.

The problem of water not safe to drink in rural areas will be eradicated by the end of 2015.

China may have harvested a record 180 million metric tons this year, up from 166 million last year, Caijing Business & Finance Review magazine reported on its website, citing an unidentified company executive. Last year, China was a net importer of corn for the first time since 1996. The government has been selling grain from state-owned inventories to cool the rally in domestic prices.

“Rising China-crop forecasts are a surprise because people have been expecting increased import demand,” said Greg Grow, the director of agribusiness for Archer Financial Services Inc. in Chicago. “People are more concerned that China will not buy U.S. corn later this year.”

Corn futures for March delivery fell 9.25 cents, or 1.6 percent, to close at $5.81 a bushel at 1:15 a.m. on the Chicago Board of Trade, the biggest drop since Oct. 21. Before today, the price surged 58 percent since the end of June, touching a two-year high of $6.175 yesterday, after adverse weather reduced the size of the U.S. crop.

Trading volume reached a record 762,387 futures contracts yesterday in Chicago, and open interest was 1.677 million contracts, the most ever, according to CME Group Inc., the owner of the CBOT.

China Crop Forecast

Chinese farmers collected 154.56 million tons this year, up from an estimated 144.374 million last year, according to an estimate by Geneva-based SGS SA for Bloomberg that was based on interviews with growers during the harvest in September and October. Farmers planted more and favorable weather boosted yields, the survey showed. Chinese corn prices have risen 30 percent in the past year.

Yesterday, the U.S. Department of Agriculture said China produced 168 million tons, up from last month’s estimate of 166 million. The USDA expects consumption to expand by 1.9 percent in China to 162 million tons in the year from Oct. 1.

Today’s price drop also was fueled by speculators reducing their bets on further rallies, Grow said. The close below the Nov. 8 low, after reaching a new high earlier in the day, created a “sell” signal for some traders who monitor historical patterns, he said.

“The reversal yesterday on record volume was a sign of at least a near-term peak,” Grow said. “The market needs to consolidate recent gains.”

Corn is the biggest U.S. crop, valued at $48.6 billion in 2009, government figures show, followed by soybeans at $31.8 billion. The U.S. is the world’s largest grower, exporter and consumer of corn.

The company’s net income rose to $7.8 million, or 30 cents per share, up from $5.2 million, or 24 cents per share, during the same period a year prior.

Revenue more than tripled to $39.5 million from $11.3 million.

Analysts polled by Thomson Reuters expected profit of 30 cents per share on $38.4 million in revenue.

The company’s fiscal first quarter ended Sept. 30.

The company said its quarter was helped by the newly acquired Beijing Gufeng Chemical Products Co., which accounted for 55 percent of revenue.

Looking ahead, the company expects net income of 29 cents per share on revenue of $33.1 million to $33.3 million in the second fiscal quarter. The company forecast net income of $1.35 to $1.37 per share on revenue of $150.5 million to $152.8 million for the full fiscal year.

Analysts expect second-quarter net income of 29 cents per share on $33.1 million in revenue and full-year net income of $1.36 per share on $152.4 million in revenue.

Shares of China Green Agriculture rose 70 cents, or 8 percent, to close at $9.48.

Facing a rising population, the central government plans to boost China’s annual grain output to more than 550 million tons by 2020, an increase of 50 million tons over 2007.

By contrast, the cultivable land in the country sharply decreased from 130.04 million hectares in 1996 to 121.72 million hectares in 2008 due to rapid urbanization and natural disasters, figures from the National Bureau of Statistics show.

Also, the current per capita cultivated farmland is about 0.092 hectares, which is only about 40 percent of the global average. Less than 4.7 million hectares in the country can be considered reserve farmland, Zhang told the legislature.

The country had its sixth consecutive grain harvest in 2009, with grain output rising 0.4 percent year-on-year to a record high of 530.8 million tons, the official figures showed.

“The increase of the grain output in recent years is mainly due to enlarging the planted areas, as the government encouraged farmers to produce grain by offering subsidies since 2004,” said Lu Bu, a researcher with the institute of agriculture resources and regional planning at the Chinese Academy of Agricultural Sciences.

“But these grain output increases cannot be continued since China does not have much additional farmland to be cultivated in the future,” he said.

More improvements should be made in other aspects, such as advancing planting techniques and increasing high-yield fields, he said.

Currently, China’s wheat yield is 4.61 tons per hectare compared with the world average of 2.76 tons. Per hectare rice and corn yields are 6.38 tons and 5.28 tons respectively, compared with the global average of 3.38 tons and 3.41 tons.

Although the country now is comfortably ahead of the global average in grain output, the potential demand is still overwhelming, Lu said.

Zhang also said in the report that so far, only 33 percent of the total planted areas in China are high-yield fields. That percentage needs to increase, he said.

Water-saving agriculture should also be encouraged, Lu said. Less than 20 percent of the country’s water resources are focused on large areas of farmland north of the Huaihe River, which account for two-thirds of the country’s total cultivable areas.

Several supporting policies to guarantee the country’s food safety will be implemented, according to the report from the National Development and Reform Commission.

“As more natural disasters hit the country, food security is becoming a top concern among the public, which forces the government to offer more concrete favorable policies,” said Zhang Hulin, a professor with the Party School of the Communist Party of China Central Committee.

Unlike wheat and barley, cotton is not just reacting to this summer’s crazy weather. True, large parts of Pakistan – the world’s fourth largest cotton producer and second largest importer – are under water. But cotton prices have been rising steadily for 18 months, after four years of consumption exceeding production, according to the US Department of Agriculture. The USDA predicts this year’s stockpiles will be only about 40 per cent of annual demand, the lowest level for 15 years.

The production problem has been centred in the US, the world’s biggest exporter (China is the biggest producer). Heavy government cotton subsidies notwithstanding, many American farmers switched from cotton to soya beans. Price was one factor: with the brief exception of the 2008 commodity-bubble spike (which was less dramatic for cotton than for other crops) cotton prices spent most of the past decade bumping around the levels of the 1980s. Soya beans, meanwhile, are about 50 per cent higher, and easier to grow to boot.

But farmers may be responding to higher cotton prices. The USDA says US acreage has increased by 20 per cent this year. Because India has curbed exports and Pakistan is swamped, American cotton farmers will likely rake it in this year. But the extra supply comes just as the global recovery is weakening and with a dispute on the legality of US subsidies still unresolved. Farmers (and cotton bulls) should make hay – or cotton – while the sun shines.

Yuan, director of the National Hybrid Rice Engineering Technology Research Center and a faculty member of the Chinese Academy of Engineering, made the remarks at the World Expo’s third theme forum, which opened on Sunday in Wuxi, in east China’s Jiangsu Province.

The new hybrid, the phase-III super hybrid rice, was expected to yield 13.5 tonnes of rice per hectare, Yuan said.

The previous hybrid, the second-generation super hybrid, was released for commercial production in 2006, yielding 9 tonnes of rice per hectare, on average

Rice is a major food crop that feeds more than half of the world’s population, Yuan said.

China is now planting 440 million mu (29 million hectares) of rice per year, with an average output capacity of 6.3 tonnes per hectare.

Among the acreage, hybrid rice accounts for about 57 percent of the total, with an average output capacity of 7.2 tonnes per hectare.

“The average yield of hybrid rice is at least 20 percent more than that of inbred rice, feeding 70 million more people annually,” Yuan said.

China is faced with a challenging grain situation this summer because of strong rainfalls in the south during the summer harvest season. Other problems include droughts in northern grain production areas and lingering low temperatures in the south.

According to the Ministry of Agriculture, China needs to maintain an annual grain output of 500 million tonnes to feed the nation’s 1.3 billion people.

China’s summer grain output rose six years in a row to top 123.35 million tonnes in 2009, which was 2.6 million tonnes more than the previous year.

“Hybrid rice will play a key role in ensuring food security worldwide in the new century,” Yuan said.

“If 50 percent of the world’s rice paddies were planted with hybrids, rice production could be increased by another 150 million tonnes, and 400 to 500 million more people could be fed,” he said.

Yuan believes food security is “a war people can not afford to lose” .

“The global economic downturn will always end, but food security is the problem we have to face every second,” Yuan said.

Statistics from the United Nations showed about 1 billion people were suffering from hunger and malnutrition and every six seconds saw a child dying of hunger or related diseases.

With the theme “science & technology innovation and urban future”, the two-day forum focuses on innovations in science and technology.

The previous two theme forums of the World Expo centered on communications and cultural heritages.

Yuan started working on hybrid rice in 1964.

“I often drive my car to go to rice paddies to do research,” said the 80-year-old, “The only difference is that when I was young, I rode a bicycle or motorcycle ….you could attribute it to improving life.”

Hybrid rice has also been commercialized in other countries, including India, Vietnam, the Philippines, Bangladesh and the United States.

“For the benefits of the world’ s people, we are well prepared to help other countries develop hybrid rice,” he said.