In China, they call it the Year of the Pig and reverentially the Year of the Golden Pig. It is a six hundred year cycle and betokens prosperity. Sadly, not this time around.
Fears of pork shortage and rising prices grip China. Ministry of Agriculture reported that pork prices went up by 43 percent and pig prices by 71.3 percent last year.
Pork has a deep impact on their psyche. It is difficult for foreigners to appreciate the fear of rise in pork prices in large parts of China. It is similar to onion prices in North India and gas prices in America.
Indeed, there is over dependence on pork. While other meat types are gaining popularity through fast food joints, pork accounts for 70 percent of all meat eaten in China. As Lester Brown writes, “While U.S. meat intake is evenly distributed between beef, pork, and poultry, in China pork totally dominates.” “Meat” in China means pork unless otherwise specified as chicken or beef.
Data show that China’s 1.3 billion people eat more than 92 billion pounds of pork every year, which is a fifth of a pound per head per day. China is the biggest pork producing country, accounting for 50 percent of global production. It is almost self-sufficient in supplies.
Greater concern of the Chinese government is the dependence of lower classes, especially migrant workers, on pork as a staple item in their diet. Along side fears of general inflation, unaffordable pork prices could destabilize the country.
Responding to reports of pork scarcity and high prices, Premier Wen Jiabo swung into action and signaled concern at the highest level in the government. He visited farms and supermarkets and made TV appearances to exhort the people. He cautioned the farmers: “The pork price hike should have a limit, because some urban residents can’t afford it.” He pleaded that the situation “needs a market adjustment.”
An emergency meeting of the Cabinet was convened and ordered local governments to increase food assistance for low-income families and to offer families subsidies to encourage pig rearing. The General Office of the State Council, a supreme body, said in a statement, “Production and distribution of pork and its products relates to the lives of the masses and influences the overall situation.” These were followed by reports that government would release stocks from the strategic pork reserve to redress the shortage. The reserve has been maintained since late nineties to meet with such shortages.
Notwithstanding these initiatives, it seems that the Chinese authorities are not sure footed in their steps. Their plate is full of woes. Nearly 70 percent of hog production is unorganized, small scale or backyard production. Efficient, large-scale production is yet to develop. The fragmented industry lacks market information. Nor does it have official forecasts to guide its production plans.
These give rise to ‘hog cycles’ and volatility in prices. When prices are unremunerative, farmers do not rear hogs or even slaughter them, which raises prices in the next round. In 2004 prices were at their peak, which led to over production and fall in prices in the next two years leading to cutbacks, which have lifted prices this year.
Some articles in China daily express the hope that the government would take over the responsibility to provide reliable forecasts of demand and minimize the price swings. Perhaps this was the ‘market adjustment’ Premier Wen had in mind. There is strength in this suggestion but it will not resolve the problem on hand.
A major factor, which exacerbated the shortage, was last year’s epidemic of blue ear disease, which led to the slaughtering of thousands of hogs. Farmers stopped raising pigs for fear of losing money if the animals died. As the Ministry of Agriculture said, “It is not only an economic issue, but also a social issue.”
More than the hog cycle and the epidemic, what drove pork prices up the hill was the increase in the price of corn. Pigs in China are reared mostly on corn. Corn prices have gone up by 30 percent since last year. This is due to corn getting diverted for industrial use, such as for the production of ethanol. On biofuels, the Chinese had over reached themselves and had not foreseen its fallout on pork production. An article in The Christian Science Monitor describes graphically the dilemma faced by the Chinese government. (As pork prices soar, Chinese put brakes on corn for ethanol, May 31, 2007.)
China’s current Five Year Plan set the goal of using biofuels at 15 percent for transport sector by 2020. Gas stations in many provinces mix 10 percent of ethanol in the gasoline they sell. Ethanol factories have sprung up across China and are competing with pig farmers for corn.
Analysts of the Earth Institute have warned about the coming clash of corn and energy. China is proving to be a test case as it has resulted in a clash between pig production and ethanol. More broadly, it creates a conflict between food and energy security. As Mr. Zhang, FAO Representative in Beijing, put it, “China cannot use food for fuel because food security is more important than energy and because food is politically very important.”
By December 2006, the government revised its biofuel policy. It suspended all projects in the pipeline and began to regulate the establishment of new projects. There are reports of hurdles faced by them in capping projects or preventing diversion of corn.
Fatal attractions of biofuel have claimed many victims. As one Reuter’s blog (01 June 2007) explains, “Tequila, pork and orangutans” are the new victims. Countries can afford to forego tequila or live without orangutans. China cannot survive without pork. Some analysts draw a doom scenario of uncontrolled prices destabilising China. There is no reason to doubt China’s ability to manage this crisis. However, it leaves open the angst that the year of the golden pig is a year of anxiety.
(The writer, Mr. K.Subramanian, is former Joint Secretary, Ministry of Finance, Government of India. )