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Who will feed China’s pigs? And why it matters to us

A new generation of Chinese companies like the New Hope Group and COFCO are challenging the dominance of US agribusiness as they seek to meet China’s growing demand for food

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The majority of the world's feed crops could soon be destined for mouths of China's pigs (Image by Cindy Cornett Seigle)

He's been called China’s richest chicken farmer, but Liu Yonghao has come a long way from his days breeding birds in rural Sichuan province.

As the billionaire founder of the New Hope Group, China’s largest producer of animal feed, Liu’s rise over the past three decades mirrors the rapid growth of the country’s agri-food corporations.

His company has been at the forefront of a boom in demand for Brazilian and US soy and maize, used to feed China's burgeoning livestock sector.

It’s a boom that helped China overtake Canada as the biggest importer of US agricultural produce, with a whopping US$13 billion-worth of soy and US$1 billion of maize exported from the US to China in 2013, according to the US Department of Agriculture (USDA). That same year also saw China overtake the EU as the largest purchaser of agricultural commodities from Brazil.

Over the next three and a half decades, China is expected to account for more than 40% of the global rise in demand for agri-food imports.

“We’re heading towards a new era...as the majority of the world’s feed crops are destined for China’s pigs,” says Mindi Schneider, an agribusiness researcher at the International Institute of Social Studies in the Netherlands.

The rise of China’s agribusiness

However, the story of China's new agri-food giants is not just about booming imports of Brazilian and US feed crops. If it is to import significantly more food, China understandably wants greater control over its production and distribution too.

Liu’s New Hope Group are among a select group of companies so-called "dragon-head enterprises" – given state support to go out and boost their global presence.

The trend started back in 2008 when state-owned grain trader COFCO bought a 5% stake in US pork giant Smithfield, but really caught public attention when Smithfield was then taken over by WH Group, one of China’s biggest pork producers, for US$4.7 billion last year.

In a reversal of US firms buying into China’s domestic sector – such as Tyson’s purchase of a major stake in the poultry producer Xinchang in 2009 – Chinese firms are now looking to challenge the long-standing hegemony of US agri-food giants like ADM, Cargill and Monsanto.

The battle in South America

Although the Smithfield deal and the rise in pork exports to China – up 44% year-on-year at the beginning of 2014 – has garnered a lot of media attention, the battleground in China’s emerging challenge to US giants is South American commodity-exporting countries.

In countries like Brazil and Paraguay, US agribusinesses have long dominated. But that’s changing fast.

COFCO's takeover of two grain traders with major interests in Brazil, Noble Group and Nidera, earlier this year has enabled China's agri-food giants quickly to gain a foothold in the country. The US$1.5 billion deal to buy Noble, incidentally, also gave COFCO control of the fourth largest grain trader in Paraguay, where 96% of soybeans are exported.

"To me it could be a real game-changer helping Chinese agribusiness become more competitive with the other agri-food companies in Brazil," says Emeile Peine, a global agribusiness specialist at the University of Puget Sound, Washington. "It signals a shift in strategy away from saying OK we’re going to partner with smaller Brazilian companies on the ground to try to establish our own infrastructure to saying we’re just going to purchase our way into the market – like what happened with Smithfield."

Soy harvestingAnd it’s a shift that could be accelerated as companies including Liu’s New Hope Group look to import more corn for use as animal feed. The World Bank forecasts maize imports will rise from 2% to 15% of China’s total consumption by 2030.

Until recently, the US has been the main exporter to China, accounting for 97% of its maize imports between 2010-12. However, in an effort to reduce this dependency and boost the influence of its own agri-food corporations, China has recently signed a supply agreement with Brazil, giving a deliberate boost to companies like the New Hope Group and the major state grain traders COFCO and Beidahuang.

It’s been a double-blow for US agribusiness, with China also repeatedly rejecting shipments over the past year claiming they contain an unapproved GM corn. Cargill admitted a 28% drop in its earnings earlier in 2014 was largely down to China’s corn rejections.

“Unlike soy, where US agri-food giants took a firm control and are deeply embedded both in South America and China, in corn Chinese firms like the New Hope Group are poised to be key traders,” explains Schneider. “A major political economic shift is happening in real time. Cargill and co are not being displaced but their supremacy is being challenged," she adds. 

Destroying the rainforest

The arrival of Chinese influence could enable Brazil to usurp US dominance of global corn production and exports. However it may come at the expense of its richly biodiverse grasslands, wetlands and forests, particularly in the newer farming frontiers of the Matopiba region.

“Corn is going to be the next big factor in the Brazilian agricultural scene,” says Peine.

“It’s much more water and nutrient intensive than soy, so its expansion could be a real important moment of change in the Brazilian agricultural industry, with major environmental implications. It’s going to be a real struggle between expanding production area in Brazil and people who are trying to limit deforestation,” she adds.

China’s agri-food sector has, so far, shown little concern about such issues. Despite being the largest soy importer in the world, the nation does not require any of its soy imports to be sustainably produced or certified. And unlike Cargill and other American companies, Chinese agri-food corporations are absent from the Round Table on Responsible Soy, for which members voluntarily commit to not purchasing soybeans from newly deforested land.

Forest campaigner at Greenpeace Brazil, Romulo Batista, fears the worst: “As usually happens with every commodity, it is the market that will regulate the increase in areas planted with this crop. If the demand is greater than the supply and the financial returns are high we can expect the same environmental damage usually seen in other monocultures, with new areas of forests and savannas converted into cornfields.”

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Default avatar
匿名 | Anonymous

想了解更多这方面的资讯吗?

农业与贸易政策协会在这个领域研究多年,并先后发表了一系列的深度报告。如果你有兴趣的话,这些报告在它的官网上都可以找到:http://www.iatp.org/documents/china%E2%80%99s-pork-miracle-agribusiness-and-development-in-china%E2%80%99s-pork-industry

For More On This Issue

The Institute for Agriculture and Trade Policy has been following this issue for several years, and has published a series of in-depth reports that are available on the website. This one is a good place to start: http://www.iatp.org/documents/china%E2%80%99s-pork-miracle-agribusiness-and-development-in-china%E2%80%99s-pork-industry

Default avatar
匿名 | Anonymous

需要传播更多“改变”的例子

中国的人口基数和消费能力注定让它成为问题的焦点,在提出问题的同时,我们也应该更多传播关于“改变”和“可持续化”消费的例子,尤其是来自发达国家的事例。

这样,中国人也可以更多地看到世界的可持续发展趋势,而不是继续认为“发达国家没有做出改变,却指责中国,要求中国人改变,限制中国人发展”。大多数中国人,在读到与这篇报道类似的文章时,都会或多或少产生这种想法。

我们以全球的视野看待中国必须面对的问题(如中国的胃口威胁到了其他国家的环境),这很必要。但同时,我们也应该更多地以全球视野,让中国人看到可持续发展的未来。在展示各国为可持续发展所做出的努力(特别是消费模式的改变和可持续农业技术的进步)后,中国人也会更加有信心和动力,探索适合自身的可持续发展方法。

We need to share more examples of “transformed”

China’s population size and ability to consume means the country becomes the focus of this problem. As well as raising questions, we also need to publicise more examples of “transformed” and “sustainable” consumption, especially from developed countries.

In this way, Chinese people will be able to see more of the world’s trend towards sustainable progress and they will not continue to believe that, “developed countries have not reformed, but still blame China and require China to change; they are limiting our progress”. Upon reading this kind of article, the vast majority of Chinese people will have these kinds of thoughts to some degree.

We must all look at China's unavoidable problems (such as China’s appetite threatening the environment in other countries) from the global perspective. At the same time however, we also need to use a global perspective to make Chinese people see sustainable future. After we demonstrate what contributions and efforts each country has made towards sustainable progress (especially the reformation of consumption methods and the progress of sustainable agriculture), Chinese people will have the confidence and motivation to explore methods of sustainable progress that suit them.