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1、Profiles of the Chinese Pig Industry Nomatterwhomyouask,theanswerwillbethesame:ChinaistheNo.1porkproducerandconsumeronthisplanet.Intheyearof2000,527millionheadsofpigswereslaughtered,andnearly50%ofallporkintheworldisnowproducedinChina(NBSC,FAO,USDA,2002).1.3billionconsumersseemtopreferporkoveranyothe
2、rmeatsintheirmeals-essentiallyallporkproducedinthecountryisconsumeddomestically. Dependingonwhomyouask,youwillatleasthavesomedifferentanswersabouttheprofilesoftheChinesepigindustry.In1999,asurveyconductedbyNBSC(NationalBureauofStatisticsofChina)revealedthathouseholdsinruralChinaraisedanaverageof1.48
3、pigs(NBSC,2000).Onepersonof8intheworldisaChinesefarmer.Anotherfrequentlyquotedstatisticisthatabout80percentofallChinesepigsareproducedinthebackyardsoffarmershomes.Recentreportspreparedin2002byhogindustryassociationsinZhejiang,Shanghai,Beijing,andGuangdongprovincesproposedthat40to50percentofthehogswe
4、reproducedonscalefarmsinthoseprovinces.,itisdifficulttopreciselydefineascalefarmandvalidatethereportswithoutmorereliabledata.Whatarethecorrectnumberstodescribetheprofiles?Therealitymaybesimple:therehasbeennosoundandcomprehensiveinvestigation/surveyaccomplishedsofarinordertoaccuratelyprofiletheindust
5、ry. IncreasingmarketopennessinferredbyChinasaccessiontotheWorldTradeOrganization,continuedincomegrowth,andtheshiftoffoodconsumptionpatternstowardsmoremeathaveattractedmoreandmoreattentionsfromtherestofworldonChineseporkindustry. ThisreportattemptstodepictthepigindustryinChinabyexploringtheproduction
6、costsandmajorconstraintsofseveralswineproducers.KeyfactorsandissueswillaccordinglybestressedtoillustratewhatdifferentiatestheChinesepigindustryfromothercountriesandwhatdirectiontheindustryisheadinginforthefuture. Case1:Ms.Yan-StrugglingBackyardProducers Ms.Yanis64yearsoldandhasbeenraisingtwopigsfort
7、helast40yearsexceptforseveralextremeyearsinearly1960smanypeoplediedoffamine.Sheandherhusbandre-builttheirhouseinruralShandongProvincesatleastsixtimesinthelast40years. InthoseverydifficultyearsamidtheCulturalRevolution,3or4pigsayearcouldaddasignificantpartoffamilyrevenue.Foodgrain(mainlywheat)wasneve
8、renoughforfouryoungchildrenintheearlyyears.Sellingapigtwoorthreetimesayearallowedforthepurchasesofotherfoodsinreturn. Table1.OperationDescriptionofMs.Yans2-pigFarm. ItemsNote 1.FeederPigs-boughtfromlocalbazaarsatabout15to23Kgandabout$0.85/Kg2-or3-waycrossbred.Paycanbedeferredasshort-termdebt. 2.Feed
9、-onlyabout10%ofthefeedisgrain,proteinmeals,andpremixes;othersarefoodresidueswithnocost.Onlyfeedlittlegrainatearlyandlatestage. 3.Daystomarket-about200daysfrom20Kgto65Kg. 4.Marketpigs-soldtodealersoronlocalbazaars.Liveweightpricevariesfrom$0.65to$0.80/Kgin2002. 5.Manure-storedinaopenpitforfieldapplic
10、ationConsideredtohavevalue 6.Labor&Vets-timeusedforbuyingandsellingpigsandcleaning;vetsanddrugscostabout$10perpig.Noopportunitycostforlaborincluded TTable2.ConsolidatedBalanceSheetofMs.Yans2-pigOperation, June30,2002 ItemsAmount,USDItemsAmount,USD AssetsLiability Current Cashforfeedandvets42Shor
11、ttermdebtforfeederpigs19 4%premixandotherfeedinstore9Taxespayable4 Fixed Pigshed,trough,andtools133 Pigs77 Totalequity238 Table3.EstimatedConsolidatedIncomeStatementofMs.Yan2-pigOperation,December31,2002 ItemsAmount,USDNote Revenues Pigssold141.53pigssoldayear Manurecollectedforfertilizeruse29Opport
12、unitycost Expenses Buyfeederpigs21.5 Grainandproteinmeals13.88%offeed Premixes2.85Kgtotal Labor65Normallynotincluded Vetsanddrugs7.3 Others6.5 Depreciation2.7 Netincomebeforetaxes&nb3 sp;50.9 Netincome48.93-5%taxesandfees Netincomeperpig16.3 Advantagestobeabackyardproducer Enterorwithdrawbusinessto/
13、frompigindustryatessentiallynocost. Productionflowistotallyadjustabledependingonmarketprice. Twoorthreepigssoldperyearusedtoaccountfor30to40percentcashincomeforherfamilybutnowmaybedowntoonly10percent. Disadvantagesandconstraints Noleveragepoweroninputsandproductsprices. Diseasescancauseseriousproble
14、msandlosses. Moredifficulttofindmarketandsellpigsduetohighercostoftransportation,thususuallyreceivelowerprices. Alwaysbeingalowestpricereceivernomatterhowmuchyouimprovedgenetics. Younggenerationconsiderodoraproblemandneighborscomplaintsofodor.Decreasedinterestsinpigproductionbyyoungergeneration.Actu
15、ally,backyardpigproductionisdisappearinginareasaroundbigcities. Opportunitycostoflaborhasbeennotedandbeginstoincrease. EmergingIssues Industrialization,continuousreform,andopeningtotheoutsideworldarebringingaboutmanychangesintheChinesepigindustry.ObserversandresearchersinterestedintheChinesepigindus
16、tryarestudyingtheissuescurrentlyemerginginthecountryinordertosketchtheoutlookforChineseindustry. Concernedaboutpotentialproblemscausedbyreductionsinruralincomes,theChinesegovernment,withalonghistoryofplannedeconomy,willprobablycontinuetoprovidevarioussupportstothehouseholdsinagriculturalareas.Pigpro
17、ductionisoneofthesectorschosenbythegovernmenttohelpraisefarmincomes.Thetrendtowardshouseholdspecializationandexpandingfarmsizeswillcontinueinthehopeofincreasingproductionefficiency. Althoughthepacetowardsprivatizingstate-ownedswinefarmsisnotfastenoughtomeettheindustryexpectation,theresolveofthegover
18、nmenttodropthelong-sufferedburdenofpoor-managedfarmsisevident.InGuangdong,localgovernmentshavealreadyliquidatedmanyswinefarms,facilitatingpurchasebyfarmmanagersandtechniciansatveryreasonableprices.Onepopularmodelistoletthemanagersownupto40%ofnetassets/equityandotherworkerscanbuytherest.Aftertherefor
19、mthestatemayormaynotretainsharesinthebusiness.Managersnormallyhavetopaycashoramortizetheinitialcostofthetransaction.Managersare.Theyareevenallowedtobuyoutthefarmusingthefutureearningsinsomeareas.Inaddition,thevalueofapigfarmwillbeassessedwellbelowtherealvalueinordertomakeitaffordableformanagers.Newl
20、ycreatedprivateswinefarmscanbeverycompetitiveduetothelowfixedcostsandtotalassets,atleastinashortterm. Inadditiontoanimmaturemarketeconomy,poorinfrastructureandlogisticstohandleliveanimalandchilledporklogisticswillremainamajorconstraintforalongtime.Otheraspectslikeproductionefficiencyarealsomajorcons
21、traintsformanyChineseswinefarmerstoovercome.Thisisnotlimitedtotechnicalskills.Perhapsmoreimportantisthelackofbasicmanagementskillsneededtoaddeconomicvaluetoaswineoperation. Chineseconsumerslookingforqualityandflavorseemwillingtopayhigherpricesforpork.Pioneeringcompanieshavereportedsuccessinvalue-add
22、edproductswhentheytrytoemphasizeporkqualitybycrossbreedingleanpigswithlocalChinesebreeds.Severalfoodproducershavealreadyopenedspecializedstoresorsupermarketcountersforlocal-flavorpork.ThebroilerindustryhasalreadyexperiencedasimilarchangeinseveralprovincesinsouthernChinawherethefast-growingbroilersha
23、venowmostlydisappearedfromthemarketsduetounfavorableeatingquality. $False$ FoodsafetyhasrecentlycausedalargeamountlotofpublicconcernsinChinaduetoaspateofcaseswhereporkwascontaminatedfood-relatedtoxicities.Inthepast3years,severalhumanfatalitieshaveresultedfrompigfarmsdeliberatelyaddingclenbuteroltoincreasepigleancontent.Complaintsandangerfromthepublichaveforcedthegovernmenttoimposetightercontrolandestablishstrictnewlawsforquarantineandinspections.changecouldpotentiallydeterthenewentriesofsmallpigproducersandreducethenumberofbackyardproducerswhohavelesscontrolofthequality.&nbs3
