August 10, 2005

China pig farmers fear for economic health

By Lucy Hornby

LONGQUAN, China (Reuters) - Three young pigs look up
drowsily from a spotless sty as Chen Chunfu, tobacco pipe in
hand, works out in his head their price three months from now.

They'll need to gain a 100 more pounds before they can be
sold, each pound helping to put his 15-year-old son through

"I can't afford to lose money on them," Chen said from his
spartan home in Peach Blossom Ravine in China's second-most
populous province of Sichuan where a deadly bacteria has killed
hundreds of hogs and nearly 40 people.

Chen relies on pigs for a fifth of his income of less than
$500 a year. He uses them to fertilize a hillside orchard hours
away from the epicenter of an outbreak of the Streptococcus
suis bacteria which has sickened hundreds of farmers, butchers
and anyone else who came in contact with the infected animals.

Sichuan, which supplies 14 percent of the nation's favorite
meat, has been forced to suspend all exports of chilled and
frozen pork from hard-hit areas to Hong Kong. Many Chinese
cities have set up tight screens to block shipments of pork
from the province.

It is China's biggest outbreak of disease since the deadly
flu-like Severe Acute Respiratory Syndrome virus emerged in
southern China in late 2002 and went on to kill about 800
people around the world.

It couldn't have come at a worse time for Sichuan, which is
better known for its fiery-hot chili and rare pandas.

Pork prices were headed south even before the outbreak of
the disease on oversupply.

Now, measures to curb the disease's spread from the
impoverished agrarian province, home to about 90 million people
-- the population of the Philippines -- threaten to knife
through already paper-thin margins for pig farmers such as

"They've made a big effort in education, telling people not
to eat pigs that died of this," said Chen at his mud home
overlooking the city of Longquan, outside Sichuan's provincial
capital of Chengdu.

He said he didn't slaughter his pigs and his family
wouldn't eat one that died of sickness.

"But some people do, for a lot of reasons. Maybe they eat
it or give it to friends and relatives, because for the most
part you can only sell the good meat. The friend can't really
refuse, but eating it isn't sanitary either."

China consumes more pork than anywhere else in the world.


Pig-raising used to be profitable in China as consumption
of meat grew due to rising incomes in urban and coastal areas,
according to Zhu Yufeng, Beijing representative for trading
company Louis Dreyfus.

But oversupply and higher feed costs have decreased profit
margins in recent months.

"From June, pig farmers have been barely making it,
especially in Sichuan and the southwest," Zhu told a conference
in Beijing in late July.

For Chen, 52, and his wife Liu Faying, 51, a 25 percent
drop in pork prices could eat into the family income of 3,000
to 4,000 yuan ($370 to $500) a year.

"Let's say you could sell a 4-month-old pig for 4 yuan a
pound, now it's about 3 yuan a pound," Liu said.

"And you can't sell as many."

For other farmers in the hardest-hit areas of Ziyang and
Neijiang on the highway between Chengdu and the city of
Chongqing, pigs make up more than half the family income, state
media have said.

Other income comes from raising vegetables and corn in
small plots in the low green hills, and from wages sent home by
family members working in more prosperous cities.

Peasant households with 20 or fewer pigs account for about
70 percent of hogs raised in Sichuan.

"My wife's family raises over 100 hogs. We've been
inspected every day since the outbreak, and we do all the
things we're supposed to in terms of sanitation and
inoculation," said Xiao Wang.

Wang is one of the lucky ones. Few other farmers have the
capital to raise 100 or more pigs, said Huang Guogang,
operations and management department secretary for feed company
Southhope Industry Co. Ltd, a unit of Chinese conglomerate New
Hope Group.

"So many households raising pigs keeps margins down, and
makes it very difficult to establish more industrial farms."

"As more people move to the cities and wealth spreads to
the countryside, fewer households would be willing to enter
such a high risk, low return business, creating more room for
industrial pig farming to take hold," Huang said.

"Right now, peasants raise one litter, earn some money,
raise the next, lose it all."