Ｐｉｇ－ｒａｉｓｉｎｇ Ｉｎｄｕｓｔｒｙ Ｏｕｔ ｏｆ Ｃｏｎｔｒｏｌ

In the middle of October, it was said that the foreign enterprises had the aim of controlling the Chinese pig-raising industry. This news hasnt been proved to be true or not. But it is really hard for the foreign enterprises to control the pig-raising industry in China, because of the low industrial concentration.

The news that Goldman Sachs has entered the Chinese pig-raising industry proved to be a rumor. “The Chinese pig-raising industry is so large that it is impossible for the foreign enterprises to monopolize the market by controlling the price,” said the source in the Chinese stockbreeding industry.

In this period the price of live pigs was dropping. The foreign enterprises might prepare for the future of live pigs which is coming on the market soon. Their aim may be to gain a higher income, not limited to the money from selling pork.

In the middle of October 2008, some experts reported that the international investment bank Goldman Sachs spent 200 or 300 billion US dollars buying out 10 more pig farms. Those pig farms were mainly located in Hunan and Fujian, key regions of pig-raising in China. At the same time, the Deutsche Bank invested 60 million US dollars to acquire 30% of the shares of a pig farm in Shanghai. It was reported that the Deutsche Bank also wanted to put another 60 million US dollars in an agricultural group in Tianjin. The Vice Chairman of China Animal Agriculture Association (CAAA) Qiao Yufeng gave his opinion on those things when he was at the Conference for the Development of Pig-raising in China. He said: “According to our survey, Agfeed, whose headquarters was in Jiangxi, acquired the pig farms in Fujian, Guangxi, Yunnan, Hainan and Jiangxi after accumulating the funds through overseas channels. It was not Goldman Sachs as it was previously reported. The report was not true.”

Though the news that Goldman Sachs has entered the Chinese pig-raising industry is no true, it is true that Charoen Pokphand Group based in Thailand is speeding up its entry into China. At the end of September 2007, Charoen Pokphand Group signed a contract with Jiangsu Agribusiness Group Corporation. They decided to collaborate and created Jiangsu Charoen Suken Pig-raising Co., Ltd as a joint venture. Their first construction project was a pig farm with 4800 breeding pigs together with the supporting cultivation farms. The total investment was 14.3 million yuan (USD 2.04 million). Both sides plan to develop the joint venture company into the one with an annual output of 1 million live pigs and corresponding slaughtering and processing abilities in 5 years. The actions of Charoen Pokphand Group raised a discussion about whether the foreign enterprises can control the price of live pigs in China.

Qiao Yufeng said: “The annual output value of the pig-raising industry in China is 640 billion yuan (USD 91.43 billion), which is 50% of the total stockbreeding industry in China. The scale of the industry is very large. However, the phenomenon that the industrial concentration is low cannot be changed in a short time. Live pigs are fresh products, which can not be reserved, so it is not possible to monopolize the market by controlling the price. The pig-raising industry in the USA has the highest concentration. Smithfield Foods Corporation, the largest company of pig-raising industry in the USA, takes 30% of the market share in the USA, but it is not yet in the monopoly status. In 2007, when the market price was under depression, it was also confronted with the stress of deficit.

According to a director of a large-sized breeding enterprise of live pigs in West China, presently the Chinese pig market is dominated by the small-sized enterprises and individual dealers. The large-sized enterprises have to follow them. The enterprises with an annual output over 10 thousand live pigs take less than 10% of the total number of enterprises in the whole country. Take the enterprise for which the above-mentioned director works for example: its annual output is hundreds of thousand live pigs, taking only 0.5% of the total amount of the province where his enterprise is based. This means that the large-sized enterprises can not even dominate the market of the provinces where they are based. Another enterprise with the annual output of millions of live pigs only takes 2% to 3% in the market share of province it is based in. There are thousands of individual dealers of live pigs in China. But they always hold irrational attitudes toward the pig-raising industry by swarming to begin or waive to raise prigs, which causes the sharp increase or drop in the price of live pigs. This also brings huge damages to the large-sized enterprises. So it is hard for the foreign-funded enterprises to take the monopoly status of the market of live pigs.

Qiao Yufeng said: “It is a good matter that the foreign enterprises plan to enter China. It is helpful for the development of the intensive pig-raising. We need advanced development theories, more capital support and a lot of management experience. The entry of foreign enterprises is helpful for the development of the pig-raising industry in China. The experience with the feedstuff industry is a good example.”

According to the statistics from the CAAA, last March the prices of live pigs and pork began to drop from the former high level. By the end of this August,the prices of live pigs and pork dropped by 15.53% and 12.38% compared to the highest prices of last year. The foreign enterprises still are enthusiastic about the Chinese pig-raising industry. According to the analysis of the experts, the foreign enterprises are mainly driven by the profit of 500 to 600 yuan (USD 71.43 to 85.74) a pig. Besides, it also prepares for the upcoming future of live pigs. “Though there is a future in live pigs, the foreigners can earn more money in other ways.” However, the future trade plan of live pigs which were raised by Dalian Commodity Exchange has not yet been approved.