Global Meat Complex: The China Series China S Pork Miracle?

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Global Meat Complex: The China SeriesChina’s Pork Miracle?Agribusiness and Developmentin China’s Pork IndustryBy: Mindi Schneider with Shefali SharmaInstitute for Agriculture and Trade PolicyFebruary 2014

Global Meat Complex: The China SeriesChina’s Pork Miracle? Agribusiness and Development in China’s Pork IndustryBy Mindi Schneider with Shefali SharmaPublished February 2014Mindi Schneider is an Assistant Professor of Agrarian, Food and Environmental Studies at the International Institute ofSocial Studies (ISS) in The Hague, Netherlands.Shefali Sharma is based in Washington D.C. as director of the Institute for Agriculture and Trade Policy’s Commodities andGlobalization program.Some of the research presented in this report was supported by Oxfam Hong Kong.The Institute for Agriculture and Trade Policy works locally and globallyat the intersection of policy and practice to ensure fair and sustainable food, farm and trade systems.More at iatp.org

ACK NOW L EDGEM EN TSWhen we embarked on this project to examine China’s role in the Global Industrial Meat Complex, we had intended toproduce only one report. Fairly quickly into the research, we realized—given the complexity of China, the scale and scopeof production and the rapid rate at which different meat segments in China are evolving—individual sectors such as feed,pork, dairy and poultry merited their own stories. This large endeavor could not have been achieved without the help ofnumerous people that were involved from the conception, research, drafting, translation and editing phases of the project.First, we’d like to thank Jim Harkness, IATP’s president for 7 years (2006–2013) as the person who conceived this projectas a critical contribution to the debate on the expansion of industrial meat production, its increasing concentration and itsimplications for social and environmental justice. Our interviews, conducted in May 2013, in China would not have been asrich without Jim’s excellent contacts, his Chinese language skills and his 16 years of experience living and working in China.His editorial input, suggestions and revisions throughout the process have been invaluable.IATP is also grateful to Mindi Schneider for being the lead author of our report: China’s Pork Miracle? Agribusiness andDevelopment in China’s Pork Industry. We are indebted to her for being generous with her knowledge, in-depth research andanalysis on China’s “pork miracle,” the role of government policies and the emergence of Chinese corporations in the meatand feed industries.Several other people contributed with hours of research and writing that helped shape these reports. We thank SophiaMurphy, Sarah Martin and Sarah Horowitz who contributed heavily in the early stages of the project and whose researchcontributed to the content of the final reports. Assistance with translations of documents and interviews was adeptlyprovided by Jiang Tuo and Yuan Miaozhu.Lastly, but definitely not least in the writing process, Zhang Rou and Chendong Pi spent numerous hours researching,writing and revising various drafts of the dairy and poultry reports, respectively. We are grateful for their hard work andefforts. Ben Lilliston also provided important editorial input throughout the process and IATP’s communications teamworked around the clock to deliver a beautiful final product.In addition, we thank experts like Fred Gale, Mia MacDonald (Brighter Green), Susanne Gura, Kees Kodde (GreenpeaceChina) and Third World Network who generously shared their research and analysis of China’s meat revolution with us. Wealso thank the researchers, academics, representatives of the industry and Chinese policymakers who were interviewedanonymously in China as part of this research. Any factual errors are our own responsibility and not of these individuals.We especially thank the Grace Foundation for supporting this project and understanding the importance of researching theglobal dimensions of the industrial meat complex and why China was a good place to start.A final caveat: The project has been an enormously enriching process of learning about how China is grappling with itschoices to consume and produce more meat and what this means for social and environmental issues within and outsideChina. It is by no means intended to be a definitive account—an impossible task for a country as complex and vast as China.We hope however, that it will be an important contribution to an evolving debate and process.–Shefali Sharma

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TA BL E OF CON T EN TSThe global industrial meat complex: Understanding China’s meat revolution. 7Executive summary. 9I. Introduction: China’s pork miracle?.11II. Developing China’s pork industry. 12All the pork in China: a brief historical overview . 12Industrializing pork. 13Pork industry production, consumption and imports . 14Imports. 15Import prospects. 16Pork industry restructuring: Who raises China’s pigs? . 18Consolidation and overcapacity of slaughterhouses.20III. China’s pork and livestock development strategy: more meat, modern meat, safe meat. 21Why more pork?. 21“Let them eat pork”. 21Food safety as a demand driver.22IV. Dragon Heads, vertical integration and contract farming.23Dragon Head Enterprises: Agribusiness firms take the lead.24DHEs link to farmers.25Dragon Heads and the pork industry.26Vertical integration and contract farming: The “company and farm” model.28Impacts of this system on small livestock producers.29V. Foreign firms and global consolidation in China’s pork industry.29VI. Impacts of the industrial livestock production model.32Conclusion.33Endnotes.34CHINA’S PORK MIRACLE? AGRIBUSINESS AND DEVELOPMENT IN CHINA’S PORK INDUSTRY5

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T HE GL OB A L IN DUST R I A LM E AT COM PL E X :U N DER STA N DING CHINA’ SM E AT R E VOLU T IONAnimal production has shifted from a decentralizedfamily farm system to a more concentrated system withfewer companies producing and large numbers of animalsin confined spaces. These operations standardized feed forweight gain, genetic selection and the mechanization offeeding and watering.When the Chinese company Shuanghui InternationalHoldings announced its intention to purchase SmithfieldFoods, it got the attention of the U.S. Congress and themedia. The idea of a foreign firm owning a giant U.S. porkproducer, and an influential player in the U.S. food system,raised a government debate about the links between foodsecurity and national security.1 The purchase was just thelatest in the growing consolidation in the global industrial meat complex—where long supply chains include feedproduction, genetics and breeding span the globe and blurnational identity. Shuanghui’s recent name change to WHGroup Limited exemplifies this global branding and reach.2Six years ago, a commission sponsored by the Pew Foundation examined the industrial meat production in the UnitedStates The Pew Commission issued a series of recommendations, including the phase out of non-therapeutic use ofantibiotics in animal production, stronger regulations tomanage waste, the shift away from intensive confinementtoward more humane treatment, vigorous enforcement ofantitrust laws and increased funding for public researchon alternative approaches for animal production. “Failureto address these issues will only result in a further lack ofconfidence in the animal agriculture industry, increasedenvironmental damage, worsening public health, dismalanimal welfare, and a grave outlook for rural communities,” concluded the commission.3Aside from operating in the U.S., the global meat industryis increasingly interlinked with emerging economies.China and Brazil are now not only big agriculturalproducers and consumers, they have spawned a newset of agribusinesses, shaping the global meat complex.Their governments have embraced the factory-style meatproduction promoted by U.S. agribusiness companies.They are also adopting Western diets, including risingmeat consumption.In 2013, the U.S. was the top global importer of beef,and top exporter of pork; Brazil was the top exporter ofbeef and poultry. China is the world’s largest producerand consumer of pork, the second largest producer ofpoultry and the world’s largest soybean (for animal feed)importer. Brazil is increasingly filling the global need formeat, while the U.S. and Brazil compete for China’s soymarket. With the purchase of Smithfield, Shuanghui/WH Group becomes the largest pork enterprise in theworld. Brazilian based JBS is now the world’s largest meatcompany. U.S.-based Tyson remains one of the world’slargest poultry companies, competing with JBS’s acquisitions in the poultry industry. In short, industrialized meatproduction, processing and consumption has truly becomea global phenomenon with global implications.U.S.-based corporations, and their model of industrialanimal production, have certainly been a major catalyst inthe growth of industrial meat production around the world.Over the last 50 years, the rise of industrial meat production in the U.S. has been nothing short of astounding.For the U.S. farm economy, the industrial meat systemhas pushed out nearly all independent poultry and porkproducers, while independent beef producers continue tohang on against all odds. Over 13 years ago, IATP documented the transformation of U.S. hog production in ThePrice We Pay for Corporate Hogs. In a period of 30 years(1950–1980), the number of U.S. hog farms declined bynearly 80 percent, while the average farm size increasedsix-fold. By 1999, 50 percent or more of the farmers wereunder some sort of contractual arrangement and fourcompanies (including Smithfield) controlled 20 percentof the production. In the last decade, this process has onlyfurther intensified. By 2007, four companies controlled 66percent of the production—at a great cost to U.S. farmers,consumers, the environment and public health. Further,working conditions at industrial meat processing facilitiesare considered some of the most dangerous in the U.S.4In response to the numerous problems associated withindustrial meat production in the U.S., rural communities, farm groups, environmental and public health organizations around the country have opposed the industrialmeat system on a number of different fronts, in manycases winning important battles. But while U.S. meatconsumption per capita has declined over the last fouryears,5 U.S. meat production continues to rise, linked toincreasing U.S. meat exports. There are clear lessons to belearned from the U.S. experience.CHINA’S PORK MIRACLE? AGRIBUSINESS AND DEVELOPMENT IN CHINA’S PORK INDUSTRY7

Like most agricultural commodities, the meat industry isnot local, regional or national—it is global. And the multinational companies that dominate this industry, fromproduction to feed to processing and distribution, are seton exporting this industrial model of production aroundthe globe. The industry is aided by trade agreements thatthreaten to lower worker safety, health and environmentalstandards while further empowering the legal standing ofcorporations to challenge national regulations.It is becoming increasingly clear that addressing theeconomic, environmental and health downsides of theglobal industrial meat system will have to include aninternational dimension. Certainly, the health threatsassociated with industrial meat production—avian influenza, Mad Cow disease, H1N1 (swine flu), antibioticresistant bacteria, melamine poisoning—do not recognizenational boundaries.Will countries such as China, Brazil and India continuedown the same path of the U.S. on industrializing theirmeat production? Or, is a different path possible?and its endemic global ramifications merit careful thought.China—as the largest producer of pork, the second largestproducer of poultry, the largest feed importer in the worldand the fourth largest dairy producer—is a critical piece ofthis global puzzle.Endnotes1.IATP, Food and national security: The Shuanhui-Smithfield mergerrevisited, September 12, 2013, .2. Wattagnet, 2014. Shuanghui International changes name to WH Group:New corporate name manifests company’s emerging global reach and aspirationsas a world-leading brand, http://www.wattagnet.com/166126.html (accessedJanuary 24, 2014).3.org.Pew Commission on Industrial Farm Animal Production, http://www.ncifap.4. Human Rights Watch “Abuses Against Workers Taint U.S. Meatand Poultry,” January 25, 2005, workers-taint-us-meat-and-poultry.5. Elaine Watson, “Is the decline in US meat consumption terminal?”, April12, 2013, FoodNavigator-USA, cline-in-US-meat-consumption-terminal.In this first phase of our research on the global industrialmeat complex, we examine the role of China. We look indepth at four sectors within China associated with animalproduction: feed, pork, dairy and poultry. It is an endeavorto understand and share how China’s transformationtowards a U.S. agribusiness model is both a common storyof industrial meat production anywhere but is also specificto China. Further, it is an attempt to show how China’sstory, like the U.S.’s, is a global one, with global links andglobal impacts.Understanding how Chinese companies are “going out” todevelop their supply chains and how major U.S. and otherinternational livestock and dairy companies are “going in”to China better prepares us to address the global natureof this industrial complex and its impacts—domestic andglobal. It can help us to get beyond big headlines in thepaper about China’s growing meat consumption and digdeeper into how and why it is taking place and imaginea different pathway towards fairness, nutrition, publichealth, environmental protection in food production—lessons that are readily available from the U.S. experience.The global trend points to ever greater consolidation offewer and more powerful corporations controlling scarcerwater and land resources to feed millions of animals inconfined spaces to produce more cheap meat. How citizensand governments deal with the externalities of this sector8INSTITUTE FOR AGRICULTURE AND TRADE POLICY

E X EC U T I V E SU M M A RYAgriculture has helped fuel the “China miracle.” Since1978, agricultural and food output has soared, Chineseagribusiness firms have become key players in domesticand international markets, and by all accounts, China hasbeen highly successful in overcoming land and resourceconstraints to feed its population of 1.3 billion people. Thecountry is celebrated for its successes in reducing povertyand hunger over the last 30 years, and more recently, forcreating an agrifood system that makes eating “high onthe hog” a possibility and reality for many Chinese people.Pork is at the heart of this miracle. A hallmark of the post1978 agricultural development model is ramping up theproduction, sale, and consumption of meat. Processed andpackaged meats are the fastest growing market segments,reflecting the increasing influence and operation of porkprocessors, and the more general trend towards processedfoods that can be shipped, stored, and sold with a longershelf-life in super- and hyper-markets. These trendsare also reflected in the Shuanghui (now called the WHGroup to take on a more international identity) buyout ofSmithfield Foods, a move that will increase China’s porksupplies, strengthen Shuanghui’s brand within China as“safer” meat with higher consumer status because of its USorigin, and further generate and shape consumer demandfor industrial pork. The Shuanghui-Smithfield deal is amatter of political and economic interest, but also signals amuch more basic insight: pork, and the systems and actorsthat produce it, are central in China’s agrifood system withincreasingly global inter-linkages and implications.Government officials support increased pork production and consumption through subsidies, investments,and favorable policies for medium- to large-scale industrial operations. Agribusiness firms control much of theproduction and sale of meat (and agricultural productsmore generally), often through production arrangementswith commercial farmers, and with financial supportfrom public and private investment. Smallholder farmerseither opt out of pig production in the context of increasingconsolidation of the industry, become specialized hogproducers, or are transformed into waged, typicallymigrant, laborers. And consumers eat more pork thanever before, with wealthier eaters preferring industriallyproduced meat, which is viewed as more strictly regulated, and therefore, safer.Yet, food safety, public health problems and environmental pollution associated with the sector are alsoincreasingly becoming bottlenecks—evident in the starklyvivid images of dead pigs floating in a river near Shanghaiearlier in 2013. This dialectic between pork’s socio-political importance in China and its mounting externalitieswill shape Chinese policy towards pork production, tradeand consumer choices in the coming decade.This report builds on Mindi Schneider’s 2011 IATP repor

trial meat complex—where long supply chains include feed production, genetics and breeding span the globe and blur national identity. Shuanghui’s recent name change to WH Group Limited exemplifies this global branding and reach. 2 Aside from operating in the U.S., the global meat industry is increasingly interlinked with emerging economies.

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