Voluntary Report - Public distribution

**Date:** 6/3/2008

**GAIN Report Number:** CH8904

CH8904

**China, Peoples Republic of**

**Agricultural Situation**

**Sichuan Earthquake Shakes-Up Local Agriculture**

**2008**

**Approved by:**

![](media/image1.wmf)Kevin Latner

US Consulat General, Chengdu

**Prepared by:**

Rachel Zhang

**Report Highlights:**

On May 12, 2008, China\'s Sichuan Province experienced a massive
earthquake measuring 8.0 on the Richter scale. Official news reports are
that 69,000 died and almost 20,000 are still missing. The total loss in
agriculture is estimated at \$1.5 billion. According to some sources,
pork production will be down one million metric tons. The affected area
includes Mianyang, one of the eight areas that account for 51 percent of
the province\'s total production. In the local area, the government is
imposing price controls. In addition, effective from June 1st until
December 31, Chinese government has reduced the pork and soy meal import
tariffs, providing possible market access opportunities for U.S.
exporters.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Chengdu ATO \[CH5\]

\[CH\]

**8.0 Earthquake Severest in 30 Years**

The May 12, 2008, earthquake hit Wenchuan County in China's Sichuan
Province has been upgraded to 8.0 by the China Seismological Bureau. The
epicenter of the earthquake was just north of the capital city of
Chengdu.

**Death Tolls Daily Rise**

Current reports are the earthquake killed over 69,000 people and there
are still almost 20,000 missing. Disaster response efforts have shifted
to addressing problems including insuring the safety of survivors
against threats of flooding, land slides and disease, and providing
services for the displaced.

**National Economic Loss to Local Devastation**

The epicenter of the earthquake is in the mountain area of Sichuan
province, where the economy is predominantly tourism and mining. The GDP
in the disaster area is reported to account for 2 percent of China's
total GDP. Even away from the devastation, in the capital city of
Chengdu, which escaped almost unscathed, five-star hotel room occupancy
rates are less than 25 percent, down 60-70 percent from the previous
year. The damage from the earthquake is expected to slow China's total
GDP growth by more than one-half percent.

**Agricultural Production Staggers But Impact Limited and Will Rebound**

Sichuan is the largest hog production province, second largest in meat
production, third largest in produce production, and fourth largest in
grain production. The earthquake damaged agricultural production areas,
infrastructure, and laboratory facilities. According to local officials,
the total loss in agriculture has reached \$1.5 billion (10.2 billion
RMB). This includes \$557 million (3.9 billion RMB) loss in production
value, and \$257 million (1.8 billion RMB) in facilities, such as
laboratories. An estimated 240,000 hectors of farm land was damaged,
0.06 percent of the total in the province. In addition, 53,000 green
houses, 520,000 biogas tanks, 880,000 square meters of farm houses, and
16,000 pieces of equipment were damaged.

**Sichuan Fattens Upon Pork**

Sichuan's swine production accounts for 12 percent of China's total
swine inventory, 11 percent of slaughter, and 10 percent of the total
pork production. Sichuan Provincial Department of Agriculture and
Forestry Bureau data shows that Sichuan slaughtered 71.1 million head of
swine in 2005 and 74.7 million head in 2006. Sichuan's swine production
is mainly concentrated in eight cities, including Chengdu and Mianyang,
and the pork production volume in these eight cities contributes 51
percent of total production in the region.

**Impact on Pork**

On May 19, 2008, Vice-Minister of Agriculture Wei Chao'an said the
impact on agriculture includes the destruction of 12.5 million head of
livestock, mostly poultry. While unconfirmed, some sources suggest that
the Sichuan earthquake killed over 3.5 million hogs and will reduce
China's pork production in 2008 by an estimated one million metric tons,
about 1.35 percent of total production.  MOA preliminary statistics show
that some agricultural production cities in the disaster area, including
Deyang, Mianyang, and Chengdu, will loose 1.845 million head of piglets
due to the loss of sows, which will bring pork production down 385,000
MT in 2008. 

**Grain Reserves Allocated to Disaster Victims**

The Chengdu Food Bureau announced that the central government has
allocated 150,000 tons of grain from the central food reserves to
Sichuan Province in order to ensure adequate food supplies in the
earthquake area. The Sichuan Provincial Food Bureau has organized a
traveling inspection team that will ensure the quality of grains and
oils in the earthquake disaster areas. Reportedly, 2000 metric tons of
central government meat stocks have also been transferred to the
disaster area.

**Disaster Relief -- Price Controls**

In response to dramatic food price increases, especially since the
winter storms disrupted logistics in Southern China, the Chinese
government has instituted price controls on target products.  Price
increases exceeding the target levels must be pre-approved by the
appropriate government authority.  After the earthquake, food and fuel
prices in the affected areas were frozen.  

**Tariff Reductions Target Food**

In recently reports, the Chinese government has asserted that pork
production declines from the earthquake have stalled forecast price
declines and the National Development and Reform Council reported on May
29, 2008, that the retail price report of lean pork declined slightly
(0.14 percent) in mid-May. Local papers paint a more sanguine picture,
noting that prices will likely continue rising because of the 3.65
million hogs lost. May 29, 2008, the Chinese government reduced import
tariffs on key food prices, including pork, soybean meal and some edible
oils. Pork tariffs were reduced from twelve to six percent, soybean and
peanut meal tariffs were reduced from five to two percent.  There were
also some tariffs reductions on cotton, serum albumin and human
vaccines.

**Reconstruction Planned by Local Government**

Sichuan Provincial Department of Agriculture is focusing on providing
crops seeds and agricultural inputs, infrastructure rebuilding,
providing farm equipment, repairing green houses, and rebuilding or
repairing hydraulic (irrigation) facilities. With transport functioning
now, it is possible for relief support efforts to reach most of the
disaster area. Electric power has been restored to 90 percent and water
has been restored to 85 percent of the earthquake disaster area.

**Current Assistance Needed**

With May and June the planting season, Sichuan Provincial Department of
Agriculture has requested special assistance because of a lack of
planting seeds.