United States 

Department 

of Agriculture 

www.ers.usda.gov 

 A Report from the Economic Research Service

Fred Gale, Daniel Marti, and Dinghuan Hu

LDP-M-211-01 China’s Volatile Pork Industry

February 2012

Contents

Approved by USDA’s 

World Agricultural 

Outlook Board

Introduction . . . . . . . . . . . . . . . 2

China’s Rising Pork Imports 

Linked to Domestic Market 

Fluctuations . . . . . . . . . . . . . . . . 3

Rising Prices and Costs for 

Chinese Pork . . . . . . . . . . . . . . . 6

Cycles in China’s Pork 

Market . . . . . . . . . . . . . . . . . . . 11

Chinese Policies Attempt To 

Smooth the Cycle . . . . . . . . . . 15

Swine Epidemics Affect the 

Pork Market . . . . . . . . . . . . . . 21

Environmental and Food 

Safety Pressures . . . . . . . . . . . 23

Looking Forward . . . . . . . . . . 26

References . . . . . . . . . . . . . . . . 27

Abstract

With China’s emergence as a new source of potential demand for U.S. pork exports, 

it is important for U.S. farmers, business leaders, and policymakers to understand 

the volatile nature of China’s pork industry. Prices, hog inventories, and pork output 

in China fluctuate from year to year in response to various factors that influence the 

market, and China’s imports of pork tend to rise when Chinese hog prices are high.

Extensive policy intervention by the Chinese government has contributed to consolidation in the country’s pork industry but has not stabilized the market. Imported pork is 

becoming more competitive in China as Chinese pork production costs rise and animal 

disease outbreaks, environmental threats, and food safety concerns constrain growth of 

China’s hog industry.

Keywords: Pork, hogs, China, exports, prices, production costs, disease, 

policy, pollution

Acknowledgments 

The authors would like to acknowledge Hongwei Xin of Iowa State University and 

David Parker, Ariel Szogi, and Brian Kerr of USDA’s Agricultural Research Service for 

providing information about U.S. and Chinese hog manure production and characteristics. The authors would also like to thank Richard Stillman, Mildred Haley, Francis 

Tuan, John Dyck, Suresh Persaud, and Mary Anne Normile of USDA’s Economic 

Research Service; Dermot Hayes of Iowa State University; Lesley Ahmed, Claire 

Mezoughem, and Michael Woolsey of USDA’s Foreign Agricultural Service; and 

Ann Seitzinger and Eric Bush of USDA’s Animal and Plant Health Inspection Service 

for helpful comments on the manuscript.

About the Authors

Fred Gale and Daniel Marti are agricultural economists with USDA’s Economic 

Research Service. Dinghuan Hu is a professor with the Institute of Agricultural 

Economics and Development, Chinese Academy of Agricultural Sciences.

The use of commercial 

and trade names does not 

imply approval or constitute 

endorsement by USDA.
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China’s potential as a major pork importer presents opportunities for hog 

farmers, business leaders, and investors around the world. Articles and newsletters examining China’s effects on the global marketplace reflect buoyant 

optimism: “The long-run potential for U.S. pork in China is enormous” 

(Hayes, 2010), and “The potential for further Chinese importation of pork is 

almost incomprehensible” (a hog industry observer quoted by Dyson (2008)).

Announcements of pork sales to China can affect the U.S. market. For 

example, in October 2009, the Wall Street Journal reported “China’s pledge 

to lift a ban on U.S. pork drove prices of lean hogs to a 3-month high on 

expectations of increased exports to the world’s largest pork consumer” (Cui 

and Waters, 2009).

As China begins to play a larger role in the world pork market, it is important 

for industry analysts, business leaders, and policymakers to understand the 

complex factors driving the Chinese hog/pork sector. China’s pork industry 

is constantly buffeted by a range of influences, including disease epidemics, 

feed prices, policy interventions, seasonal consumption patterns, demand for 

other meats, and macroeconomic factors. While much attention is focused 

on the upward trend in commodity prices, pork prices in China tend to rise 

and fall in multiyear cycles as the industry expands and contracts. The degree 

of volatility appears to have increased after record-high pork prices in 2007 

prompted extensive government intervention and a surge in private investment accelerated structural change in the industry. Following a period of 

depressed prices in 2010, Chinese pork prices rose to new highs in 2011.

China’s imports of pork fluctuated in a similar cyclical manner.

This report provides information on volatility in the Chinese pork industry.

It reviews recent trends in China-Hong Kong pork imports and fluctuations 

in Chinese pork prices. It also analyzes the influences of rising feed costs, 

policy interventions, structural change, and disease epidemics on China’s 

pork industry. As increases in production costs, animal disease epidemics, 

animal waste disposal challenges, and food safety concerns limit the expansion of China’s domestic pork industry, the outlook for pork exports to China 

is favorable. However, volatility in China’s domestic market may result in 

similar volatility in export sales.

Introduction
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China’s potential to affect the world pork market derives from the size and 

volatility of its domestic pork market. China accounts for nearly half of the 

world’s pork production and consumption. Its annual pork output is four to 

five times that of the United States and more than double that of the European Union. According to official Chinese statistics, China slaughters over 

600 million hogs annually—one hog for every 2.2 Chinese people.

Historically, China has been a mostly self-sufficient pork economy. Mainland China traditionally imported modest amounts of pork offal and muscle 

meats and exported a similar amount of pork and live hogs to Hong Kong (a 

separate customs territory from mainland China). Some pork shipments from 

other countries to Hong Kong are re-exported to mainland China through 

“gray” market channels, but the amount is unknown. While Hong Kong is a 

short distance from the country producing half of the world’s pork, most of 

the territory’s imports come from Europe, the United States, and Brazil. From 

2000 to 2006, China and Hong Kong combined to import between 500,000 

and 600,000 metric tons of pork and pork products annually.

1 These amounts 

were a significant share of world pork trade but equated to less than 1 percent 

of annual pork consumption in China-Hong Kong.

China and Hong Kong pork imports surged in 2007 when a shortfall in 

Chinese pork production led to record Chinese pork prices. That year, Hong 

Kong-China pork imports nearly doubled to just over 1 million metric tons 

(mmt), then rose to over 1.9 mmt in 2008 (fig. 1). According to the U.S. Meat 

1We combine trade statistics for 

mainland China and Hong Kong since 

industry sources say that some pork 

imported to Hong Kong is re-exported 

to mainland China. Also, Hong Kong’s 

pork imports shift away from mainland 

China to other suppliers when Chinese 

prices rise.

China’s Rising Pork Imports Linked to 

Domestic Market Fluctuations

Figure 1

China and Hong Kong have become a larger market for pork imports

1,000 metric tons

Note: Data include fresh, chilled, and frozen pork; sausage casings; offal; and processed pork 

products (Harmonized System codes 0203, 020630, 020641, 020649, 0210, 0504, 160241, 

160242, 160249). 

Source: USDA, Economic Research Service using data from China National Bureau of Statistics 

and China customs statistics accessed through Global Trade Information Service, Global Trade 

Atlas.

2000 01 02 03 04 05 06 07 08 09 10

0

500

1,000

1,500

2,000

2,500

China and Hong Kong pork imports from other 

countries

China and Hong Kong pork imports from the U.S.
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Export Federation, the 2008 total far surpassed the previous pork-import 

record of 1 mmt set by Japan in 2005. In 2009, China-Hong Kong pork 

imports fell to about 1.5 mmt—still nearly three times the pace of imports 

earlier in the decade—but rebounded to 1.8 mmt in 2010. The 2010 import 

volume was equivalent to 3.6 percent of China’s domestic pork output. The 

United States supplied about 20 percent of China-Hong Kong pork imports in 

recent years.

For the U.S. pork industry, China-Hong Kong has been one of the leading 

export markets since 2007. During the peak import period of 2008, U.S.

sales to the region accounted for over 18 percent of U.S. pork exports, about 

double the annual share exported to China-Hong Kong during 2000-2006.

Monthly statistics on mainland China’s pork trade reveal a link between 

imports and domestic pork prices (fig. 2). High domestic prices during 

2007-08 reflected short supplies in the Chinese market and prompted a surge 

in pork imports. The average domestic hog price in China doubled from 

about $.52 per pound in the first 4 months of 2007 to a peak of $1.08 per 

pound in April 2008. Monthly imports by mainland China grew rapidly as 

prices rose, reaching a peak of 119,000 mt in June 2008, up from 15,000 to 

30,000 mt during 2004-06. Imports were boosted by a temporary cut in the 

country’s pork tariff and a state-owned company’s contract to purchase U.S.

pork to build up reserves ahead of the Olympic Games held in Beijing in 

August 2008.

After peaking in April 2008, Chinese pork prices fell until early 2009. China’s 

monthly pork imports also fell to under 40,000 mt during the first half of 

Figure 2

China monthly pork imports vary with domestic hog price

1,000 metric tons

Note: Data include fresh, chilled, and frozen pork; sausage casings; offal; and processed pork 

products (Harmonized System codes 0203, 020630, 020641, 020649, 0210, 0504, 160241, 

160242, 160249). China hog price converted to U.S. dollars at the official exchange rate.

Source: USDA, Economic Research Service using data from China National Bureau of Statistics 

and China customs statistics accessed through Global Trade Information Service, Global Trade 

Atlas.

Dollars per lb.

China pork imports from U.S.

China pork imports from other countries

China hog price

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

0

20

40

60

80

100

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160

180

200

0

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2009. The decline in prices reached a low of $.61 per pound in May 2009, 

about a year after the peak. A combination of factors helped drive down 

prices during this period: a buildup in production capacity that increased the 

domestic supply and a temporary decrease in demand due to concerns among 

Chinese consumers that the H1N1 influenza virus (swine flu) could be transmitted by eating pork.

2 While no link between pork consumption and H1N1 

transmission was scientifically established, Chinese authorities still banned 

imports of pork from North America to prevent the spread of the disease to 

China.

3 The ban remained in place for the remainder of 2009 and stopped 

direct imports of U.S. pork for nearly a year until June 2010.

Chinese pork prices began another run of monthly increases in the second 

half of 2010 and reached new highs during 2011, 3 years after the sharp 

increase in prices during 2007-08. With domestic pork prices rising, less 

expensive foreign pork was more competitive in the Chinese market. Chinese 

customs statistics revealed that China’s monthly pork imports during late 

2010 and 2011 surpassed the record pace set in 2008, rising as high as 

150,000 mt during September 2011 (see fig. 2). Imports from the United 

States accounted for most of the import growth during 2011.

2According to Zhang (2010), the pork 

price dropped dramatically during the 

H1N1 (swine flu) crisis, but consumer 

confidence recovered rapidly after 

China’s vice minister of agriculture 

made an announcement to reassure the 

public that pork was safe to eat.

3Chinese authorities also quarantined 

large numbers of travelers from North 

America during this period.
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Rising prices in China’s domestic pork market were the main contributor to 

the country’s rising pork imports. From 1991 to 2006, Chinese hog prices 

fluctuated within a relatively narrow range of $.30 per pound to $.50 per 

pound and were usually less than U.S. prices (fig. 3). After a sharp increase 

during 2007-08, however, Chinese hog prices have been significantly higher 

than U.S. hog prices. While Chinese hog prices fell sharply after peaking 

in 2008, the average price during 2007-10 ($.79 per pound) was more than 

double the average in 1991-2006 ($.37 per pound). During 2011, prices rose 

as high as $1.40 per pound.

The shift in prices is an indication of the general improvement of prospects 

for U.S. pork sales to China. To be cost competitive in China, however, 

U.S. pork must be comparable in cost or cheaper than Chinese pork after 

accounting for freight costs, tariffs (12-20 percent), and value-added taxes 

(13-17 percent). Overall, we estimate that prices in the Chinese market would 

have to be approximately 30 to 45 percent higher than U.S. prices for U.S.

pork to be cost competitive in China.

U.S. and Chinese consumers have complementary tastes that encourage pork 

trade between the two countries. U.S. consumers prefer muscle meats, while 

Chinese consumers prefer offal and variety meats that have low value in the 

United States (Hayes and Clemens, 1997; Fabiosa et al., 2005). As a reflection of these differing preferences, price competitiveness varies for different 

cuts of pork. In 2011, the average U.S. prices of livers, hearts, hocks, feet, 

kidneys, and tails were less than half the prices of corresponding parts in a 

Beijing wholesale market (fig. 4). Prices of all cuts tend to rise and fall to 

Rising Prices and Costs for Chinese Pork

Figure 3

The average China hog price has risen above the U.S. price

Dollars per lb.

Note: U.S. live hog equivalent, 51-52 percent lean. China price converted to U.S. dollars at official 

exchange rate. Prices are not adjusted for inflation. 

Source: USDA, Economic Research Service using data from USDA, China National Bureau of 

Statistics, and China Ministry of Agriculture. 19919293949596979899

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0

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

China hog price

U.S. hog price

China average

2007-2010 = $.79

China average

1991-2006 = $.37
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reflect general changes in pork prices, and in 2011, the rise in Chinese hog 

prices drove the prices of both muscle meats and variety meats well above 

corresponding U.S. prices. For example, the price of a lean carcass in Beijing 

was about $70 higher than the U.S. carcass price of about $91 per 100 lbs.

A year earlier, carcass prices had been nearly equal in the two countries. In 

mid-2011, muscle meat prices were also relatively high in China. The Beijing 

price of hams was more than double the U.S. price, the price of spare ribs 

was nearly 50 percent higher, and the price of bellies was nearly 40 percent 

higher. Variety meats constitute most of the U.S. pork exported to China, but 

the widening difference in prices improves the prospects for U.S. muscle 

meats to be competitive in China.

High pork prices in China likely stem from the rising costs of hog production in China. ERS analysis of data from China’s National Development 

and Reform Commission (NDRC) shows that average hog production costs, 

converted to U.S. dollars, more than doubled from 2002 to 2009. Chinese 

hog production costs per pound of live weight rose from about $.30 in 2002 

to $.71 in 2010 (fig. 5). Feed is the largest of the hog production expenses 

in China, accounting for about 60 percent of the total. Feed costs rose from 

$.18 per pound in 2002 to $.25 per pound in 2006. In 2010, the feed cost rose 

to $.44 per pound, an increase of 77 percent from 2006. The cost of a feeder 

pig more than doubled during 2002-10 as well.

4 Estimates of hog production 

costs for 2011 were not available when this report was prepared, but with 

corn prices rising, it is likely that feed costs rose further in 2011.

Labor and other expenses may have more of an impact on hog production costs than is indicated in figure 5. China’s vibrant labor market and an 

4Chinese feeder pig prices follow an 

even more pronounced cyclical pattern than do pork and live hog prices.

Feeder pig prices rise during periods of 

industry expansion and fall when farms 

are cutting back on production.

Figure 4

Comparison of price of pork parts, U.S. and Beijing averages, 2011

Note: U.S. average price, January-May 2011; China average price from Xinfadi wholesale 

market, May 2011.

*China lean carcass (bai tiao rou) is compared with U.S. 53-54 percent lean, .65-.80 inches of 

backfat at last rib.

**China lean ham (hou tun jian) is compared with U.S. composite primal ham.

***China lean belly (wu hua rou) is compared with U.S. composite primal belly.

Source: USDA, Economic Research Service using USDA, Agricultural Marketing Service, LGMN 

Portal database and Beijing Xinfadi Wholesale Market “price quotations.”

U.S. dollars per 100 lbs.

Variety meats

Muscle meats

Tails

Ears

Kidneys

Tongues

Stomachs

Hearts

Feet

Hocks

Livers

Spare ribs

Lean belly***

Lean ham**

Lean carcass*

0 100 150 200 250 300

U.S. price

China price

50
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increase in school attendance have absorbed slack household labor that was 

traditionally used for small-scale “backyard” hog production. According to 

industry reports, the number of rural households raising hogs has been in 

decline since 2007. And as these small-scale farms exit the industry, they 

are increasingly being replaced by larger commercial-scale farms operated 

by companies or farmers who specialize in raising hogs.

5 Compared with 

small farms, commercial-scale farms have higher overhead costs for housing, 

equipment, and manure treatment; they purchase higher value breeds of 

feeder pigs; and they use paid laborers and technicians instead of relying on 

unpaid family labor. Commercial-scale farms purchase commercial feeds, 

while small-scale farms use inexpensive crop stalks, bran and hulls from 

grains, food scraps, and forages.

The increase in feed costs has pushed Chinese hog production costs above 

those of the United States. Based on data from China and U.S. production 

cost surveys for 2009, U.S. hog producers had significantly lower costs per 

pound of live hog weight ($.57) than commercial-scale hog producers in 

China ($.68) and “backyard” producers in China ($.70) (fig. 6). The U.S. cost 

advantage was mostly due to lower feed expenses and may be a reflection of 

a more efficient conversion of feed to meat as well as lower feed prices. Even 

the Chinese cost advantage in feeder pig prices observed in 2002 by Fabiosa 

et al. (2005) was reversed after the increase in feeder pig prices during 2007.

The Chinese surveys may understate costs of commercial-scale producers by 

excluding very large 10,000-head farms that are becoming more common in 

China. These farms have overhead costs that may be comparable to the relatively high “other” costs shown for U.S. farms in figure 6.

Grain prices in China have been rising due to the scarcity of cropland and 

surging demand for grain by feed mills and industrial users. Chinese hog 

5Data from the China Ministry of 

Agriculture Livestock Industry Yearbook indicate that approximately half 

of hogs slaughtered in China in 2010 

came from “backyard” farms raising 

fewer than 50 hogs per year.

Figure 5

China hog production costs are rising

Note: Data in Chinese yuan per head were converted to U.S. dollars per pound of live weight 

using the official exchange rate. Data are for farms raising 30 or more hogs per year.

Source: USDA, Economic Research Service using data from China National Development and 

Reform Commission. Data not adjusted for inflation.

US$/lb

2002 03 04 05 06 07 08 09 10

0

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Feed

Feeder pig

Labor

Other
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producers and feed mills pay much higher prices for corn than do their U.S.

counterparts, and in recent years, rising corn prices have pushed China’s feed 

expenses higher. Rising feed prices tend to push hog and pork prices upward 

as well.

While the Chinese pork industry still uses a wide variety of feeds, Chinese 

market analysts focus on the price of corn as an indicator of feed costs (see 

box, “Wide Variety of Feeds Used”). When high corn prices raise the cost 

of producing pork in China, industry members may take two approaches to 

alleviate the cost pressure on Chinese consumers: (1) import corn from the 

United States or other countries with lower corn prices to reduce the cost of 

producing pork in China, or (2) import pork produced in countries with lower 

feed costs. While pork production costs are also rising in the United States, 

U.S. feed costs remain lower than in China because the United States has 

more abundant land, water, and grain resources. Meeting Chinese demand 

for pork by producing hogs near sources of feed in the United States and then 

exporting pork to China is more cost-efficient than exporting large volumes 

of grain and oilseeds to produce pork in China (Hayes and Clemens, 1997).

The difference between corn costs in China and those in the United States 

varies from year to year. Corn prices have generally been rising and are 

higher in China, but surging U.S. corn prices during 2007-08 and 2010-11 

narrowed the gap. A comparison of the monthly average cash prices of corn 

in Guangdong Province and central Illinois during 2005-10 provides evidence 

of the cost differential (fig. 7).

6 The Guangdong corn price increased from 

about $150 per metric ton to over $300 in late 2010. The price of corn in 

central Illinois was consistently lower than the price in Guangdong, but the 

difference between the two fluctuated throughout the 5-year period. In early 

2010, the Illinois price was less than half the Guangdong price. The large 

6Guangdong Province is a major hogproducing area in southern China, and 

it has the largest output of commercial 

animal feed of any province in China.

Corn prices in Guangdong are among 

the highest in China because little 

corn is produced there. Several million 

metric tons of corn are shipped from 

northeastern China to Guangdong each 

year.

Figure 6

U.S. hog production cost advantage due to lower feed cost, 2009

Note: Data in Chinese yuan per head were converted to U.S. dollars per pound of live weight 

using the official exchange rate. “Backyard” farms raise fewer than 30 hogs per year. 

Source: USDA, Economic Research Service using data from China National Development and 

Reform Commission.

US$/lb

Type of hog farm

China "backyard" China commercial scale U.S.

0

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Feed Feeder pig Labor Other
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price difference during mid-2010 stimulated China’s first significant corn 

imports from the United States since the 1990s. (As noted earlier, China’s 

pork imports were also robust during 2010.) U.S. corn sales to China came 

to a standstill as U.S. corn prices rose and the corn-price difference narrowed 

later in 2010. However, the Illinois corn price was still 20 percent below the 

Guangdong price in February 2011.

2005 06 07 08 09 10 11

0

50

100

150

200

250

300

350

400

450

Chinese (Guangdong Province)

United States (central Illinois)

Figure 7

Corn prices are higher in China

U.S. dollars per metric ton

Note: China price converted to U.S. dollars at the official exchange rate.

Source: USDA, Economic Research Service using data from China National Grain and Oils 

Information Center and USDA.

Wide Variety of Feeds Used 

A standard Chinese hog feed ration includes about 60 percent corn and 15 

percent soymeal. However, the composition of feed can vary widely across 

farms. Moreover, feed formulations can vary dramatically by region, by 

farm size, and over time. Chinese farmers have traditionally fed pigs locally 

available grains, wheat bran, rice hulls, crop residues, vines, potatoes, 

food scraps, and byproducts from agricultural processors. The composition of feed depends on the types of materials that are available locally at 

low cost. Farmers often mix these materials with commercial concentrate 

feeds that contain soymeal, other protein meals, amino acids, vitamins, 

and trace elements. An increasing number of farmers use commercial 

formula feeds that include various combinations of the above items already 

mixed together. Based on interviews with farmers in Sichuan Province, 

the proportion of corn in hog feed ranges from 30 to 70 percent, while the 

proportion of commercial concentrate feeds varies from 10 to 20 percent.

Commercial-scale farms account for an increasing share of hog production 

in China and tend to use a higher proportion of corn and commercial feeds 

than do smaller farms.
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The sharp increase in pork prices during 2007 drew attention to the Chinese 

market’s volatility and cycles. Fluctuations in prices and production, 

however, are not new to the industry. Cyclical patterns in the hog market 

were recognized in the United States during the 19th century and studied 

extensively by agricultural economists beginning in the early-20th century 

(Haas and Ezekiel, 1926). Chinese scholars and analysts have observed 

similar cyclical fluctuations in China (Liu and Wang 2009; 2010). Zhang 

(2010a) identified six periods of pork-price increases (1985, 1988, 1994, 

1997, 2004, 2007). Several Chinese studies identified a series of four 3- to 

4-year cycles in the hog sector during 1996-2009 (Han and Qin, 2007; Liu 

and Wang, 2009; Nie et al., 2009). The price increase during 2007 prompted 

Chinese officials to intervene extensively in the pork market to stabilize 

prices (discussed later in this report).

The well-known “cobweb model” was developed in the 1930s to show how 

cycles in pork prices can result from the biological lag in supply response 

(Ezekiel, 1938; Coase and Fowler, 1935). In China, it takes 18-20 months 

to raise a new generation of gilts to breeding age, produce a crop of pigs, 

and then raise those pigs to slaughter weight (Zhou, 2010). Thus, when an 

increase in pork prices prompts farmers to expand production, the corresponding increase in pork supply may take more than a year to enter the 

market. Conversely, when farmers slaughter sows during a downturn in the 

market, the sector’s ability to expand supply is constrained in future months.

Seasonal fluctuations in demand that correspond to major holidays also 

affect China’s pork market. Hog inventories build up in anticipation of peak 

demand before the Chinese New Year (usually late January or early February) 

and the mid-Autumn festival and National Day (mid-September to October 

1). In the months following these festival/holiday periods, demand, hog 

slaughter, and pork prices often decline.

Cycles are evident in the ratio of hog price to corn price, an indicator of 

short-term profitability in the hog sector. A high ratio indicates that the 

output price (for hogs) is high relative to the price of the chief input (corn), 

which typically induces farms to build up hog inventories to increase production. Conversely, a low ratio signals financial losses, which prompt farms to 

decrease hog inventories.

China’s hog-corn price ratio has generally fluctuated around 6:1 (fig. 8, see 

box, “The Hog-Corn Price Ratio”). A series of fluctuations in China’s pork 

industry are marked by peaks in the ratio early in 2005 and a much higher 

peak 3 years later in 2008. Periods of low prices and severe losses for hog 

producers occurred in mid-2006 and mid-2009, again 3 years apart.

The recent cycles resulted from a chain of events that began in 2004 when 

concerns over an outbreak of avian influenza drove Chinese consumers to 

substitute pork for poultry meat. The increased demand for pork increased 

hog prices and encouraged farmers to expand hog inventories. Hog prices 

peaked in 2005 but subsequently fell as the supply of pork surged. Prices 

reached a low in mid-2006, and many producers experienced losses and 

Cycles in China’s Pork Market
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culled sows. In late 2006 and 2007, animal disease epidemics reduced the 

supply of pork, and pork prices again began to rise. The previous year’s 

cull of sows and continuing concerns over the effects of animal diseases 

constrained the industry’s ability to expand production in the short run.

Demographic changes also affected the pork supply as off-farm employment 

and rising incomes encouraged many rural families to purchase pork instead 

of raising hogs in their backyards. The inelastic shortrun supply contributed 

to a sharp increase in pork prices.

Rapidly rising pork prices became a national concern in China during 2007.

China’s consumer price index for meat was up 40 percent year over year, the 

highest increase among all categories. The jump in pork prices contributed to 

the country’s high inflation rate that year.

7

An NDRC study of the factors behind rising pork prices during 2007 focused 

on the tight supply of feeder pigs. The report found that hog prices received 

by farmers were up 45 percent year-on-year, but that feeder pig prices were 

up 60 percent. The feeder pig supply was reduced by the culling of sows and 

the effects of a disease epidemic that caused sows to abort.

High prices for hogs in 2007 and early 2008 attracted investment in large 

Chinese hog farms and pork processing. Investors included meat, feed, and 

real estate companies; overseas investment banks; and a well-known Chinese 

software entrepreneur (Jiao and Kou, 2010). According to official statistics, 

China’s hog inventory grew 5 percent during 2007, and it expanded at a 

similar pace in 2008. The hog inventory peaked at nearly 470 million head in 

late 2009, an increase of 51 million from the 2006 total. This marked China’s 

largest expansion of hog inventories since 1996-99.

7The increase in China’s consumer 

price index was 12 percent for all food 

and 4.8 percent for all items during 

2007.

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Figure 8

China hog prices are cyclical

Yuan per 500g

Note: Hog-corn price ratio is a measure of profitability in hog production. Cycles are delineated 

based on Nie et al., 2009.

Source: USDA, Economic Research Service using data from China National Bureau of Statistics 

and China Ministry of Agriculture. 

Ratio

Hog-corn

price ratio

(right axis)

Hog price

(left axis)

6:1

"normal"
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The Hog-Corn Price Ratio

The hog-corn price ratio became a valued resource for U.S. commodity market analysts in the 19th century as 

it reflected the ratio of output price to the price of the main input. At that time, many Midwestern farmers used 

hogs as an alternative way of marketing corn. When corn prices were low, farmers fed the corn to hogs instead 

of selling it on the market.

The hog-corn price ratio is now widely used in China as an indicator of hog sector profitability. Market analysts 

and policymakers in China often view 6:1 as a “normal” level for the ratio. Higher values are considered an 

indicator of profitability and expansion, while lower values are an indicator of losses and contraction. The 

breakeven level is often reported to be 5.5:1. The ratio is not as widely used in the U.S. hog industry today 

because corn accounts for a smaller share of production costs than in years past. The ratio’s value as an indicator is also questionable in the Chinese hog industry because corn is only one of many kinds of feeds used by 

Chinese farmers.

In China, the hog-corn price ratio is computed using prices in yuan per kg. In the United States, the ratio is 

traditionally computed in dollars per cwt for hogs and dollars per bushel for corn. Because the units used by the 

two countries differ, the U.S. ratio is typically quoted as a much larger number. Using data from the 1970s, Van 

Arsdall and Nelson (1984) calculated a breakeven (cash basis) ratio of 15:1 to 16:1, which would be equivalent 

to 8.5:1 to 9.0:1 calculated using prices in dollars per kg. In a study of historical patterns in the U.S. hog-corn 

ratio, Holt and Craig (2006) surmised that an increasing trend in the ratio beginning in the 1940s reflected 

diversification of hog feedstuffs during the post-war period. Recently, U.S. hog market analysts have quoted a 

higher reference level of 18:1 to 20:1.

Chinese officials regarded the fluctuations in hog prices and profitability beginning in 2007 as evidence of 

unusual volatility. This prompted extensive government intervention to stabilize the market. However, a 

comparison with historical U.S. data for 1909-2010 shows that the recent cycles in the Chinese hog-corn price 

ratio are not unusual (see figure). Chinese fluctuations are similar to cycles that occurred in the United States 

during the early 20th century. Coase and Fowler’s (1935) description of hog cycles in Great Britain during 

1920-33 is also remarkably similar to that of recent cycles in China. 

Fluctuations in the China hog-corn price ratio are similar to early 20th-century U.S. fluctuations

Ratio

Note: Chart displays monthly ratio of hog to corn price in the United States for 1910-2011 

and for China for 1998-2011.

Source: USDA, Economic Research Service analysis of data from USDA, China Ministry of Agriculture and China National Bureau 

of Statistics. 191015

20253035404550556065707580859095

2000

0510

0

5

10

15

20

25

U.S. hog-corn price ratio

China hog-corn price ratio
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During 2009 and 2010, two periods of losses and recovery occurred about a 

year apart, interrupting the pattern of 3-year cycles. The hog-corn price ratio 

reached a low point in May 2009, about 3 years after the rapid increase in 

pork prices in 2007. During the second half of 2009, prices rebounded briefly, 

but the hog-corn price ratio fell again during the first half of 2010 following 

outbreaks of animal disease epidemics that led to many animal deaths and 

early slaughter of sick hogs. Furthermore, low prices and economic losses 

prompted many farmers to cull sows or exit the industry, and China’s hog 

inventory declined during early 2010. Hog prices rebounded in July that year 

and continued rising during the second half of 2010 and into 2011. The sector 

returned to profitability during the second half of 2010, but rising corn prices 

slowed the increase in the hog-corn price ratio. In early 2011, hog prices 

neared the historical high reached in 2008, and the hog-corn price ratio was 

7:1, slightly above “normal.” Due to high corn prices, however, the 2011 hogcorn price ratio did not rise as high as it did during the 2008 peak period.

By mid-2011, rising pork prices were again a major influence on China’s 

consumer price index, as they had been in 2007. The sow inventory had yet to 

recover from the losses and culls of the previous year, and the tight supply of 

piglets slowed the industry’s expansion. High feeder pig prices seemed to be 

consistent with a limited supply of feeder pigs, and Ministry of Agriculture 

statistics indicated that sow inventories were down 2-3 percent from a year 

earlier. In one article, industry analysts expressed unease that the situation 

would be “a repeat of the 2008 roller coaster” (Sun et al., 2011).
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Chinese officials use a variety of policy measures that are intended to 

reduce cyclical fluctuations in pork production. Measures include subsidies, 

tax breaks, and market interventions in hog farming and pork processing.

Government officials often play a coordinating role by recruiting farmers as 

suppliers, arranging access to land and bank loans, and brokering deals with 

investors or final customers.

In response to the steep increase in pork prices during 2007, the government 

announced a package of hog-sector subsidies just 2 months after rising pork 

prices became a subject of public concern (see Zhu, 2007). A series of additional grants, subsidies, and tax breaks aimed at the pork industry followed 

later in 2007 and in succeeding years. A program introduced in 2009 sought 

to stabilize pork prices by buying and selling pork for government reserves.

The government renewed its emphasis on pork policies in mid-2011 when 

pork prices surged again.

Pork Industry Subsidies

China’s pork policies are part of an ongoing effort to transform the traditional structure of “backyard” farms, small butchers, and pork vendors into 

a “modern” livestock sector (see box, “Policy Priorities: Modernization and 

Stability”). Since the 1980s, efforts to modernize the industry have included 

standardizing hog breeds, feeds, and veterinary medicines; regulating the use 

of feed additives; enforcing animal health regulations; and shifting toward 

modern slaughter, processing, and retail markets.

Efforts to modernize China’s pork industry were revisited in 2007, a period 

marked by soaring prices and widespread animal disease epidemics. Officials 

viewed the prevalence of small-scale backyard farmers as a source of instability because these operations are said to more readily slaughter sows during 

a market downturn and are more susceptible to animal disease epidemics than 

larger operations.

8 Officials believe a modernized industry chain will bring 

stability to the market while also addressing food safety and disease issues.

China’s pork policies emphasize improvements in the breeding and farrowing 

stages of production, upgrading or refurbishing structures and equipment for 

farms raising slaughter hogs, and attracting investment to the sector.

9 The 

main policy measures include the following (values converted to U.S. dollars 

at the official exchange rate in 2010):

•	 A subsidy payment for each breedable sow set at 50 yuan per head in

2007, raised to 100 yuan ($14.60) in 2008. The sow subsidy was withdrawn in many areas in 2009 but was restored in 2011.

•	 Subsidized insurance for sows against losses from disease and natural

disasters. The premium (paid to a designated insurance company) is 60 

yuan ($8.78) per head, of which 12 yuan is paid by farmers and 48 yuan 

is paid by central and local governments. Initially, the program only 

8A Peoples Daily article blamed the 

“herd mentality” and “synchronized 

behavior” of small farmers for market 

volatility and suggested that intervention cannot stabilize the market as long 

as small-scale farmers are predominant 

(Zhang, 2010a). The Ministry of Agriculture asserted that sow subsidies and 

improved market information prevented 

a large cull of sows during the period of 

low prices in 2010 (Sun, 2010).

9Only one policy was aimed at pork 

consumers: small cash subsidies for 

low-income families and students from 

poor families to compensate for the 

rising cost of purchasing pork during 

a brief period in 2007. Temporary subsidies for general food-price increases 

were given in late 2010. During 2011, 

some local governments opened temporary shops selling discounted pork.

Chinese Policies Attempt To Smooth 

the Cycle
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covered breedable sows, but it was extended to include gilts in 2011.

Pilot programs in some areas insure hogs raised for slaughter.

•	 Free mandatory immunizations against Porcine Reproductive and Respiratory Syndrome (PRRS, called “blue ear disease” in China), foot-and-mouth 

disease, and classical swine fever. Vaccines are procured from companies through a bidding process with costs split between central and local 

government. Vaccines are distributed to farms by veterinary officials.

•	 A “fine breed” subsidy for artificial insemination using semen from

boars of approved breeds (such as Duroc, Landrace, and Yorkshire). The 

subsidy is 10 yuan ($1.46) for each insemination, for up to 4 attempts per 

year for each sow.

•	 Financial awards (grants) of approximately $1 million each to local

governments of 362 major pork-supplying counties for financing investments in hog housing, manure handling, immunization, and veterinary 

work.

•	 Financial awards to large farms holding at least 500 sows ($146,000) and

to standardized farms and village “production zones” where at least 500 

hogs are slaughtered annually (from $30,000 to $117,000 according to 

farm size and province).

•	 Subsidies of $146,000 were given to each of 300 key breeding farms and

provincial hog-breeding centers.

•	 A waiver of the 25-percent corporate income tax for companies that

engage in livestock and poultry production took effect in January 2008 

(Petry and Zhang, 2009).

Spending on these programs is only reported on a piecemeal basis by 

Chinese authorities. The total is difficult to ascertain since there are so many 

programs, and many are financed jointly by central and local government 

funds. Central government funds for the “fine breed” subsidy increased from 

$26 million in 2007 to $95 million in 2010. Pork surplus county awards 

totaled 3 billion yuan ($450 million) in 2010. Financial awards for large-scale 

farms totaled $367 million in 2010. Most subsidies are targeted to 362 important pork-producing counties that account for over 40 percent of China’s hog 

production.

10 The award funds are distributed by local authorities to farms, 

companies, and local officials for refurbishment of hog housing, acquisition 

of breeding hogs, vaccination programs, manure management, subsidized 

loans, and support of pork processing, breeding, feed companies and other 

segments of the industry supply chain.

Various measures are carried out at the local level as experimental pilot 

programs. These include subsidies for village methane digesters to produce 

natural gas from hog waste, “ecological” hog-farming projects, subsidized 

insurance for finishing hogs, funds to pay for disposal of carcasses of 

diseased hogs, and small cash grants to encourage migrant workers to return 

to their home villages and set up hog farms.

11 Some of these are extensions 

of an existing web of local subsidies, model farms, pork reserves, wholesale markets, and supply chain linkages supported by the “vegetable basket 

responsibility system” in which municipal leaders use various measures to 

ensure adequate supplies of meat and vegetables for their cities. Pork reserves 

10These pork counties (zhu rou chu 

diao xian) are important suppliers of 

pork that produce more pork than they 

consume. They are chosen by ranking 

counties using an index based on the 

number of hogs sold outside the county, 

volume of hogs slaughtered, and inventory of hogs. The number of counties 

receiving awards increased each year 

during 2007-10.

11Some of these local programs are 

financed by the financial awards and 

other subsidies included in the list 

above.
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(both frozen pork and hogs kept in reserve) are held at three levels: central, 

provincial, and city. In 2011, China’s state council ordered large and medium 

cities in coastal provinces to hold pork reserves to meet 10 days of consumption; other cities were ordered to hold a 7-day reserve.

The implementation of hog sector support varies from year to year and place 

to place. Local government and bank officials make extra efforts to implement policies when orders are issued from national officials. In 2007, the 

China Bank Regulatory Commission issued a document ordering banks to 

make loans to expand pork production capacity. Commercial banks were 

instructed to lend to companies that raise or slaughter hogs; rural credit cooperatives were instructed to lend to individual hog farmers; and village banks 

and rural lending companies were instructed to offer production credit. An 

account by journalists described how local officials in a county of Sichuan 

Province organized a meeting in 2007 to urge farmers to raise hogs and offer 

them subsidies while bank officials went door to door to offer loans secured 

by personal property like ceiling fans and washing machines.

In coastal provinces, hog production is increasingly dominated by large-scale 

farms operated by companies. In some cities, hog production is banned due 

to environmental concerns. In western provinces, slaughter hogs are usually 

raised by individual small-scale farmers, but officials encourage companies to 

invest in large breeding and farrowing farms that supply feeder pigs. In 2007 

and subsequent years, Ministry of Agriculture officials accelerated implePolicy Priorities: Modernization and Stability

In 2006, China’s vice minister of agriculture gave a speech at a “Modern Livestock Industry Summit” that typifies the government’s approach to livestock industry policy. In his remarks, the vice minister stressed the importance of the hog sector’s transformation to a modern industry, citing special instructions issued by the country’s 

top leaders. According to the speech, President Hu Jintao had instructed officials to design policy measures to 

ensure the stable development of the industry, and Premier Wen Jiabao had called for policies that would stabilize 

hog prices and prevent large fluctuations in pork production.

Promoting a “modern” livestock sector was emphasized in the government’s 5-year plan for 2006-10. Modernization includes the related strategies of “industrialization” (chan ye hua), “standardization” (biao zhun hua), and 

increased scale of production (gui mo hua). These strategies entail concentrating livestock on larger scale farms, 

making capital investments in farms and processing facilities, disseminating new technologies and equipment, 

and integrating farms with processors, breeders, and feed mills. The vice minister’s speech emphasized the need 

to nurture strong pork processing companies that would establish well-known brands, play a leadership role in 

the industry, and improve the industry’s competitiveness on the international market. He also encouraged farmers 

to unite in cooperative organizations. The speech called for livestock industry support measures, including subsidies, tax waivers, earmarked bank loans, and other methods. It also said that the government would experiment 

with methods for attracting private investment to the pork industry.

The vice minister stated that the livestock industry had experienced unprecedented price fluctuations in recent 

years, and that the hog industry was recovering from a period of very low prices. He emphasized the importance 

of improving vaccinations and disease resistance. The speech took place about 6 months before the spread of 

“blue ear” disease and sharp increases in pork prices in 2007. Many of these policies were implemented during 

2008-09, but they failed to prevent an even steeper increase in pork prices during 2010-11.
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mentation of a plan to subsidize construction of “livestock production zones” 

(yang zhi xiao qu) where individual farmers may concentrate their animals 

in facilities that simulate large-scale farms. In 2011, China’s State Council 

announced a plan to allocate 2.5 billion yuan ($385 million) annually over 5 

years for construction of large-scale hog farms.

In 2007, the combination of policies and high prices attracted investment in 

new farms, slaughter and processing plants, and imported breeding animals.

The buildup of production capacity stimulated by policies helped drive prices 

down during 2008-09 nearly as fast as they had risen during 2007. Meat 

sector analysts attributed falling prices to excess supply of pork, with some 

citing the influx of investment due to government policies as a chief cause (Yi 

Zhang, 2010, Feng, 2004; Xiao and Wang, 2009).

“Price Alert” Market Stabilization

In 2009, Chinese policymakers introduced a “hog price alert” market intervention program aimed at reducing the cyclical variation in hog prices. The 

program’s main function is to buy up pork for reserves to increase demand 

when prices are low and sell pork to augment supply when prices are high.

The program intends to stabilize hog inventories by preventing extended 

periods of low prices that might prompt large culls of sows.

12

According to documents describing the program, movements in the hog-corn 

price ratio and several other designated market indicators trigger purchases and 

sales of pork reserves. The program specifies the “normal” range for the ratio 

as 6:1 to 9:1, and authorities may take measures to prevent the hog-corn price 

ratio from falling below 5.5:1.

13 When the ratio falls in various ranges below 

6:1, authorities can order designated meat companies to purchase frozen pork 

to hold in reserve (table 1)14 When the ratio is 5.5:1 to 6:1, provincial documents specify that cities should maintain a 7-day reserve of pork (based on 

average consumption of 100 grams/person/day).

15 When the ratio falls below 

5.5:1, the central government can subsidize interest on loans to slaughter and 

processing companies to encourage them to increase inventories of pork and 

increase output of processed pork products. Also, the government can authorize an increase in central meat reserves and local reserves in large cities. At 

“abnormally low” levels below 5:1, the program calls for large increases in 

reserves, and officials can authorize one-time subsidies per sow for farmers in 

major pork-producing counties to prevent slaughter of sows. The document 

also calls for limits on pork imports “to reduce market supply” and increases 

in pork exports by raising food safety standards and providing technical, information, and policy support.

16 When the hog-grain price ratio exceeds 9:1, the 

government can sell frozen pork reserves to bring down prices, and it may issue 

subsidies to low-income consumers.

Since the program’s inception, China’s NDRC has published weekly average 

prices and monthly hog inventory and slaughter on a web site (www.gov.cn/

zfjg/szsctk.htm). However, little information about purchases and sales of 

pork under the program is revealed. News media reports reveal that purchases 

and sales have taken place, but details on amounts or locations of the transactions are seldom announced.

12A large cull of sows constrains the 

sector’s ability to expand production 

in later months. This phenomenon was 

blamed for the sharp increase in pork 

prices in 2007.

13Provincial guidelines specify 

that the ratio is to be calculated using 

the provincial average live hog price 

received by farmers and the wholesale 

price of corn. Secondary targets stated 

in the National Development and 

Reform Commission document are to 

prevent the ratio of feeder pig-to-hog 

carcass (bai tiao rou) prices from falling below 0.7:1, maintain hog inventories of at least 410 million head, and 

maintain sow inventories of at least 41 

million head.

14Provincial documents for implementing the program set 6:1 as the 

breakeven point for the hog-corn price 

ratio, but officials may adjust the targets 

based on changes in industry structure 

and other factors. Henan Province’s 

document set the breakeven point at 

7:1, and Zhejiang Province set it at 

6.5:1.

15Zhejiang Province specified a 7-day 

supply of reserve pork for its three largest cities and a 3-day supply for other 

cities. As noted on page 19, the national 

required reserve for large cities was 

raised to a 10-day supply in 2011.

16The means of limiting imports are 

not specified. The Shandong Province 

document explains that the provincial 

branch of the inspection and quarantine 

bureau will work with other departments to implement temporary policies 

to limit imports.
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The first intervention under the stabilization program occurred in May 2009, 

less than 6 months after its introduction (fig. 9). The hog-grain price ratio fell 

below 6:1, and the government began purchasing pork for reserves in mid-June 

2009. During April-June 2010, the government conducted five rounds of pork 

purchases before prices rebounded in July. Official reports said the hog-grain 

price ratio fell from 5.07 in mid-April to 4.81 by May 26, well into the “red” 

region specified by the program. It was still in the red region when the fifth 

round of purchases was carried out at the end of June 2010. NDRC reported 

that the hog-grain price ratio reached the 6:1 normal level in late July.

Later in 2010, the government ordered sales of pork reserves when pork 

prices began to rise rapidly. Hog prices rose more than 20 percent during 

July-November 2010. A round of frozen pork sales was ordered to prevent 

excessive price increases ahead of the October 1 National Day holiday, 

and a second round was ordered in November. Some local authorities sold 

pork reserves in mid-2011 as pork prices reached record levels. These sales 

occurred when the hog-corn price was far below the 9:1 ratio specified for 

triggering such sales.

During 2011, as pork prices again became a national concern, there were 

scattered reports of pork reserve sales by some local authorities but no coordinated national campaign to sell pork reserves. Instead, the State Council 

issued a new directive ordering local authorities to increase their pork 

reserves. Large and medium cities and cities in coastal areas were directed 

to maintain a reserve equivalent to 10 days of pork consumption, and other 

cities were directed to maintain a 7-day reserve.

The influence of the price alert program on pork prices is hard to discern, 

especially since the amount, timing, and location of pork reserve purchases 

and sales are not announced. The program’s ability to affect the market is 

Table 1

China’s pork market intervention guidelines

Hog-grain price ratio1 Color code Government action

Over 9:1 Sell frozen pork reserves into the market; issue subsidies to low-income 

consumers.

6:1 to 9:1 Green (“normal”) Monitor markets and price fluctuations; issue information. Pork reserves mainly 

used for emergencies and disasters.

5.5:1 to 6:1 Blue Add to central and local pork reserves when ratio is in this range for 4 

consecutive weeks.

5:1 to 5.5:1 Yellow Subsidize interest on loans to large meat processing companies to encourage 

them to add to commercial reserves and increase pork processing.

Under 5:1 Red Increase central reserves and require large and medium cities to increase local 

reserves of frozen pork when the ratio is in this range for 4 consecutive weeks. 

The number of live hogs kept in reserve may be increased. If the ratio is still in 

this range after reserve purchases, a temporary subsidy of 100 yuan per sow 

may be given to farms in main hog-producing counties when sow inventory is 

down 5 percent year-on-year. Appropriately limit pork imports to reduce the 

market supply; “improve” the food safety system to encourage pork exports.

1Some provinces set a higher threshold for the hog-grain price ratio. 

Source: USDA, Economic Research Service using National Development and Reform Commission, Regulatory plan for controlling excessive 

hog price declines, Bulletin No. 1, January 9, 2009, and provincial guidelines for implementation.
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limited because frozen pork purchases constitute a tiny portion of a huge, 

scattered market. Zhang and Nie (2010) reported that reserve purchases in 

2009 totaled 110,000 metric tons, equivalent to just 0.26 percent of China’s 

annual pork output. The Agricultural Development Bank of China reported 

that it financed meat-reserve purchases of 250,000 metric tons in 2010, about 

0.5 percent of annual pork production.

17 Frozen pork itself constitutes a 

relatively small part of the market because Chinese consumers have a strong 

preference for freshly slaughtered meat.

18

Officials credited the first round of purchases in 2009 for bringing about a 

recovery of pork prices that year, but this seems unlikely since authorities 

were still recruiting companies to hold reserves and many provinces had not 

even released their implementation regulations at that time. Some market 

reports again credited reserve purchases for the rebound in hog prices in July 

2010, but the rebound was more likely due to a 5.7-percent decrease in hog 

slaughter that month.

The weakness of the hog price alert program was revealed by the sharp 

increase in pork prices during 2010-11. During this period, rising food prices 

were a major policy concern in China and officials ordered sales of pork in the 

fall of 2010, yet hog prices rose 40-to-50 percent and by June 2011 pork prices 

reached the record level set in early 2008. Market reports ascribed the surge 

in prices to short supplies of pork, which resulted from widespread animal 

disease, culls of sows, and exits from the industry during the period of low 

prices and losses in 2010. The supply of feeder pigs in 2011 was limited by the 

cull of sows a year earlier, while rapid income growth created robust demand 

(Woolsey and Zhang, 2011). The wide swing in prices and hog inventories 

during 2010-11 was remarkably similar to that of 2006-07—exactly the type of 

phenomenon that the price alert policy was intended to prevent.

17This total may include modest 

amounts of other meats in addition to 

pork.

18Liu and Sun (2010) estimated that 

all sales of chilled, frozen, and processed pork together account for less 

than 10 percent of China’s pork market.

Dec 2007

Mar

Jun

Sep

Dec

Mar

Jun

Sep

Dec

Mar

Jun

Sep

Dec

Mar

Jun

Sep

38

40

42

44

46

48

50

52

0

2

4

6

8

10

12

Figure 9

China's sow inventory follows changes in hog-corn price ratio

Million head

Source: USDA, Economic Research Service using data from China Ministry of Agriculture.

Hog-corn price ratio

Hog-corn price ratio

Breeding sow inventory

(no data)

6:1 normal

hog-corn ratio

2008 2009 2010 2011

Pork reserve purchases Sales 
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Outbreaks of “blue ear” disease (PRRS), foot-and-mouth disease (FMD), 

classical swine fever, pneumonia, streptococcus suis, circovirus, parasites, 

and erysipelas (a bacterial infection of the skin) are common in China’s hog 

industry. News reports indicate that large losses attributed to disease periodically restrict the supply of pork, contributing to price surges. Chinese 

news media periodically report illegal sale of pork from diseased hogs, pork 

that is discolored or bearing lesions, and discovery of large numbers of hog 

carcasses in rivers and canals.

The impact of disease on the pork market is impossible to assess with any 

precision. When disease affects sows and young pigs, impacts on the market 

may occur several months after an outbreak. The frequency and incidence of 

disease is hard to measure accurately, and outbreaks are often regional. While 

the Ministry of Agriculture reports on disease outbreaks, these figures likely 

understate the actual incidence of disease because farmers and merchants 

have little incentive to report diseased animals to authorities (Woolsey et al., 

2010).

Rising pork prices in 2007 and 2011 were attributed in part to disease 

outbreaks. During 2006-07, the supply of feeder pigs was reduced in part 

because blue ear disease caused sows to abort. This restricted the supply of 

finished hogs and led to high prices during 2007-08. During 2010, another 

round of disease outbreaks induced many farmers to slaughter hogs early, 

and many diseased carcasses were illegally sold to slaughterhouses. The 

increased supply of slaughtered hogs and the prevalence of tainted pork led 

to a period of depressed prices during 2010 (see Woolsey et al., 2010). The 

disease-related decline in hog inventories during 2010 led to tight supplies 

of feeder pigs and another surge in pork prices during 2011 (Woolsey and 

Zhang, 2011; Sun et al., 2011).

Chinese agricultural officials have taken steps to reduce the effects of animal 

disease epidemics. Immunizations for PRRS, classical swine fever, and FMD 

disease are compulsory and subsidized. Farmers are compensated for culling 

animals to prevent epidemics, and local officials must bear the cost of sanitary disposal of dead animals. Agricultural officials have made it a priority to 

improve veterinary services, biosafety, and monitoring and control of farms, 

slaughterhouses, transportation, and markets. Chinese pigs are required to 

have ear tags recording 7 to 8 mandatory immunizations. Slaughterhouses are 

required to ensure that hogs have ear tags and vaccination certificates. Inspectors are required to conduct ante- and post-mortem inspections of slaughtered 

hogs, and tissue samples are to be examined for parasites at slaughterhouses.

However, government programs and regulations are not uniformly implemented, and problems with animal health persist. Vaccines may not be 

effective against multiple strains of PRRS that exist in China’s hog herds.

Wang (2009) reported that ear tags (that record immunizations) and animal 

quarantine certificates can be easily falsified or purchased; farmers often miss 

vaccinations; syringes are often used on multiple animals; and veterinary 

personnel needed to carry out vaccinations are in short supply. In a small 

survey of farmers, Liu et al. (2007) found most farmers whose sick pigs did 

Swine Epidemics Affect the Pork Market
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not respond to treatment sold the animals before they died or improperly 

discarded the carcasses of dead animals (only one farmer said he buried dead 

pigs as required by regulations). Liu et al. found that most farmers did not 

use ear tags or only attached them at the time the pigs were sold; pigs without 

ear tags were sold to unlicensed butchers or neighboring farmers.

The high density of animal populations, rudimentary facilities, lack of 

technical knowledge among farm personnel, and lack of resistance among 

“foreign” breeds of pigs may contribute to vulnerability to disease. One 

article in a Chinese veterinary publication warned farmers that changes 

in feed, poor nutrition, neglect of immunizations, and other animal stressinducing factors that are more common on small-scale farms may heighten 

risk of classical swine fever outbreaks (Ren, 2010). According to Feng 

(2010), periods of extreme weather or flooding can trigger an epidemic 

among farms characterized by stressed animals and neglect of immunizations.

19 As evidence of farmers’ cost-cutting, Feng noted that many feed and 

veterinary drug companies reported sales declines of as much as 30 percent 

during the period of losses in 2010. Feng also suggested that periods of losses 

by farmers may leave local governments short of cash to pay veterinary technicians and dispose of carcasses.

Feng (2010) hypothesized that disease outbreaks may actually be linked 

to the hog cycle itself. Writing in an industry newsletter, he observed that 

extended periods of losses for small- and medium-scale hog farmers may 

leave them short of cash. Farmers may then cut costs by switching to 

lower quality, less-nutritious feeds, and neglect vaccinations. Less nutritious diets leave animals in a weakened state and vulnerable to disease. Jiao 

and Kou (2010) reported that farmers in Sichuan cut costs during a period 

of depressed prices by increasing the proportion of rapeseed stalks in hog 

rations. Sun et al. (2011) observed that the substitution of cheaper feed 

substitutes contributed to chronic disease problems in the industry.

Chinese officials introduced subsidized insurance for producers of sows 

to reduce the risk of financial losses attributed to animal deaths, but some 

market reports indicate that this program encountered moral hazard problems. Liu (2010) reported heavy losses incurred by companies offering sow 

insurance in Henan Province, citing large numbers of claims, high costs, 

and fraud.

20 In July 2010, a Yangzhou newspaper reported that the insurance 

company’s payouts for sow death losses had doubled from the previous year 

and reached 25 percent in one county (Yang, 2010). According to an insurance worker quoted in the article, some farmers neglected to treat sows for 

diseases during periods of low hog prices because the insurance indemnity 

exceeded the animal’s salvage value if it were culled and sold.

19Woolsey et al. (2010) also report 

that low efficacy of free vaccines may 

contribute to epidemics. Some local 

distributors lack facilities to keep vaccines at the proper temperature. 

20A company official told Liu that 

in some cases, multiple farmers filed 

claims on the same dead animal.
23

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Producing large quantities of pork in China entails “external” costs—the 

environmental impacts of hog waste and risks of food safety incidents—

that are not factored into the market price of pork. According to Wang et 

al. (2006), one Chinese hog produces 5.3 kg of waste daily, which contains 

large amounts of nutrients not absorbed by the animal as well as heavy 

metals and pharmaceutical residues. During the 1950s and 1960s, Chinese 

officials encouraged individual households to raise hogs as a means of 

producing organic fertilizer to spread on fields to raise grain yields. In later 

decades, chemical fertilizer became available and the rising demand for meat 

prompted a large increase in the number of hogs. Consequently, the production of manure exceeded the capacity of the surrounding farmland to absorb 

its nutrients. Small farms rarely treat manure, but large farms are usually 

required to invest in treatment facilities. Gao et al. (2006) estimated that 80 

percent of commercial-scale farms lack equipment and facilities to properly 

dispose of waste, which causes “serious pollution of water, soil, and air and 

threatens the health of animals and humans.” Waste often washes into streams 

and rivers, fouling drinking water and contributing to eutrophication (nutrient 

enrichment) of major bodies of water.

Several Chinese studies estimated that pollution from livestock farms totaled 

roughly 3 billion metric tons annually, about three times the pollution emitted 

from industrial sources (Gao et al., 2006; Liu, 2009; and Wang et al., 2006).

Gao et al. estimated China’s hog waste at 1.29 billion metric tons annually, 

47 percent of the total livestock and poultry waste generated. A census of 

pollution sources released in 2009 found that livestock waste was a chief 

cause of water pollution in China (China Ministry of Environmental Protection, 2010).

While Chinese officials are taking steps to address these problems, the dense 

population of hogs strains the capacity of the land to supply feed for hogs 

and absorb their waste and also makes it difficult to control and prevent 

animal diseases (FAO, 2006). China has many regions with high hog population densities. ERS calculations using provincial- and state-level data on hog 

inventories and cropland for China and the United States show that China had 

94 hogs for every 100 acres of cropland nationwide at year end in 2008, more 

than 4 times the U.S. ratio of 20 hogs per 100 acres (table 2). In many of 

China’s leading hog-producing provinces, the density exceeded 100 hogs per 

100 acres, and the density exceeded 200 in Sichuan, Hunan, and Guangdong 

Provinces. North Carolina was the only U.S. State with over 200 hogs per 

100 acres (similar to the density in Sichuan), and Iowa had 82 (slightly below 

the China average and similar to the density in Hebei and Jiangsu Provinces).

Other U.S. States had densities of fewer than 40 hogs per 100 acres, far 

less than in China. With an already-high density of hogs, the environmental 

impact of hog production and tight supplies of feed may constrain growth of 

China’s hog industry.

Environmental and Food Safety Pressures
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Chinese officials are promoting “ecological” modes of hog production that 

use hog waste to feed fish or fertilize crops and use bacteria to break down 

hog waste. China’s 2011-2015 5-year plan will emphasize the importance 

of controlling livestock waste (Zhang, 2010b). However, a number of cities 

and provinces in China have introduced regulations that ban hog farms and 

slaughterhouses from operating near residential areas and waterways. Draft 

regulations prepared by Shandong Province in 2010 banned new livestock 

farms in urban areas, near sources of drinking water, in scenic areas, and in 

places where toxic substances exceed prescribed limits.

Food safety is also a major concern for Chinese consumers of pork. The 

news media in China has frequently reported on the hog industry’s use of 

clenbuterol and other illegal feed additives, the slaughter of sick hogs, the 

pumping of potentially contaminated water into hogs prior to slaughter, 

and the contamination of feed with heavy metals. Chinese consumers are 

also becoming more wary of pork products that contain dyes, preservatives, 

and other food additives. In March 2011, a widely publicized report that a 

subsidiary of China’s largest processed pork manufacturer purchased hogs 

raised with illegal feed additives had little direct impact on the pork market 

(Woolsey and Zhang, 2011). However, industry reports claim that the incident helped drive the trend toward consolidation of hog farms discussed 

earlier in this report. For example, the company implicated in the incident 

pledged to open a 10,000-head company-operated farm to supply each 

slaughterhouse it builds to gain more control over the production process.

Table 2

Comparison of hog population density in China and United States, 

2008

Hog 

population

Hogcropland 

density

Hog 

population

Hogcropland 

density

Million 

head

Hogs per 

100 acres

Million 

head

Hogs per 

100 acres

China 462.9 94 66.7 20

Leading

provinces:

Leading 

States:

 Sichuan 53.3 221 Iowa 19.8 82

 Henan 44.6 139 North 

Carolina

9.6 225

 Hunan 39.2 255 Minnesota 7.4 37

 Shandong 27.3 90 Illinois 4.4 19

 Yunnan 26.7 109 Indiana 3.5 29

 Hubei 24.6 130 Nebraska 3.4 17

 Guangdong 23.8 206 Missouri 3.1 23

 Guangxi 23.1 135 Oklahoma 2.4 26

 Hebei 20.2 79 Ohio 1.9 19

 Jiangsu 17.2 89 Kansas 1.7 7

Note: Hog population is year-end inventory. Density is the ratio of hog inventory to total 

cropland. Provinces and States are ranked by hog population; only the top 10 are shown.

Source: USDA, Economic Research Service using data from China National Bureau of 

Statistics and USDA, National Agricultural Statistics Service.
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Food safety concerns are also contributing to changes in purchase patterns 

that may make consumers more receptive to imported pork. Traditionally, 

Chinese consumers preferred to purchase freshly slaughtered pork from 

small wet market vendors, but food safety concerns have encouraged them 

to shift purchases to supermarkets where pork is believed to be more sanitary and free of illegal feed additives. Government plans to consolidate 

slaughterhouses by 2015 entail an increase in interregional trade in chilled or 

frozen pork. The diminishing role of localized wet markets and the development of modern market channels with cold chain facilities may create more 

opportunities for imported pork to reach Chinese consumers. Many Chinese 

consumers responded to the dairy industry’s melamine adulteration crisis by 

purchasing imported milk products, and demand for imported pork could 

similarly be boosted by domestic food safety concerns.
26

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China’s status as a major pork importer will likely continue to grow. China’s 

tradition of self-sufficiency in pork will be hard to maintain as feed costs rise 

and as land for expanding farms and processing facilities becomes scarce and 

expensive. The environmental and food safety impacts of producing large 

numbers of hogs in China will become more apparent. Interregional shipments of pork within China are limited by lack of reliable transportation and 

temperature-controlled storage.

Stricter regulatory enforcement in the United States, greater investments 

in animal housing and manure handling, wider dissemination of technical 

expertise, and closer coordination between producers and processing companies help U.S. farmers produce pork with less of an impact on the environment, fewer food safety incidents, and fewer disease outbreaks than in China.

Demand from China raises the value of variety meats and offal that are not 

widely used as food in the U.S. market.

Chinese restaurant chains, hotels, and other buyers who demand pork with 

high and consistent quality are important potential customers for imported 

pork (Fabiosa et al., 2005). With diversifying consumer tastes and growing 

segmentation in the market, imported pork can coexist in the Chinese market 

with domestic grain-fed pork and meat from local pig breeds.

21

Strong resistance to pork imports in China can disrupt trade and affect 

exporters. China lowered tariffs on pork after its accession to the World Trade 

Organization, but pork imports still face resistance similar to that described 

by Hayes and Clemens (1997). Evidence of this can be seen among the policy 

responses listed in the Chinese “hog price alert” program, which include 

unspecified “limits” on imported pork to reduce the market supply and 

“encouragement” of pork exports. When Chinese pork prices were soaring 

in 2007, officials made announcements to assure the public that China would 

not import large amounts of pork (Xinhua, 2007).

22 In June 2010 (after 

China lifted its H1N1-related ban on U.S. pork), an article entitled “Be on 

Guard! American Pork’s ‘Soybean Appetite’” warned that imports could 

“eat up” China’s pork industry if the industry was not protected (Li, 2009).

An analyst quoted in the article cautioned readers to “Be careful of the trap 

set by the Americans,” warning that if U.S. pork imports are not limited, the 

pork industry “...is likely to repeat the mistakes of the soybean industry with 

disastrous consequences.”23 Similarly, Liu (2010) reported that Chinese officials were wary of foreign investment in the pork industry because officials 

feared losing “guidance power” over the industry.

21Many supermarkets and specialty 

retail shops in China offer pork from 

local pig breeds. The appeal of this 

pork, generally sold at premium prices, 

is its stronger flavor and purported 

health benefits.

22Articles from official media 

included assurances that imported pork 

was purchased mainly by hotels, that 

imports would not affect the market, 

and that China has free trade in pork 

but also a strict inspection and quarantine system.

23This refers to China’s high reliance 

on soybean imports.

Looking Forward
27

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