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China and the challenge of precision pork production

In the long term, Chinese producers will have to gain access to their own processors in order to break the information barrier which prevents precision investment in the production process.

Tuesday 31 May 2016 (2 years 6 months 14 days ago)

I had an opportunity to spend some time with the largest and most successful modern pork producers in China on a couple of occasions in the last few months. It brought back a lot of memories of the excitement and energy that filled the air during the 1990’s in United States when pork production moved indoors and became a highly specialized, modern business.

Much of the same is happening now in China but on a grander scale and I can say that the key people creating the expansions across several companies are incredibly able and talented people with seemingly boundless energy. The opportunities for young people fresh from the best agricultural universities in China is easily equal to or better than their counterparts entering investment banking in Beijing and Shanghai. Since much of the largest scale production in China is from companies that have gone public to source the huge investment capital needed for the next 100,000 sows for instance, the level of finance, financial reporting, and compensation schemes are on par with large non-agricultural companies. I had the privilege to share small group meals with several of these owners and their key top level managers on several occasions and our interchange was both delightful, inspiring and richly informative.

They are enjoying a double benefit now from pig prices in the stratosphere related to a consolidation of the sow herd, as older less efficient production finally gave way under the pressure of an extended period of deeply depressed prices and large losses. Add to that the tremendous demand generated by growing per capita incomes and the turnover of technology in China today is well under way. Like everyone’s experience in the modern business world-wide, even the best producers of China also had extended periods of below cost of production prices that tested their mettle but the best have stayed the course and organized during the lean times for their targeted future growth.

As might be expected, they are facing some very important challenges which will be difficult to overcome in the short run but they are reaching the size and scale where what they need to be successful will likely be successfully negotiated or produced. Most of their challenges are structural issues which are the key creators and sustainers of high variance production. Disease, lack of rapid diagnostic support and bio-security management including the utilization of many existing small farms as contract growers to facilitate early phases of rapid growth fan into flame the built-in genetic predisposition to variability. Rapid growth requires the near constant restructuring of internal management, administration, information flows and reporting structures and add to that IT development and the disproportionate focus on those during the growth phase delays the needed careful focus on managing variance. Since most of the companies are publically traded, the quality and timeliness of reporting is crucial to economic survival.

I have tried to convince them in the brief time I was there that the only viable future, regardless of the farm product is precision agriculture. The pathway to precision runs directly through the variance but modern livestock production is built squarely on achieving high average mean production. As you know, the very systems put in place to propel modern pork production out of the wallow and onto the concrete is great at achieving high throughput but our technologies do not allow the measurement of almost any individual animal information except in the sow herd where individual sow management is the norm. Not only is it not possible, in many cases, with today’s technology it would not be recommended to for instance, weigh each animal at certain intervals. To do so, except in some rare cases where producers have mastered the automatic scaling technologies, is to inject additional variance into the production process and the disturbance of the animals can cause a more than a few to reduce feed intake for an extended period. We are waiting for technologies where the cure is not worse than the disease.

A popular record system providing benchmarking in the US now makes available both the mean and standard deviation of most sow herd metrics which is a wonderful leap forward since it raises the issue, gives it credibility and provides a raw beginning but still a veritable storehouse of information for researchers and modelers. I am arguing that we cannot wait until we have the information perfectly collected (like daily feed intakes, daily weights, etc.), we must do what the crop producers do, rely on credible bio-economic modeling of the processes at work on the farm as a first step. Such modeling can provide important “ah-hah!” moments which can guide producers into wiser decision-making even if the exact data is not available and even when the models are wrong within some amount of reason of course.

Production variation unavoidably rolls up into profit variation and wastes scarce global resources at a level which will not be tolerated as we move into the future. It may not be a governmental edict (but of course there will be many more of those) as much as the forces of economics which will price key inputs out of range for high variance production systems, forcing them to change or to retire.

In the long term, Chinese producers will have to gain access to their own processors in order to break the information barrier which prevents precision investment in the production process. Where ownership changes hands at the harvest level, there is an understandable yet long-term unacceptable blockage and blurring of information flow which prevents investments in the correct precision at the production level. Since by far and away, most of the investment in that piece of pork on the consumer’s table is made at the production level, it must transform to precision processes over time to line up with the coming combination of ferocious demand requirements and limited resources.

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