INDUSTRIAL LIVESTOCK PRODUCTION, CONCENTRATE FEED DEMAND AND NATURAL RESOURCE REQUIREMENTS IN CHINA KE BINGSHENG China Agricultural University, Beijing, China

The current and future food issues in China have aroused worldwide attention and concerns in recent years. The future food issue in China is by nature a livestock problem. Expanding population, rising income and aspiration, coupled with rapid urbanization, will continuously enhance the demand for livestock. This growth in demand calls for further intensification of natural resource uses, which will increasingly have significant economic, ecological and environmental impacts. As China becomes more and more integrated in the global economy, this development trend in China will not only have significant implications for China itself, but also for the rest of the world. This paper will provide an overview and a review on the driving forces for livestock demand, the industrialization of livestock production, the requirements for feed resources and the environmental implications in China.

1. Main factors influencing the demand for livestock products

Major factors influencing the demand for livestock products include population growth, growth of the per capita income changes in population structure and marketing infrastructure as well as policies.

Population development

The population expansion has had one of the most important influences on the demand for livestock products in China. The average annual population growth for the past decade was 1.4%. If this trend continues in the next 35 years, China's population will reach 2.0 billion by the year 2030. The Chinese government has set a very high goal for population control, according to which the total population should be 1.4 billion in 2010, 1.5 billion in 2020, and 1.6 billion in 2030 (IOSC, 1996). Whether or not this goal can be realized will have substantial impacts on the growth of the demand for livestock and hence on the Chinese food balance in the future. The high scenario for population growth implies a 25% higher need for food compared to the low scenario for population growth, while other factors remain unchanged.

Population structure change (urbanization)

The urbanization process is another major factor influencing the demand for livestockproducts. The consumption level of meat and other livestock products in the urban households is two to three times as high as that in the rural households. The share of the urban population has risen from 23.7% in 1985 to 29.0% in 1995 (SSB, 1985–1995). If this trend continues in the next 35 years, the urban share will be nearly 50% by 2030. This urbanization process is and will further generate an increased demand for livestock products in China.

Income growth

An improvement in income is the prime driving force for an increase in livestock consumption. The average income for urban and rural population has risen significantly in the past 15 years. The nominal income per capita rose over sevenfold for both urban and rural households. In real terms, namely reduced by the inflation rate, the per capita income has increased by 170% for urban and 150% for rural residents.

Cross sectional statistics of income also show a close relationship between income and livestock consumption. As for rural residents, the group with a higher income has a markedly higher consumption level of livestock products. The top income group consumes about 70% more pork than the lowest income group. For chicken, beef and mutton, the consumption disparity is about 100% (SSB, 1981 – 1995).

According to a study of the State Statistical Bureau (SSB), the average income elasticities for poultry meat and fish were the highest in 1988, 1.46 and 1.34 respectively. The corresponding figures for pork, beef and mutton were at the same level of 0. 57. The figure for eggs was somewhat higher, 0. 66. In comparision with crop products, of which the income elasticity was below 0. 30, all livestock products had an apparent higher income elasticity.

Another study has been undertaken by the International Food Policy Research Institute (Huang, et al., 1997), showing a similar picture of the income elasticity for livestock products in China. The income elasticity for all livestock products was in the range of 0. 75-0. 85 in the early 1990s and will increase slightly towards the 2010s. Milk has the highest income elasticity, over 1.5 in the early 1990s, followed by fish and poultry. Beef and mutton have the lowest income elasticity, 0. 34 for the rural residents and 0. 69 for the urban consumers.

Improvement in marketing sectors

Significant improvements have been made in marketing sectors for livestock products, enabling the potential demand to be met adequately, satisfactorily and more timely,. For example, the development of the milk processing industry has provided more and diversified milk products and has greatly stimulated milk demand. Prior to the reform in the late 1970s, there were hardly any other milk products besides milk powder. The development of the milk processing industry and the related food industry, including ice cream, yogurt, butter, cheese, cakes and so on, have created a large demand for milk. On the other hand, market development, especially the expansion of retailer shops with refrigerator facilities, have significantly enlarged the market reach of milk and meat products. Food shops with refrigerators can now be found anywhere in cities and towns. Fifteen years ago, there were hardly any such shops, even in large cities like Beijing.

Policy Development

Livestock, especially large animals such as horses, donkeys, cattle and buffaloes, were considered to be production means during the pre-reform period, and were owned either by state farms or collectives. Individual farmers were not allowed to raise large animals. There were only exceptions in the northwest and southwest nomadic regions, where each household was permitted to keep one or two milk cattle, or a couple of sheep or goats, to meet the consumption needs of the family. The same applied for pig and poultry raising in farming areas, mostly located in the eastern half of China.

Since the end of 1970s, the old system has been reformed progressively. Though farming land as well as grazing land remain public goods, their right of use has been contracted to the individual farmers and herdsmen. Livestock herds in both pastoral areas and cropping areas have been allocated to individual herdsmen and farmers. The prevailing production system has turned from a collective to a rural household- based one. Presently, except for a limited number of large-scale state pig and dairy cattle farms in suburbs of large cities like Beijing and Shanghai, almost all livestock is owned by individual farmers.

The reform process of the livestock sector can basically be regarded as one of privatization. The individual farmers and herdsmen have become the decision-makers for their livestock production and marketing. This has greatly improved production incentives, resulting in a rapid expansion of livestock inventory and output. However, at the same time, over-grazing and other environmental problems have also been aggravated.

There were times when individual farmers also got direct support for pig raising and milk production through the provision of subsidized feed. This practice has been abolished in the past decade. The only form of direct assistance still provided by local or central goverments is granting subsidized credit for investment, provision of technical assistance and improved breeds to individual farmers and setting up pilot farms, for example, in the northeastern region.

Parallel to the reform of the production policy, marketing and price policies for livestock products have undergone dramatic changes since 1980 as well. The market liberalization process for livestock products was initiated much earlier than that for grain. By the mid-1980s, the obligatory delivery scheme had been completely abolished. Not only have livestock raisers obtained the freedom to make marketing decisions, but also private middlemen have been allowed to enter the livestock market. The state monopoly in the marketing of livestock products has been abolished and a very competitive market has formed.

Price control in various forms has gradually been lifted Government subsidies to state-owned marketing agencies and shops have substantially been reduced. In small cities and towns and in vast rural areas, the state marketing agencies receive no more subsidies. Only in large cities do they still get a direct subsidy, but at a much reduced level. Reasons for the maintenance of the subsidies include cost compensation for stock holding, price stabilization and support to retired state enterprise employees. The level of the subsidy is usually the result of negotiations between the state marketing agency and the municipal government.

In the pre-reform period, before the end of the 1970s, livestock products were provided at subsidized prices and rationed to urban consumers. The rural population was not covered by the ration scheme, but had to meet the consumption need themselves. The availability of the livestock products in each city determined the level of rationing. Both the quantity and quality of the rationed products were far from satisfactory. Meat purchasing was often a source of quarrels between customers and the butchers' clerk, for the customers usually could only get the pieces of meat the clerk assigned to them, but not the ones they most preferred. Following the abolition of the rationing system in the mid-1980s, the entire population has been given access to meat at market retail prices.

2. Structural changes in the livestock sector

Dramatic structural changes have taken place in China's livestock sector, primarily in three aspects: intensification, production of different kinds of meat, and geographical patterns.

The modern production system, i.e. the commercialized intensive system, has grown fast and remarkably increased its share in the total production especially for the poultry sector. Fifteen years ago, almost all chickens were raised in the traditional backyard system. According to officials from the Ministry of Agriculture (MOA), the intensive poultry farming by now consists of 40% broilers and 60% layers. The intensive system is probably much larger in the coast regions such as Shanghai and Guangdong Province, where the offtake rate for poultry is over 400%. There are also similar shifts in the pig sector and the dairy sector, though the modern sector still is a much smaller, around 10-15%.

The industrialization or intensification of livestock production in China is to a large degree stimulated by the development of the industrial feed industry. The first premix feed plant was only constructed in 1985 (Simpson et al., 1994). Industrial feed production soared from merely 2 million tons in 1980 to over 50 million tons in 1995, including complete feed, concentrated and premixed feed (NOFI, 1996). In its development process, the quality and the credit of the industrial feed has also been improved gradually. Many livestock producers, including those in the traditional sector, have changed their reticence towards using industrial feed and have become accustomed to it. The robust development of the industrial feed sector has been the decisive factor for the rising share of intensive livestock systems, especially for the poultry and pig sectors.

Pig feed has the lion share in the total industrial feed production; this was 42% in 1995. Layer feed and broiler feed have similar shares, together accounting for 50% of the total production. Fish feed has a share of 5%, and the remaining 3% is divided between cattle and other animals. From this information it is apparent that the layer and broiler sector have been commercialized to a much larger extent than cattle and other livestock sectors.

Due to the differences in development level among the various meat categories, the composition of meat production has changed. The share of pork fell continuously, from 87% in 1980 to 69% in 1995, while that of all other meat categories has risen. The share of poultry registered the largest increase from 8% to 18%, followed by beef from 2% to 8%, and mutton from 3% to 4%.

The changes in the structure of meat production reflect the changes on the technical side and on the economic environment. Given its efficient feed-meat conversion ratio, the commercialized chicken industry has developed fastest. Cattle raising, under the prevailing raising systems in China, needs less grain than pig raising. Furthermore, the mechanization process in crop production has reduced the number of draught animals and increased the number of beef and dairy cattle. The mutton and goat meat production have increased, but due to the constraint in grazing areas, the growth rate is slower than that of cattle.

Geographically, the share in total livestock production of the major cropping areas has increased, and the importance of the pastoral areas has declined substantially. The five pastoral provinces, Xinjiang, Gansu, Tibet, Qinghai and Inner Mongolia, have considerably lost their share in beef production from 55% in 1980 to only 13% in 1995. Five major cropping provinces, Shandong, Henan, Hebei, Liaoning and Anhui, in contrast, have become the most important beef producers in China, with their combined share rising from 10% in 1980 to 57% in 1995. The trend for mutton is similar. The mutton share of Inner Mongolia, previously the top producer, has dropped sharply from 17% in 1980 to 8% in 1995. The share of Xinjiang has also declined from 14.6% to 12.2% in the same period. In contrast, Shandong's share has increased from 6.9% to 19.4%, making it by far the top mutton producer in China. Pork production is concentrated in the central part of the country, while poultry production is concentrated in the coast areas of the South and the East. Milk production is concentrated in the North. With a share of nearly 30% in the national total, the Heilongjiang Province is by far the largest milk producer in China, followed by Inner Mongolia and Xinjiang, each with around 8%. The three municipalities, Beijing, Shanghai and Tianjin, are also important in milk production, taking into account that they are very small in areas. The milk production system in the suburbs of those three large cities is highly intensive and productive. The lactation yields are over 3500 kg, more than double the national average. The pastoral areas in Xinjiang, Gansu, Tibet and Inner Mongolia, in contrast, have much lower yields, just 500–800 kg.

The changes in technical variables and other factors affecting efficient production are expressed in changes of a number of production parameters. The offtake rate for pigs has increased steadily and considerably, from 62% in 1980 to 116% in 1995. At the same time, slaughtered animals have become heavier. The average slaughterweight of hogs has increased from 57 kg to 76 kg. The meat production per head, the combined results of the offtake rate and the slaughter weight, more than doubled in the past 15 years. The offtake rate for beef cattle improved spectacularly, from 5% in 1980 to 25% in 1995. However, this should be adjusted downwards, since these rates could be overestimated. The most significant achievements in efficiency are found in the poultry sector. Poultry production has seen the fastest growth in the past 15 years compared to all meat categories, from 1 million tons in 1980 to 9.35 million tons in 1995. The egg production has almost shown the same growth rate, from 2.57 million tons to 16.77 million tons in 1995. The poultry population amounted to 3740 million birds in 1995, an increase of 3.4 times the production in 1980, implying a significant improvement in the offtake rate, which increased from 105% in 1991 to 170% in 1995.

3. Meeting the demand for feed concentrates(grains)

The growth potential for grain production in China is one of the most controversial issues in the recent hot debate on “who will feed China. ” The prevailing views of most Chinese scholars are that China basically has to rely on itself to meet the increasing demand. The growth potential lies in yield improvement which can be realized through intensification of land use, as there is hardly any possibility to expand the farmland area.

In China, virtually all arable land has been put into cultivation. In many places, such as in the Loess Plateau, semi-arid regions in the Northwest and mountainous areas in the Southwest, very fragile lands which are not suitable for cultivation at all have also been explored for grain production.

The exact figure of the area of cultivated land in China is a disputed issue. According to many estimates, the actual figure should be 30-40% higher than the officially released figures. One major reason for the under-reporting of farmland is that most newly reclaimed farmland has not been included in the statistics. Farmers and local government do not like to report this due to economic and other reasons. Another reason is that a large part of the unreported land is marginal land and often abandoned after one or two years of cultivation.

According to SSB statistics, arable land areas have declined from 103.3 million ha in 1965 to 95.0 million ha in 1995, or a decline of 8% during the last three decades (Table 1). The modernization process in China will take away more fertile farmland from agriculture. Though there are still reclaimable land resources, which are estimated at 14.7 million ha in total (IOSC, 1996), their reclamation needs high investments and is very expensive. Quantitatively, the land reclaimed annually might offset the farmland reduction and keep the total farmland areas at the same level. However, qualitatively, the productivity of the newly reclaimed land cannot be compared with the land lost. The lost areas are mostly in the South and the East, and are usually flat and suitable for two or three crops a year, while the added land is usually in the North and the West, mostly under dry, cold and poor fertility conditions.

Table 1 Agricultural Areas in China, million ha

Source: SSB, Statistical Yearbook of China, various years.

Multiple cropping is one of the major ways to intensify land use. The multiple cropping index was raised from 138% in 1965 to 158% in 1995, resulting in an increase of 5% in sown areas despite the 8% decline in cultivated land areas. Irrigated areas were also substantially expanded, from 32% of the total farmland to 52% during the same period.

Great efforts have been made in building terraced fields, which accounts for 8% of the total farmland. Another area-related measure is the rapid expansion of areas covered with plastic sheeting. This practice significantly improves the temperature conditions of the fields and enables early planting, which is especially important in the northern provinces.

The application of chemical fertilizers has played a very significant role in intensifying the land use and improving the productivity. Chemical fertilizer input increased dramatically from 2 million tons in 1965 to 13 million tons in 1980 and 36 million tons in 1995, with an annual growth of 10% for the three decades. The quantity of pesticides used did not increase much, fluctuating largely between 0. 25-0. 45 million tons during the 1965-1995 period. However, the quality probably improved.

Technical progress in crop growing and improved varieties has made a substantial contribution to the yield growth in China. The development of hybrid rice and crossbred corn varieties and the continuing expansion of areas with those varieties, coupled with other related measures including seed coating and improved sowing methods, have played a very important part in the growth in grain yields in China.

There is a wide range of other measures to intensify the use of land The total power of agricultural machinery increased from 15 million kw in 1965 to 147 million kw in 1980 and to 361 in 1995. This progress in mechanization has enabled a better timing for planting and harvesting, has caused a reduction in post-harvest loss, and reduced the number of and the need for feed of draught animals, thus increasing the available feed for meat and milk production. With the institutional and policy reform, individual farmers can make their own decision on what and how to produce, resulting in more rationalized production patterns, adapted to the local natural and economical conditions. Regional specialization makes a better and more efficient use of land resources. The arising corn belt in north and northeast China centered in Jilin Province is an example.

The effects of all the intensification measures mentioned above reflect on the continued yield improvement, as indicated in Table 2. Through the intensification of land use, China has been able to increase its grain production from 200 million tons in the mid-1960s to 400 million tons in the mid-1980s, and to 467 million tons in 1995.

Table 2 Grain yield growth in China, ton/ha sown area

Source: SSB, Statistical Yearbook of China, various years.

Apart from domestic production, China has also actively participated in the world grain trade. Until recently, China used to import wheat and export rice and feedgrain.

The total corn export in 1993 and 1994 amounted to 20 million tons. However, China began to be a net importer of grain for both human and animal consumption in 1995 and 1996. Many studies have projected that, in the long run, China would increase its grain import in the future. However, for a large country such as China, the import could only play a supplementary role, and China mainly has to rely on itself to meet the increased requirements for concentrate feed

4. Environmental impacts of the production of feed concentrates (grain)

Some of the measures to increase the concentrate feed production have already shown negative ecological and environmental impacts. Those mainly include problems caused by too high levels of fertilizer use, soil erosion and river water pollution from over-cultivation. underground water depletion and reduction of river water due to irrigation, and other forms of resource depletion and degradation.

As indicated in Table 3, the fertilizer input is very high in most provinces in China, especially in the Southeast. In Guangdong and Fujian, for example, the input of chemical fertilizer was over 800 kg/ha in 1995, compared with 200–300 kg/ha in the western European countries. Suburb areas in large cities are also especially burdened with a very high fertilizer input. For example, a state farm in Beijing suburb has 800 ha farmland, 7900 dairy cows, 900 sows, and 0. 84 million slaughtering ducks a year. All manure from livestock production was used on the 800 ha farm land. In addition, around 700 kg/ha chemical fertilizer was added to the fields.

Table 3 Fertilizer Input in China, 1995, effective components

Note: National average: 378 kg/ha.
Source: SSB. Statistical Yearbook of China, various years.

Soil erosion from over-cultivation is another serious environmental problem. Despite continued water and soil conservation efforts, areas of soil erosion had been expanding, from 1.29 million square km in 1985 to 1.63 square km in 1995, reaching 17% of the total land area in China. As mentioned earlier, terraced areas account for 8% of the total farmland. In many mountainous places, steep slopes are cultivated without being terraced, resulting in not only high soil and nutrient losses, but also environmental problems for surface water. The soil and sand content in rivers has been rising, especially in the South. It is reported that the soil losses in the nation amount to 5 billion tons a year, containing nutrients equivalent to the total fertilizer production (Li and Yang, 1994). The soil and sand content in the Yellow River is as high as 37 kg per cubic meter. The Yangtze River, the largest river in China, has virtually become the second “Yellow River”. Soil erosion is particularly serious in the ecologically fragile regions, such as the Loess Plateau, the mountainous areas in the southwest and in the southeast.

In the North China Plane, irrigation depends heavily on groundwater. Wells as deep as over 300 meters are built to draw groundwater for drinking and irrigation. Such deep wells are built through a range of regional development and public agricultural investment policies in promoting farm production. In many places, the groundwater level has been declining at a speed of almost one meter a year, increasingly causing concerns for the sustainability of the development. Too much and inefficient utilization of river water for farmland irrigation in the upper reach of the Yellow River has caused critical shortages for the lower reach of the river. It was reported last year that the entire lower reach of the Yellow River dried up for several months.

In the 1970s, a massive campaign was launched to reclaim farmland in the lake areas in Central China. The reclamation reduced the surface area of the lakes, weakened their ability to absorb floods, and lowered the bio-diversity. The dramatic decline in water storage capacity in those lakes is believed to be the major reason for last year's heavy flooding in Hubei and Hunan provinces. Over-cultivation in the arid and semi-arid areas, especially in the transition zones between agricultural and pastoral production systems in the North and the Northwest, has caused desertification problems. There are reports that the threat of desertification due to over-cultivation and over-grazing is aggravating continuously, currently at an expansion rate of over 1000 square kilometers a year (Li and Yang, 1994). Over-cultivation is also one of the major reasons for the deforestation. The forest coverage in many places has declined dramatically. For example, in Sichuan Province, one of the most important forest regions in China, the forest coverage has fallen from 20% to 12% during the last three decades.

There are also other problems which are of a “chronic” nature, i.e. not explicitly and readily recognizable as the problems mentioned above, including the decline of organic matter in the soil, an unfavorable development trend in soil structure, and, in the suburban areas of big cities, heavy metal pollution of the soil and plants through irrigation, using polluted surface water.

5. Lessons learnt and future development perspectives

Important lessons learnt from China's experience in the agricultural and livestock development of the past decades can be summarized as follows:

First, incentives for producers are crucial to stimulate both the concentrate feed and the livestock production. Through market-oriented policy reforms and institutional innovation. China has greatly inspired the incentives for the producers, and the productivity has dramatically improved since the reform policies were introduced in the late 1970s. Looking into the future, China will continue her reform policy and accelerate the transforming process toward a market economy. Better incentives for all stakeholders will enable a more efficient use of the scarce natural resources.

Second, special care should be taken of the ecological and environmental impacts when designing regional development policies. The current development goals (production growth, income enhancing) should be better balanced with the consideration on the sustainability of the natural and environmental resources. Problems from the encroachment of agriculture on lakes and semi-arid grassland, and the investment in drilling deep wells for irrigation in the North China Plane, for example, have taught China to pay much more respect to the environmental rules of the nature. China has launched an array of measures to protect farmland, to rehabilitate resource quality and to save water use.

Third, agricultural and livestock research and the technical extension to improve yields should be given more attention. The great achievements of agricultural and livestock production in the past two decades have been accomplished, entirely for the crop sector and substantially for the livestock sector, through an increased productivity. Looking into the future, under increased resource constraints, intensification of production through technical progress and its application will be the only hope for China to meet its food demand for an expanding population with rising consumption aspirations in the long-run. It is urgently needed to increase government investments in research and training substantially, for both the grain (concentrate feed) sector and the livestock sector.

Fourth the development of the feed processing industry is very important to increase the efficiency and productivity of the livestock sector. Shortage of feed resources is a crucial bottleneck for the development of livestock production in China. On the one hand, two thirds of the concentrate feed is still fed directly to animals without processing. On the other hand, large amounts of crop by-products such as straw remain unused or are burnt in the fields. It is not only a loss of potential feed resources, but it also causes environmental pollution. The development of the feed processing industry, including the concentrate feed processing and the treatment of crop by-products and forages for feed, has a high priority in China's development strategy for the livestock sector. A more efficient use will not only stimulate livestock production, but also considerably reduce the pressure placed on the environment in the form of over-grazing and over-cultivation.

Finally, the “commercialization” of the livestock sector in China is inevitable and should be welcomed. A commercialized production system is not only efficient when looked at from an economic or feed production point of view but also from the environmental point of view. From all estimates and projections, the demand for livestock products will see a continuing strong growth in the next three decades and beyond. Commercialization of livestock production in an intensive system may cause some environmental problems for the production sites, but this is a tradeoff for protecting other more fragile land areas. Pollution caused by a commercialized system is a point-pollution problem and is relatively easy to be handled. Technical progress in improving an efficient use of resources will first find application in the commercialized intensive system, and lead to a much higher resource/product conversion ratio. This will lessen the pressure on the resources and environment for the whole country. Without a commercialized livestock sector based on efficient feed uses, the land, water and other natural resources and environmental degradation and deterioration problems will inevitably worsen under the pressing demand requirements.

Looking into the future, there are great challenges for China to meet its rising livestock demand in a sustainable and environmentally benign way. Through further policy reform and institutional innovation, a better management of resources, an enhanced technical research and application, more rationalized production patterns adapted to the advantages of local resource and a closer international cooperation, it will be possible for China to balance the triangular relationship between livestock production, human food need and environment in a successful way

References

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Information Office of the State Council (IOSC), 1996, The Grain issue in China.

Li, W. and Yang, X., 1994, Environment and Development, Science and Technology Literature Publishing House, Beijing.

National Office for Feed Industry (NOFI), 1996, Statistical data of feed industry.

Simpson, James R. et al., 1994, China's livestock and related agriculture: projections to 2025, CAB International, Wallingford, UK.

State Statistical Bureau (SSB), 1981–1996, Statistical yearbook of China.