June 17, 2008

Losses of pig farmers in Sichuan may prompt industry consolidation

Post-earthquake losses of pig farmers in China's Sichuan province may lead to consolidation in the industry, with bigger companies leading the pack.

Liu Yigui, the director of Mianyang's animal husbandry bureau, said the earthquake may lead to a change in the sector's structure, from dominance by individual farmers to a prevalence of corporate pig breeders.

Mianyang, the second largest city in Sichuan province, is a major pig breeding centre for more than two decades now. As one of the worst-hit areas in the quake, its farmers lost 1.2 million of their 6.3 million hogs on May 12.

Sichuan authorities said many sows might fail to mate or might miscarry because of the quake, leading to an estimated drop of nearly 10 million pigs produced by Sichuan or a 10-percent drop from last year's total.

Individual pig breeders will have to look for enough funds to rebuild pigsties and buy piglets.

Post-earthquake reconstruction will be a much more important source of inflation compared with physical destruction of assets because it will boost fixed-asset investment, said Deutsche Bank greater China chief economist Ma Jun.

Ma forecast that the China's post-earthquake spending would exceed RMB500 billion (US$72.5 billion).

The peak spending period for the next three years would be from the fourth quarter of this year to the second quarter of next year, Ma added.