In Depth: China’s Small Pig Farmers Stuck in Financing Mire After Swine Fever
By Wu Yujian, Peng Qinqin and Denise Jia, Caixin (China)
Nov 27, 2019
Chen Lie (not his real name), a pig farmer in eastern Shandong province, has been struggling since June. The crushing blow was not losing his hog herd last year in the African swine fever epidemic but the financing woes in the recovery process afterward.
After 20 years in the business, Chen had 350 breeding pigs until August 2018. They could produce more than 7,000 piglets a year, making him one of the top five pig farmers in Linshu county. If not for the swine fever, he could have made a profit of 2,000 yuan to 2,500 yuan ($284-$355) a head.
Smaller, family-based pig farmers like Chen have always been the mainstay of China’s hog industry, accounting for more than half of country’s total annual production of almost 700 million pigs. But the African swine fever left them suffering the most and struggling to recover because of insufficient government subsidies, unreliable insurance and ruthless banks.
In September last year when Chen found that some of his pigs were infected, he sold some surviving animals at a discount and requested government subsidies for those that died. But he was told they were not killed by the deadly viral disease and instead by another common infectious disease, so he was not eligible for the subsidies.
His next resort was to file an insurance claim. He bought the most common livestock insurance, which, in theory, would provide as much as 1,200 yuan ($170) of coverage for a breeding pig and 600 yuan for a finishing pig. To encourage pig farmers to buy coverage, insurers promised reimbursement of no less than twice the premium they pay.
Chen eventually collected only a little more than 40,000 yuan from the insurance company for his 1,400 dead pigs, while he paid 37,000 yuan of premiums. Even the lower finishing-pig rate of 600 yuan, compensation for that many animals could work out to 840,000 yuan.
Chen took out a 350,000 yuan short-term loan from a state-owned bank in May to restart his herd. A month later, when he needed to renew the loan, he was told he had to repay it in full and take out a new one. He tapped usury lending to repay the bank, but then the bank refused to extend a new loan, citing excessive risks in pig farming. Now he faces lawsuits from rural banks and debt collections from usury lenders and feed suppliers.
Chen’s financial mire isn’t unusual for pig farmers. Six of the top 10 pig farmers in Linshu county have been listed as debt defaulters, according to Chen.
Insurers not enthusiastic ...
Under-reporting by local governments ...
Industry to be dominated by big players ...
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