Chinese CAFO's...  

As despised and frankly unappealing as CAFO"s are, they still are the best current method to produce a lot of pork. In a country where it may be easier to slide around environmental restrictions, they would be a real protein efficiency boost.

And that's what China seems to be doing.

In the long run, China’s move from backyard pigpens to huge industrial farms like Jiahua Pig Breeding, which benefit from economies of scale and more stable production plans, could help calm volatile boom-bust pork cycles and bring inflation more under control.

“The faster the trend to scale up and the faster that backyard breeding is phased out, the more volatility will be dampened,” Hua Jianqing, Jiahua’s president and principle investor, said from his headquarters in rural Zhejiang, south of Shanghai.

“It won’t be a year or two,” he said. “My analysis is that it will take three to five years to reach the balancing point.”

Jiahua keeps 5,000 breeding sows at a time and raises 100,000 pigs a year.

Squirming and oinking, young sows are lined up daily for buyers peering through a glass window. Those that are picked can be shipped hundreds of kilometers to help seed yet another huge farm. Large-scale operations with about 3,000 pigs each now account for about 20 percent of China’s herd, but huge, American-style farms of Jiahua’s size account for only about 2 percent.

The record-high margins last summer created a classic boom in investment in pigs, but now a drought in the United States is pushing up the price of grain used for feed, prompting owners of small farms to slaughter their animals and setting the stage for a possible supply shortage in months to come.

Small farms still produce enough hogs — about one-third of the national herd — that their decisions to buy more piglets or sit out a season can have a big influence on prices.

“If fewer choose to raise, in the third quarter of 2013 we see a shortage of pork and a run-up in prices,” said Andy Rothman, China strategist for the brokerage firm CLSA in Shanghai. [More]

It also suggests their appetite for corn will be a little more resilient to high prices, just as our big operators have proven to be remarkably tough during this current runup in prices.