Invited papers

The livestock revolution in China

Zhang Cungen

Institute of Agricultural Economics
Chinese Academy of Agricultural sciences
Beijing 100081

Since the 1980s, China has made great progress in the livestock sector and has undertaken what amounts to a livestock revolution, which is to be carried over into the next century. The growth rates of GDP and of the livestock sector have significant positive interrelations. The market of livestock products made in China is mainly located within China and there have been no significant changes between 1996 and 1998 on the impact of import and export of major livestock products on the general economy. This paper reviews the livestock revolution in China, comments on the implications of the recent economic crisis on livestock production, marketing and consumption in China, and provides some policy suggestions that may assist the further development of the livestock revolution in China.

China is one of the largest agricultural and developing countries in the world, with 9.6 million square kilometres and 1.2 billion people. Since the 1980s, China has made great progress in agricultural and livestock development. It is an important fact that China, using 7 percent of all agricultural land in the word, feeds 21 percent of the world population. So it may not be an empty boast to state that a livestock revolution has being undertaken in China.

Review of the livestock revolution in China

General situation

In the past 18 years (1980–1998), China's livestock production just grew and grew. It is estimated that the meat output reached 54.1 million tons in 1998, an increase of 4.2 times over 1980; the egg output reached 22.2 million tons, an increase of 8.6 times; and the milk output reached 8.2 million tons, a six-fold increase.

Table 1 (in annexe) shows that since the early 1990s the growth rate of the population has been well under control. At the same time, the growth rate of meat, egg and fishery products has continued to increase steadily, while that of grain (which, in Chinese statistics, includes cereals, soybeans and tubers), milk and wool output decreased to its lowest level, particularly the grain output, which shrank by 2.1 percent in 1997. The growth rates of meat, egg and fishery products also slowed down in 1998.

In the past 18 years, although the Chinese population increased by 26 percent, per capita output of meat multiplied by a factor of 3.3 (from 13.1 to 43.5kg), that of egg by a factor of 6.9 (from 2.6 to 17.9kg) and that of milk by a factor of 4.8 (from 1.4 to 6.7kg).

Table 2 shows that the present per capita output of meat in China exceeds the world level, while that of eggs has reached the level of developed countries. However, the per capita output of milk is still low: less than 7kg in 1998, which is equal to one-sixth of the average level in developing countries and to less than one-fortieth of the average level in developed countries. So Chinese per capita animal protein supply (about 20g/day) is lower than the average world level (about 25g/day).

Macro policies and development path

For a long time, there had been much pressure in China for increasing food (particularly grain) production in order to meet the needs of a large, fast-growing population. Increasing livestock production could improve food productivity, but it would also increase feed grain consumption. So China faced a strategic choice in developing the livestock industry, which should fully use all kinds of feed resources and improve feed conversion.

The government decided to increase infrastructure investment for the livestock sector while encouraging diversified economic interests to enter that sector. At present, most of the livestock production in the rural areas comes from smallholders, who can fully use local feed resources. Developing livestock production has become a major method to develop the rural economy and make farmers rich in the underdeveloped regions.

In order to solve the “vegetable basket” problems of urban residents - in fact, this includes meat, eggs, milk, vegetables and fruit-, some industrial (large-scale intensive) livestock enterprises have been set up in the suburbs of large and middle-sized cities and in the industrial and mining regions since the 1980s.

And in order to fully use feed resources and improve feed conversion and livestock productivity, China has taken a series of measures, as follows:

1. To develop the feed industry. The output of formula, concentrate and pre-mixed feeds increased from 0.6 million tons in 1978 to 63 million tons in 1997.

2. To establish and perfect livestock breeding systems and technical support service systems. The breeding systems of pig, layer, broiler, dairy and beef cattle have been set up in their major producing areas. There are relevant technical support service systems at the national, provincial, prefecture and county levels.

3. To adjust and optimise the structure of livestock production. The development of ruminants and poultry is given priority. And the Straw-for-Ruminants Programme has been carried out in the whole country since 1992. Progress in adjusting and optimising the structure of meat production, for instance, has been achieved, as shown in Table 3.

4. To formulate a series of laws, regulations and standards on livestock, feed, veterinary and grassland fields.

Development targets for the 21st century

It is forecast that the global population will increase to 7.7 billion in 2020 and that most of the population growth will take place in developing countries. The demand for livestock products will increase tremendously: meat demand is projected to rise from 185 million tons in 1993 to 3 033 million tons in 2020, and milk demand from 413 million tons to 654 million tons. Sixty-five percent of the growth in meat demand world-wide and 60 percent in the case of milk will be in Asia.

It is forecast that the Chinese population will reach its peak of 1.6 billion people by the 2030s. How to feed such a huge population is a daunting task. With the development of the economy and the rise in standards of living in China, the country must further develop its livestock industry and cannot possibly rely on importing large quantities of animal products to feed 1.6 billion people. It is estimated that by the 2030s the output of meat, egg and fishery products needs to double from what it was in 1997 and that of milk to grow fourfold for the level of per capita animal protein supply to reach that of middle-ranking developed countries (45 g/day).

Problems and constraints to further development

China will face the following problems and constraints in developing livestock in the next century:

Feed resources

• Lack of feed grain. The growth rate of the grain output has decreased to its lowest level, while the output of feed grains (particularly maize) is not stable. In normal years China usually exports maize, but imported maize reached 5.18 million tons in 1996 due to a shortfall in domestic production. Over the long term, China may become a major maize importing country.

• Shortage of protein feed. The output of soyabeans has decreased year by year in China. Import of soyabeans reached 1.1, 2.8 and 4.5 million tons respectively in 1996; 1997 and 1998, while that of soyabean meal reached 1.87 and 3.47 million tons respectively in 1996 and 1997. In addition, China needs to import 1.05 million tons of fishmeal.

• Weak base of the feed industry. Some feed additives with high technological content (e.g. methionine, lysine) rely on imported products.

• Serious degradation of the grassland. Particularly the range land in north-western China.

Lower level of livestock productivity

Lower productivity of livestock individuals, labour power and feed conversion, and higher mortality rate of animals.

Environmental pollution

Mainly in some large-scale and intensive livestock sectors.

Weak base of the market and information systems

China has just entered the market economy and has yet to perfect her market and information systems.

Lack of strong macro-control capacity

The legal system for the livestock sector is far from perfect and the administration of the sector by the Ministry of Agriculture does not keep the necessary means for macro-control, some of which (e.g. price, tax revenue, tax rate, credit and subsidy) depend on other ministries or departments.

Current situation of livestock product supply and demand

A huge change

From the 1950s to the early 1980s, the growth rate of the food output was very low; the food supply could not meet the demands of population growth and living standard improvement. The government had to adopt a ration system - certificates for buying grain rations, meat and eggs - which left each person with limited quantities of such essential staples. This was the inevitable outcome of implementing a planned economy.

In the 1980s, China basically solved the grain problem. In the 1990s, the supply-and-demand situation of livestock products changed considerably. Although the growth rate of the grain output decreased to its lowest level during the decade, as mentioned above, that of the meat and egg output continued to increase and reached its highest level. At present, the Chinese livestock product market has gone from shortage to plenty and from a seller's to a buyer's market. Some will say this is the inevitable outcome of developing a market economy.

Although the livestock sector has retained a high growth rate throughout the 1990s, there have been fluctuations in pork and egg production and marketing once every two to three years. Because the production of pork and eggs requires much feed grains (particularly maize), changes in feed grain output affect feed prices and thus the relationship between supply and demand. In addition, 80 percent of the maize output is concentrated in Northeast and North China, whereas South China mainly relies on imported maize from North China or from overseas. The unsteadiness of the feed grain output added to the regional unbalance have led to the above fluctuations.

The changing growth rates of the national economy, the reform of state enterprises, housing and public health systems in urban areas are also important factors in the fluctuation of livestock production and marketing. This means that the supply of major livestock products has slightly exceeded demand in recent years.

China has been preparing to enter the World Trade Organisation. When she does, the development of the Chinese livestock sector will face new challenges and opportunities. Accession to WTO will have considerable impact on the import and export of livestock products.

Analysis of the factors affecting livestock product supply and demand

There are many factors affecting livestock product supply and demand in China, some of which are difficult to analyse due to insufficient background information. Some researchers believe that the recent Asian economic crisis has had some direct implications on Chinese economic development but none on China's livestock sector. If this is the case, we need only be concerned about the implications on the import and export of livestock products.

Two questions need to be asked: What are the implications of the national economic development on the livestock sector? And what are the implications of the recent economic crisis on the trade in livestock products?

The relationship between the growth rates of GDP and of the livestock sector
The Chinese economy grew at a high rate in the 1990–1994 period. Table 4 shows that the growth rate of GDP reached its highest level (12.66 percent) in 1994 and then began to decrease (10.5 percent in 1995) and continually down to 7.8 percent in 1998. At the same time, the growth rate of the livestock output value (LOV) reached its highest level (16.71%) in 1994 and then began to decrease to 14.8 percent in 1995 and continually down to 5.0 percent in 1998. The downward trend was the same in both cases. Yet, GDP growth rates were lower than those of LOV in 1994–1996, then higher in 1997 and 1998. This probably resulted from the reform of state enterprises and of the housing and public health systems in urban areas, which started in 1997.

Table 4 also shows that LOV growth rates were higher than those of the gross agriculture output value in 1997 and 1998, and that the proportion of LOV in the latter slightly increased, reflecting the growing importance of the livestock sector in agriculture.

The relationship between the Asian economic crisis and the import and export of livestock products The import and export of major livestock products in 1996–1998 are shown in Table 5. The market of Chinese livestock products is mainly located within China and there has been no significant impact of the recent economic crisis on the import and export of major livestock products in 1997 and 1998 compared to 1996.

Policy suggestions

Strengthening macro control over the livestock sector

Macro control is an instrument of government. Macro control over the livestock sector means that the central administration undertakes to control the disposition of livestock resources, the amount and structure of livestock product output, market and consumption in order to balance and safeguard the interests of producers, traders and consumers through the formulation and implementation of policies, laws and regulations and the adoption of means of control over investment, credit, price, tax and subsidy.

First, it is necessary to complete the laws and regulations relevant to the livestock sector and to continue to strictly implement those that exist.

Second, it is necessary to accelerate the reform of the government administration and to unify the management of the livestock sector. The central government should give the administrative department of the livestock sector (e.g. the Ministry of Agriculture) needed macro control means.

Third, it is necessary to further adjust and optimise the structure of livestock production and to support the development of the dairy and broiler industries. The percentage of pork output to total meat output will drop to 50 percent in the early 21^st century.

Enhancing the livestock product market and information system

A complete livestock product market and information system is essential to the exchange of livestock production means and products. A complete livestock product information system is also essential to macro control by the government.

It is necessary to set up diversified special livestock product markets, step by step, in the major producing regions and in some suburbs of large cities. At the same time, an agricultural and livestock product information system connecting livestock and feed enterprises and special product markets should be completed. The Ministry of Agriculture should become the centre of such an information system.

Developing feed industry, improving feed conversion and reducing production costs

To fully use feed resources and improve feed conversion and livestock productivity, it is necessary to continue to develop the feed industry, particularly the feed concentrates and pre-mixed feeds most smallholders need.

Extending formula feed, improving feed conversion and cutting down mortality rates are major means of reducing production costs.

Accelerating the course of livestock agribusiness and reducing livestock risk

It is necessary to develop diversified livestock agribusiness groups or integrated bodies, through which producers (particularly a large number of decentralised smallholders) and traders will combine to form profit-oriented communities. This can help reduce the middle links of commodity circulation as well as marketing costs, strengthen the capacity against risk and improve the comparative advantages of the livestock sector.

Improving product quality and enhancing the competitive capacity of exports

It is necessary to stabilise the existing base for livestock product export and try the utmost to improve product quality in accordance with product demand and the standards of the international market. Since China is prepared to join the WTO, she should enhance the competitive capacity of livestock products in the international market.

References

Greenfield, JN. 1998. Implications of the Asian financial crisis on the agricultural product market (in Chinese). In Chinese Rural Economy, No12, pp72–75

ILRI (International Livestock Research Institute). 1999. The external environment: implications for ILRI's systems research (a lecture)

Jia, Y. 1999. Constraints to Chinese Livestock Development and its Macro-control. Chinese Rural Economy, No1, pp40–45

Li, W et al. 1998. Implications of the Asian financial crisis on the Chinese agricultural product trade. Chinese Rural Economy, No4, pp26–40

Zhang, C. 1998. Current Situation of the Chinese livestock and aquaculture and their development prospects in the 21^st century. Guide To Chinese Poultry, Vol15, No5, pp3–4 and No6, pp3–5

Zhang, C et al. 1998. Beef market analysis in China. A report contributed to the World Bank's China smallholder beef cattle development project

Zhang, C et al. 1998. Proper recognition and Introduction to livestock agribusiness. China Animal Husbandry Bulletin, No 6, p6

Zhang, C. 1996. Strengthen the government's macro-control capacities over the livestock sector. China Animal Husbandry Bulletin, No1, p24

Table 1. Population and main agricultural product output in China 1980–1998

[  ] Estimated figures
* Average annual growth rate during the previous 5 years
** Annual growth rate in comparison with the preceding year

Table 2. Per capita output of main animal products in China and in the world 1980–1998

[  ] Estimated figures
* Only wool output
Sources: China Statistical Yearbook 1997 & 1998, Production Yearbook 1992 & 1997, FAO

Table 3. Changes in meat structure in China (1980–1997) Unit: thousand tons

[  ] Estimated figure -
Source: China Statistical Yearbook 1997 & 1998

Table 4. Growth rate of GDP and livestock sector 1994–1998

* Calculated at current prices -
** Calculated at comparable prices
Sources: China Statistical Yearbook 1997 & 1998, A Statistical Survey of China 1999

Table 5. Import and export of main livestock products 1996–1998

* Calculated at carcass weight -
** Calculated at fresh weight
[  ] Estimated figure
Source: China Customs Statistics 1997, 1997 & 1998

The livestock sector in India: a country report with special emphasis on trade with Southeast Asian economies

A Ravishankar & Pratap S Birthal

National Centre for Agricultural Economics and Policy Research
New Delhi-12

Along with crop husbandry, livestock has been an integral part of the Indian lifestyle since time out of mind. Meshed as it is in the religious, social and cultural ethos of the people, its importance transcends economics. Besides complementing agriculture, animal husbandry has often provided succour and a sense of security (read: insurance) to farmers. The livestock sector plays a crucial role in the welfare of India's rural population. It contributes nine percent to GDP and employs eight percent of the labour force. Research establishes that the distribution of livestock wealth is more egalitarian than that of land. Hence, from the equity and livelihood perspective, it is an important component in poverty alleviation. In the recent past, the livestock sector has recorded growth of more than five percent every year. Its share in agricultural GDP has risen from 17 percent in 1980–81 to 26 percent in 1996–97. This sector has expanded considerably with the onset of economic liberalisation in the early 1990s. Rising levels of income have fuelled the demand for livestock products. The demand for livestock products in the country is highly income elastic.

There are however constraints that hinder the realisation of the full potential of the sector. Livestock is raised under extensive systems of production and is characterised by small herds and low levels of productivity. The feed-fodder deficit is a chronic feature and common property resources are under severe pressure. The livestock population continues to be dominated by low-yielding indigenous species. Taboos pre-empt the business potential of the meat-processing sector. Low research investment and cow-worshipping have hampered the balanced growth of the livestock sector.

India's livestock has immense potential, though. This paper takes stock of the livestock economy in a holistic manner. A separate section deals with the Southeast Asian crisis and its impact on the trade in livestock products.

Population dynamics

Structure

Among the different livestock species, cattle dominate by sheer numbers (Table 1). Over time (1945–87), the percentage increase in the buffalo population (87%) is almost double that of cattle (44%). There is also a distinct shift in the priorities of the farm sector - from work animals to milch animals. This is reflected in the increase in the female-to-male ratio from 0.45 to 0.50 between 1977 and 1982. Crossbreeding affects only about 10 percent of the total cattle population, and there too there has been an increase in the number of females.

Besides cattle, goats, buffaloes and sheep are the other main components. All of them recorded high growth in the 1977–82 period, especially goats. The number of camels, which had been going down between 1987 and 1992, has started to rise again. Between 1982 and 1987, a deceleration in the population of sheep, horses & ponies, camels and donkeys was observed. Since 1987, the trend reversed with positive growth rates.

Table 1. Structure and growth in livestock population, 1972–1992

Source: Livestock Census (various issues), Directorate of Economics and Statistics, Ministry of Agriculture
Note: The overall growth rate (1972–92) is highest for mules (4.45), poultry (3.86), pigs (2.98), goat (2.58), buffalo (1.8), sheep (1.14) and cattle (0.65). Camels, donkeys, horses and ponies recorded deceleration in their numbers.

Production system

Livestock production systems are characterised by low input and low productivity. Excluding the poultry and dairy industries, by and large the system of production is extensive. The average herd size per farm is 3.7 head of cattle and buffalo. More than half of the bovines are raised on small and marginal holdings. Only five percent are raised on farms larger than 10 ha. Concerning milk production, there is a distinct shift from indigenous cattle to buffalo and crossbred cattle. There has been a significant increase in the female buffalo and crossbred cow populations.

Production of small ruminants is either nomadic (30 percent) or sedentary (70 percent). The nomadic system has grown in importance in the past ten to fifteen years. The herd size is also relatively higher, with 40 sheep and 20 goats. In the sedentary system, the average herd size is only 1.5 sheep per household. Available data show that there is a direct relationship between herd size and landholding.

The poultry sub-sector is a mixture of intensive and traditional production systems. The intensive system is rapidly gaining in importance. About 60 percent of poultry meat and 56 percent of eggs are produced under this system.

Equity aspects

The distribution pattern of land and livestock wealth reveals the extent of equity or inequity. In Table 2, by comparing data at two points in time, equity implications can be drawn. The pattern of landholding reveals the predominance of a large number of smallholdings. Almost half of all households in the country possess less than one hectare of land. In contrast, about 15 percent of the households own half of the total cultivated area. Livestock wealth is more equitably distributed than land. Peasants with less than one hectare of land own different livestock species accounting for more than 30 percent of the total livestock population. Excluding the landless category, there is an inverse relationship between land and livestock holdings. This trend has only strengthened with the passage of time.

Table 2. Distribution of land and livestock holdings, 1981–82 and 1991–92

Source: Report on Land and Livestock Holdings, 1992, National Sample Survey Organisation

Another way of looking at the distributive aspect is on a unit basis (Table 3). In some 48 percent of the households, the average size of holding is 0.35 ha.

Table 3. Distribution of land and livestock holdings, 1981–82 and 1991–92

Source: Report on Land and Livestock Holdings, 1992, National Sample Survey Organisation

As against 1981–82, the number of cattle per household had hardly changed in 1991–92. In contrast, the number of buffaloes per household increased in direct proportion to the size of the landholding. The same trend holds for small ruminants, which puts paid to the myth that they are the poor man's cow. The distribution of pigs across different land categories is more or less the same. Poultry is concentrated in the medium category, i.e. between one and four hectares.

Output trends and productivity

The annual compound growth rates in the output of various livestock products are given in Table 4 at different points in time. Considering the overall period (1981–1995), growth has been most impressive in beef and veal production. This is followed by buffalo meat, pig meat, poultry meat, egg, milk, goat meat and mutton and lamb. Perhaps the slow growth in mutton is responsible for its rather high prices.

Table 4. Growth rate in the output of livestock products

The year 1988–1989 was a watershed as far as meat production is concerned, in particular for beef and veal, buffalo meat and pig meat. There are two reasons for this: the 1987 drought, which led to increased slaughtering of animals in the following years, and the promotion of exports. There was a sudden increase in the export of buffalo meat in the late 1980s. Since then, the upward trend has persisted, though limited in the case of mutton, whose production is growing only slowly. There is also an improvement in the growth of poultry meat production.

Table 5. Production of livestock products, 1980–1992

Source: Department of Animal Husbandry and Dairying. 1995

Milk and meat are the two major livestock products. Production of milk almost doubled between 1980 and 1992 (Table 5). Output of cow milk increased by 128 percent, of buffalo milk by 68 percent. The two account for 48 percent each of the total milk output. Beef & veal and buffalo meat account for 63 percent of the total meat output. Over time, the most impressive increase was in poultry meat, which more than doubled.

Egg production is also impressive and has more than doubled over time. This is largely due to the improved hybrid layers, which account for 56 percent of the total layer population.

Milk is by far the most important of all livestock products in India. Output growth is largely driven by gains in productivity in the case of cows. This is most noticeable for the 1982–1987 period (Table 6). Thereafter, their relative share in terms of numbers has increased.

Table 6. Sources of growth in output of livestock 1972–1992 (%)

Though the relative contribution of yield is higher than that of the population, between 1982 and 1987 there was a sharp decline in the share of productivity to overall production. Therefore, there is plenty of room for improving productivity in buffalo milk.

Macroeconomic indicators

From Table 7 it is apparent that while the contribution of agriculture to GDP is declining (from 34 percent in 1980–81 to 26 percent in 1995–96), that of the livestock sector is growing: it increased from R697 million (5.7%) in 1980–81 to R1 553 million (6.06%) in 1995–96. This is true also for the contribution of livestock to agricultural GDP.

Table 7. Share of livestock in GDP and agricultural GDP at 1980–81 prices

Source: National Accounts Statistics, CSO, Department of Statistics, GOI.
Note: TE: triennium ending average.
Ag GDP also includes GDP from livestock

Composition of the value of livestock output at constant prices

Over the past fifteen years, the total value of livestock products has almost doubled in real terms. Milk and milk products are the largest commodity, with a 65-percent share of the total value (Table 8). This share has remained more or less constant for the past twenty years. The shares of all other products are in single digits. Meat and meat products, egg and poultry meat, and dung are the other significant contributors.

Table 8. Composition of value of livestock output at 1980–81 prices (billion rupees) (%)

Source: National Accounts Statistics, CSO, Department of Statistics

Input constraints: the case of feed-fodder

Composition

More than 65 percent of the feed consumed in India consists in green and dry fodder. Only in the intensive system of production are grains and concentrates used. Common property resources are the predominant sources of green and dry fodder. In the past twenty-five years or so, they have been under severe pressure for many reasons, notably the lack of clear property rights, agricultural intensification and overgrazing.

Feed-fodder deficit

The feed-fodder deficit in coming years will be the key constraint faced by the livestock sector (Table 9).

Table 9. Availability and requirement of feed and fodder in India, 1993 (million tonnes)

Source: Report of the Policy Advisory Group on Integrated Grazing Policy, Ministry of Environment and Forests, 1993

The availability of concentrates and dry and green fodder will suffer from supply-side constraints. The deficit is huge and poses a serious challenge in supply-demand management, requiring technological improvements (read: crop improvement) or a significant diversion of inferior grains to feed animals. If the former option is a distinct possibility, the latter seems unlikely in the Indian context.

Consumption of livestock products

The household expenditure on livestock products has increased over time and among rural and urban consumers (Table 10), and so has the latter's share for various products. Between 1982 and 1993, the expenditure on livestock products grew from 21 to 24 percent of the total expenditure on food in urban India. Milk and milk products accounted for 75 percent of total expenditure on livestock products, the remaining 25 percent going to meat, eggs and fish.

Table 10. Share of livestock products in total food consumption expenditure (%)

Source: National Sample Survey Organisation, Department of Statistics, 1995

The Southeast Asian crisis and its impact on Indian livestock exports

It all started in the early 1990s, when most Asian governments opened their economies to foreign capital. Global banks and portfolio investors flooded in. In 1995, the appreciation of the dollar coupled with the depreciation of the yen led to an erosion of export competitiveness in those economies whose currencies were pegged to the dollar. This led to huge current account deficits in Thailand and Malaysia. One crisis led to another, in a chain reaction spreading across the Southeast Asian economies.

The underlying cause appears to be poor investment and lending decisions by overseas firms, which failed to exercise caution while investing or lending. As a result, there was an enormous outflow of capital when the crisis occurred. Three Southeast Asian countries were particularly affected, namely Thailand, Malaysia and Indonesia.

India, on the other hand, was largely unaffected by the crisis. GDP growth year on year remains in excess of five percent. The rupee is stable and strong. In fact, at times it appreciates against the dollar. Growth in exports diminished, due to reasons beyond the crisis.

There has been some impact of the crisis on the trade with Southeast Asia. The region accounts roughly for 15 percent of India's exports (see Table 11 in annex). This share has increased from 11.76 percent (R 51 798 million in 1991–92) to 16.63 percent (R 197 584 million in 1996–97), but in 1997–98 has declined to 14.8 percent (R 187 069 million). Agriculture and allied products account for 26 percent of total exports to the region (see Table 12 in annex) and their share has fluctuated from 14 percent in 1991–92 to 21 percent in 1996–97 and to 15.7 percent in 1997–98, clearly as a result of the crisis.

Meat and meat preparations account for only 10 percent of total agricultural and allied exports to Southeast Asia, whose share in total exports grew from 46 percent in 1991–92 to 50 percent in 1996–97 (see Table 13 in annex). In 1997–98, this declined to 48.5 percent. One can therefore infer that there is almost no impact of the crisis on the export of Indian meat and meat preparation. Malaysia is the largest importer of buffalo meat from India, accounting for almost 45 percent of total Indian exports of such meat and for more than 60 percent of exports of Southeast Asia. The Philippines are the next most important destination, accounting for 37 percent of total buffalo meat exports to the region.

Poultry and dairy products and leather and leather goods account for only five percent of Indian exports to the region. The share of poultry and dairy products has declined over time (see Table 14 in annex) from 9 percent in 1993–94 to 3 percent in 1996–97. There was a partial recovery in 1997–98, to 5.62 percent. The export of leather and leather goods has hovered around the 5-percent mark (see Table 15 in annex). In 1997–98, there was a marginal decline to 4.8 percent, from 5.5 percent in the previous year.

Policy issues and implications

Future source of growth: numbers or productivity?

With a production of 74 million tonnes in 1998–99, India is the largest producer of milk. Operation Flood, started in the early 1990s, provided a stimulus to milk production, which has never looked back since then. The steady growth registered is due to both improvements in productivity and a shift in priority toward buffalo and crossbred cattle. Yet, the productivity is low compared to the world average (Table 16). Meat output has grown tremendously since the 1980s, due to an increase in the number of animals slaughtered. The productivity of most meat-producing species is low and shows no sign of growing. And so it is with the production of eggs. With the exception of milk, the other products are lagging behind in productivity. This has several implications. First, the demand for livestock products is income-elastic and rising continuously. Over the next two decades, demand for livestock products is likely to grow faster. Domestic supply will satisfy demand for meat and eggs if current trends in production growth are sustained. The real price of most commodities is expected to increase by more than five percent.

Table 16: Yield levels and growth in livestock output

* Average for cattle
Source: FAO Production Yearbook & Basic Statistics (Department of Animal Husbandry)

In particular, the relative price of meat is anticipated to increase faster than it has so far. The third and most obvious impact of growing numbers will be on the environment, due to increasing pressure on common property resources and to the widening gap between feed-fodder availability and demand. Also, the negative impact of slaughterhouses on human health and the environment needs to be addressed.

Issues of concern

There are many areas of concern that constrain the realisation of the full potential of this sector. The structure of the animal population is one such issue. Despite significant advances in livestock breeding, the population structure continues to be dominated by local breeds. According to the 1992 livestock census, crossbred animals accounted for only 7.5, 4.8 and 14.5 percent of the cattle, sheep and pig populations respectively (Table 17). Improved breeds represented only one third of the poultry population.

Table 17. Species-wide percentage of crossbred in total animal population, 1992

The second issue is about the organisation of the production system. The system of production is extensive in nature, although some technological dualism persists (Table 17). The dairy system in and around the urban areas is based on improved breeds and intensive input use, whereas the rural system of production is characterised by low input and low technology. Technological change and commercialisation will probably further enlarge this divide. Meat production is constrained by the lack of productivity-boosting technologies and by social and religious taboos. Breeding efforts are yet to capitalise on the genetic stock of the indigenous breeds. The yawning gap between the existing slaughter rates and the potential off-take for certain species deserves urgent attention. Premature slaughtering of animals for meat is a national waste. A case in point is that of goats and buffaloes. Improvements in poultry breeds must concentrate on increasing feed efficiency and tropical adaptation. Non-compliance with phyto-sanitary and quality standards in the export of livestock products is another grey area. Ineffective quarantine dispositions lead to the importation of contaminated biological agents and infected livestock species.

Budgetary allocations for animal husbandry and dairy processing

The budgetary support of animal husbandry and dairy processing by the government has increased fourfold, from R1 329.9 million in 1980–81 to R4 047.3 million in 1996–97. While the share of animal husbandry-related activities is increasing progressively, that of dairy processing is on the decline (Table 18).

Two important implications emerge from such shifts in investment behaviour by the government. First, the livestock sector has attracted greater attention from successive governments in the form of increase outlays. Second, after self-sufficiency (and even surpluses) was achieved in milk production, the government has sought to shift the attention to other sub-sectors. This is evident from the fact that investment in animal husbandry activities has recorded a six-fold jump.

Table 18. Expenditure on animal husbandry and dairy processing, 1980–97 (10 million rupees)

Source: Basic Statistics, Department of Animal Husbandry, Ministry of Agriculture

Blueprint for future research

The reorientation of research priorities is the need of the hour. In the past, research efforts have centred on cattle. This has yielded some results, but at the cost of other promising livestock species like buffaloes, sheep and goats. Henceforth, livestock research needs to go by certain essential technical parameters. Regarding cattle, the emphasis must be on the ecological adaptability and disease resistance of crossbred species. Buffaloes hold the promise of raising milk production. Their feed-conversion efficiency is remarkable and a breakthrough in buffalo breeding will provide a big push to the livestock economy. Small-ruminant meat production is likely to come under pressure unless there is a breakthrough in the genetics of sheep and goat. The genetic evaluation of 75–80 percent of the goats has yet to be attempted. Therefore, buffalo and small ruminants deserve a greater share in research resources. Research focussing on heat stress in various agro-ecological regions warrants priority. Simultaneously, crop improvement efforts must focus on the forage quality aspects. A farming system perspective needs to be adopted. Research must be client-oriented. The future research agenda should explicitly focus on these issues.

Policy initiatives

Until the 1990s the policy thrust in this sector was rather moderate. In 1991, the dairy sector was delicensed in order to attract private investment and new technology. The policy remains restrictive in the sense that the new entrants are required to develop new milk sheds. Restricting the processing of milk into high-value products during the lean season of production also acts as a disincentive for private investment (Box 1).

Box 1. Reforms: conflicting signals

The co-operative sector is a major player in the organised marketing of milk and milk products. De-licensing of dairy processing in 1991 resulted in a weakening of the co-operative sector, due to the flow of new entrants. To solve this problem, the Milk and Milk Products Order was promulgated in 1992. The order is an example of the policy dilemma the government faces. Promoting viable and vibrant co-operatives is a national priority, yet the blanket protection of the entire sector may encourage inefficiency. There is room for reconsidering the order and making it more flexible.

Such restrictions curb competition and market efficiency, which are essential for stimulating investment in productivity-enhancing technologies at both macro and micro levels. The onset of economic reforms helped boost the export of livestock products. Exports of buffalo meat have recorded substantial increases in recent years mainly through price competitiveness (Box 2). The scope for the export of sheep, goat and poultry meat is constrained by high domestic demand and prices.

Box 2. WTO: latent opportunities

On the export front, India has a competitive advantage in the world market for many livestock products. However, its share in world trade remains lean. The export of dairy products in the past has been hindered by high domestic demand and by lack of competitiveness in the world market. As, by the year 2000, World Trade Organisation member states have to reduce export subsidies and export volumes by 36 and 21 percent respectively, India's exports of dairy products are likely to expand thanks to price competitiveness.

Health, nutrition and extension support merit special consideration in the technological transformation of the livestock sector. The current extension system is largely crop-oriented. Based on a SWOT analysis of the extension system for crop production, a flexible system for livestock should be evolved. This may involve many actors, namely the government, private processing industries and non-governmental organisations. In the area of health, the smaller animals need greater attention, and so does an appropriate institutional framework. Technological change must be accompanied by policies aimed at population optimisation and enhanced feed-fodder supply. In rural areas the potential benefits of technological change are likely to be greater for medium-sized and large farmers due to skewed distribution of land, a crucial determinant of the size of livestock holdings. Strong measures in the form of institutional arrangements and policy intervention would be needed to counter these tendencies.

Box 3. Wish-list of the private sector

The following interventions would provide stimulus to private-sector participation in the production and processing of livestock products: easing import restrictions on feed like corn, particularly for the traders; compulsory backward integration of slaughterhouses, particularly for male buffalo calves; provision of a decent marketing infrastructure, mainly a network of cold-storage facilities; incentives for the mechanisation of slaughterhouses; effective disease surveillance mechanisms and establishment of disease-free zones for export marketing; establishment of standards and grades for livestock products; better interface between public sector and private sector; access to cheap institutional credit; reduction of the import duty for feed additives; and promotion of stall-feeding for small ruminants.

The private sector is playing a proactive role in the marketing of livestock products. It has a vital role in strengthening forward linkages and value-addition, particularly in areas that have remained neglected. There are, however, some constraints that hinder its entry. The much-needed interface between public and private sectors is sadly missing. Increasingly, in the years to come, initiatives will be led by the private sector (Box 3). The government must restrict its role to providing policy impetus, infrastructure and monitoring. The National Livestock Policy Perspective document details the policy changes required for the livestock sector in the future. Certain issues can strengthen this effort. Explicit focus should be placed on agro-climatic and location-specific breeding, the tightening of quarantine dispositions, increased research investment, measures to stop or reduce the degradation of common property resources, conservation of animal germ plasm, processing and market intelligence.

REFERENCES

Centre for Monitoring Indian Economy. Economic Intelligence Service, Foreign Trade, Aug 1998. Mumbai, India

Dhanmanjiri Sathe. 1998. Asian Currency Crisis and the Indian Economy, Economic and Political Weekly, VolXXXIII, No18, pp1003–1005, 2 May

FAO. 1996. Production Yearbook Vol50, Rome

GOI (Government of India). 1997. Basic Animal Husbandry Statistics, Ministry of Agriculture, New Delhi

GOI. 1994. Report of the Technical Committee of Direction for the Improvement of Animal Husbandry and Dairy Processing Statistics, Ministry of Agriculture, New Delhi

GOI. 1996. National Livestock Policy Perspective: Report of The Steering Group, Ministry of Agriculture, New Delhi

GOI. National Sample Survey Organisation, various issues, Department of Statistics, New Delhi

Pratap S Birthal, Anjani Kumar, Ravishankar A & Pandey. 1999. UK, Sources of Growth in the Livestock Sector, Policy Paper No9, NCAP, New Delhi

Ravishankar A & Pratap S Birthal. 1999. Livestock Sector in India: Agenda for the Future, Policy Brief No7, NCAP, New Delhi

The Economist. Various issues. London

World Bank. 1996. India's Livestock Sector Review: Enhancing Growth and Development, Washington DC

Table 11. Value and share of Southeast Asian countries in India's total exports, 1991–1998 (`00 000 rupees)

Source: CMIE, Foreign Trade, Aug 1998

Table 12. Value and share of Southeast Asian countries in India's export of agricultural and allied products, 1991–1998 ('00 000 rupees)

Source: CMIE, Foreign Trade, Aug 1998

Table 13. Value and share of Southeast Asian countries in India's export of meat and meat preparations, 1991–1998 ('00 000 rupees)

Source: CMIE, Foreign Trade, Aug 1998

Table 14. Value and share of Southeast Asian countries in India's export of poultry and dairy products, 1991–1998 ('00 000 rupees)

Source: CMIE, Foreign Trade, Aug 1998

Table 15. Value and share of Southeast Asian countries in India's export of leather and leather goods, 1991–1998 ('00 000 rupees)

Source: CMIE, Foreign Trade, Aug 1998