China Daily - Vital to manage the risks in China's food chain

 

8 September 2015

 

China's agricultural production has undergone historic growth during the past 30 years. The country is the world's largest producer of pork, fruit, vegetables and eggs. It is also the second-largest chicken producer and the third-largest milk producer.


This incredible growth has vastly improved nutritional standards and the quality of life for consumers. But it has not been easy for regulatory bodies to keep up with the changes and challenges facing the industry.

New risks have emerged with intensive livestock operations, industrial food processing, and the widespread availability of chemical additives and pesticides. The fragmented nature of China's agricultural sector poses enormous safety concerns for food companies.

The government is taking steps to improve food safety, including a revised national law. Other measures involve limiting pesticides and chemical fertilizers, increasing supervision and technical assistance, and enhancing regulatory enforcement.

Corporations are increasingly being held responsible for ensuring food safety throughout their entire supply chains.

Since 1980, China's major crop production has tripled but farmland grew by only 10 percent. Growth was partly due to a quadrupling of chemical fertilizer and pesticide use after 1991. China's farmers use more than three times the amount of pesticides and four times the chemical fertilizer per hectare as farmers in Europe and the United States.

Since 1980, pork output increased by 350 percent, chicken meat production grew by 1,200 percent and milk production jumped by 3,000 percent. The use of antibiotics in animal feed also grew substantially.

According to China's most recent agricultural census in 2006, 184 million farms grew crops and their average size was 0.7 hectares. In contrast, the US has 1.6 million farms with an average size of 102 hectares.

With so many small farms, it is difficult to supervise the use of pesticides and fertilizers, and difficult to ensure that crops raised on contaminated soil do not enter the food chain.

China's livestock sector is also highly fragmented. About 52 million farms raised pigs, compared to 56,000 in the US. Most of China's pigs come from farms that produce fewer than 500 per year, while in the US, 90 percent come from farms that annually raise more than 5,000.

China has nearly 24 million farms that raise broilers-chickens raised for meat-compared to 33,000 in the US. Most of China's broilers come from small and medium-sized farms that produce fewer than 50,000 per year. In contrast, 96 percent of US broilers come from farms that produce more than 200,000 per year.

Just 20 years ago, China's meat and dairy production was mainly from small household farms. But recent growth has been fueled by small, medium and large-scale livestock operations. In the long term, large-scale businesses will make supervision easier and help adopt best practices.

In the short term, there is a risk that management and staff do not have adequate training or technical expertise to safely manage large enclosed herds and flocks.

Also, companies with trading, processing, distribution or retail operations must take active responsibility for the safety of their entire supply network, beginning with the primary producers. A high level of interaction with suppliers will help ensure quality.

Of course, there are extra costs associated with ensuring food safety, but leading corporations can not afford to keep their supply chain at arm's length. The following principles will help companies better address safety risks in China's challenging industry landscape.

  • Be familiar with the entire food supply chain through regular on-site visits to farmers, traders, processors and logistics companies.

  • Verify the quality of the agricultural production environment, including potential water and soil contamination, and the proper use of fertilizer, pesticides and growth promoters.

  • Create a "win-win" supplier relationships, starting with clear, detailed specifications and regular performance measurement. Provide training and assistance to ensure implementation of best practices.

  • To prevent economically motivated shortcuts, provide credit or subsidies for raw materials and establish controls to ensure their proper use.

  • Design effective monitoring and verification programs that include testing, audits and unannounced visits.

  • These should be statistically designed to provide optimal quality assurance for both upstream vendors and in-house operations. Risks change along with market conditions.

  • Strive for transparency. This is essential in responding to food safety incidents.


Originally published on China Daily on 8th September, 2015 (link:http://www.chinadaily.com.cn/bizchina/2015-09/08/content_21817049.htm),PwC has been authorised to re-post. 

 

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