Episode 18

Understanding the USA-China Connection for the future of the global swine industry

In this episode, we will visit with doctoral candidate Edward Yang, formerly a pig producer from China, on the opportunities within the global swine industry from the USA to China. Edward will also discuss what he has learned in his business minor and how it applies to make producers profitable and sustainable. Edward is an upcoming leader in our industry and has the ability to bring the global swine industry into perspective from both the USA and China perspectives.

Hello, there, this is Dr. Casey Bradley, and you’re listening to the Real P3 podcast: a podcast dedicated to the real pork producers around the world.  I hope you enjoy.

Hi, everyone.  We’re going to be visiting with Edward Yang from the University of Minnesota.  Edward is originally from China, he grew up in the swine industry, and he has a unique perspective of understanding the US-China relationship and what he feels is the future of the swine industry from a global perspective. So, I hope you enjoy.

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[00:42]

Casey: Hello, Edward, how are you doing today?

Edward: Good, I’m doing great.  How are you, Casey?

Casey: Good. Would you mind telling our audience a little about yourself?

Edward: Yeah, sure. My name is Chou hu Yung, I go by Edward. I was born and raised in Southern China.  I was actually born at the farm.  My parents were working at a University farm when I was born.  My father was a University professor and he worked in different roles in the feed and pork industry in China; that got me into the pork industry.  We had a 500-sow farrow-to-finish operation, so I helped him a lot on the farm.  When I was 18, I decided to take a challenge and come to the US to do my higher education.  I went to the University of Wisconsin thinking I’m going to be a dairy scientist, but Dr. Tom Crenshaw convinced me that pigs are more fun than dairy, so I decided to go with pigs.  When I finished my undergrad, I see the light in Minnesota and Dr. Jerry and Pedro Oriola recruited me here, and so I did my masters here, and now I’m continuing on my PhD; this is my third year on PhD.  So yeah, that’s my journey.

Casey: Awesome.  But I’ve also heard from you that you’re not just getting a PhD in Swine Nutrition but you’re also working on a business degree as well. Kinda explain why you’re looking at a [2:00] dual degree.

Edward: Exactly.  That’s kind of a challenge for me.  It’s another thing I want to do to get comfortable with the uncomfortable.  I never imagined myself being in a business school before, because I’m don’t think I’m that kind of person. When I heard one webinar, the guest talked about how people in the pork industry are so focused on the nutrition side or genetic or whatever side they’re doing, but not necessarily narrowing the gap between research and application and bringing that to the customers, and that hit me hard.  I thought, somebody needs to do this. And another guest speaker in seminars said students need to gain more business skills, so I told my adviser I want to get a minor in business management, and he supported me. So, I went to the business school and took a couple strategy, marketing, [03:00] management and leadership classes, and that benefitted me a lot.

Casey: Well, with your business degree so far and your classes and looking back and even on your parents’ operation, kind of walk us through what your farm looked like in China, is it still operational today, and then maybe some of the things business-wise that may have made sense to keep it in operation.

Edwards: So, we sold the farm I think the 2nd year I came to the US, because the pork market was so bad at that time, and we could not afford to keep everything.  That farm was kind of a old farm, it was in the south of Guang-dong province.  Heat stress is always a problem, we had a concrete floor, we didn’t have a lot of equipment to keep the pigs cool, and my dad didn’t really have a lot of experience in pig farming. So, we did that for 5 years or so, but we didn’t keep it for a long time.  Thinking about it now, you really do need to understand the pork business before you get a farm. I would say marketing is also a very important thing.  Here, marketing a pig is a huge deal.  In China, the brokers come in and pick a pig and you don’t have a lot of saying power.  That’s one of the things I thought of bringing back to China is when the pork industry matures a little bit more then the marketing of pigs’ side can be introduced.  From the bigger picture in US and China, a lot of people need to understand we are not only caring for the pig, we’re marketing the pork.  We have to understand the customers.  We are really good pig-caretakers, but we are not that good at the business side.  People in the pork business should pay more attention to the business. [5:00] Especially with the challenges of fake meat and stuff, we need to fight as a whole and see what strategies we can put together to gain our share.

Casey: Your story is not really a lot different than my story: watching people in the collapse of agriculture in the 90s.  We rebounded and reorganized.  Today with Covid, struggling with good prices, everybody is optimistic for the summer here again.  But it’s this constant battle here, I see, in pork production, it sounds like it’s a global issue, we have our ups and downs.  In your mind, how do we balance the ups and downs? What do producers on a business side need to look at to make sure it’s not up and down woes constantly? What’s lacking in our industry?

E: Shortly, I don’t have a clear answer, but I have a similar story to tell. One of my committee members wrote a book about the energy industry.  The oil and natural gas industry, they’re facing two challenges: volatile price and sustainability concerns.  Doesn’t that sound familiar with the pork industry?  So, what they have been doing is a strategy called hedging.  While they are making profit, they invest a lot on vertical integration and investing in all different aspects of the value chain, so they are not hit so hard by the volatile price.  I think that’s where the pork industry is going as well. If the volatile price gets severe and the sustainability problem gets even worse, then I don’t see the best strategy we have now.  But we definitely need to invest more on how the pork industry can as a whole contribute to the sustainability issue.  We have to tell the customers we are not raising pigs to damage the environment, but, [07:00] in some ways, we are actually protecting the environment.  It’s not just the environment, it’s about the social structure, economics, and everything.

C: I agree, and every time the market prices go up, we put more sows down.  We almost cause our own cycles.  Is that similar in China: market’s great, we put more sows down, and then vicious cycles like that?

E: Yes, about 5 years ago, I was telling someone about how the pork price and the inventory cycle went up and down.  Don’t we have a solution to that?  The US has seen that for a number of years in the pig cycle, we don’t have a strategy to control that?  The person told me China is 20 years behind the US in the system, and you’re doing exactly what US was doing 20 years ago.  In short, yes, China is experiencing the same thing. Pork price is low, everybody putting down the pigs; pork price is high, everybody trying to get back to business. I used to have a lot of family members raising pigs, now not anymore.

C: Is that because of the vicious cycle?  ASF?

E: Mostly before ASF.  The pork prices were so low.  People talk about the rise of China, you can get higher paying jobs in other industries, so that’s why people are leaving.  It’s very hard to keep people on the farm.

C: Sounds like the US. Same problem everywhere you go. So, what are some solutions for us?  I see a divergence in the US pork sector, very vertically integrated, very controlled, very business-like as you talked about, then I see a very niche market of producers that caters to certain customers and consumers.  What are some solutions to keep everybody profitable and some business advice that you have?

E: That’s a really good question.  I don’t have a clear answer to that, but from my very limited knowledge on the business management side, people say you can make money either by making a similar product at a lower cost or differentiate yourself and charge a premium price, right?  So, for the niche market, you can find your own sweet spot, you can do organic or outdoor pigs or whatever to find something customers want, and they will be willing to pay a higher price.  For the integrators or contractors, people have to form a union sort of thing to have a higher negotiating power, so in that case you’re not dealing with the pork price by itself, you would have several thousands or hundreds of pigs together, then you have more [10:00] negotiating power, I guess.

C: So, you see the same future.  There’s still some resistance, I think, with the independent producers left because there’s a reason they’re independent; they want to make their own decisions. I see the culture of farming and agriculture, when you go to the shareholder systems, these co-operatives, these contract growing conditions, you now can’t make your own decisions. I don’t know the balance between something like that.  I see that going on in China as well, vertically integrated, the companies are getting bigger.  Then I also see talking to Africa, they’re asking how can we solve the problem, and I’m sitting here saying well, maybe we need to go to segmented pork production, the people who are really great at taking care of sows raise the baby pigs, and the people where there’s maybe more disease pressure will raise grow-finisher pigs or something, and I’m sitting here recommending something very similar to get them going.  It’s a challenge.

E: It is a challenge, and then like I mentioned earlier, you have to either go low cost or premium product.  So if you’re a small producer and you don’t really want to get into corporate… well, I guess a couple of the people together should form a… they can make their own decisions together, but probably do more for the buy local and those kind of things. In China, when covid hit China hardly, why the slaughterhouses didn’t shut down, it’s in a lot of places the smaller producers (because China doesn’t have that many huge processing plants, but locally they have a lot of small butchers). In a way, they were protected by the hit of covid and lack of transportation and things because people are willing to buy local because of the lack of transportation required.  So maybe that’s a way to go, but thinking about China’s population is too huge, and [12:00] even in small towns you have that many pigs in the butchers, it’s good enough.  In the US it might not be that convenient, but it can be done.

C: I know the state of Missouri is giving out grants and stuff for the smaller packing and butcher shops to size up or add more.  I think some states are recognizing that during covid a lot of butchers are booked up.  You go into the concept, it’s an art and maybe a science too, and people are getting out of that to get different work.  My husband says let’s get a butcher shop, and I’m like do you realize how much equipment costs we would have and then we have to get all the licenses and inspections and all that. There’s always those hurdles, too, wherever we are. The US Pork Industry to date has seen China as a major export market opportunity.  Do you see that changing where China becomes the export market?

E: Not in the near future, but in the long term might be, because the big guys are getting bigger.  I don’t have the data here, but I was looking it up one day. In Denmark, the concentration ratio – which is how many pigs are owned by the top couple companies – of the top two companies is 90%.  In US, the concentration ratio of the top 4 companies is 67%.  In China, it’s less than 10%.  So, there’s still a lot of small producers, and they make their own decisions, and they just supply the local demands.  But, when the larger operations are doubling their inventory in 2020, that might change the story slightly.  Not only the pork, though, we also have to look at the ingredients.  I was looking at data yesterday, and China imported corn; the same amount of corn we produced locally as the amount of corn we imported.  So, there’s a huge demand for ingredients, for pork, for everything.  The population is growing, the middle class is growing.  Even if China is going to produce more pork, they might still need a huge amount from imports.  So, I still see a huge opportunity for US for exporting pork.  But also, politics come in play, and we don’t know what’s going to happen. [14:47]

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[15:07]

Casey: What’s your insight on these Chinese companies moving to Africa and other countries and buying land and raising pork there.  Similar to Smithfield foods being owned by Chinese investors.

E: For Smithfield, it’s a different story.  For companies moving to Africa and South America, too, it’s a different aim, I guess.  Just like USAID has a lot of programs to help farmers in other countries, the Chinese government also is trying to form a closer bond with African countries.  In some countries, they have a higher profitability there, so they go there.  In other ones, the government is sponsoring those to help people and make the two countries have a closer connection.  Pork companies in China are starting to set up offices in Boston, New York, and major cities in the US, too.  I’m not sure what’s going to happen, but interesting things are happening.

Casey: So, what are some of the limitations of pork production as you see globally?  You talk sustainability business management, volatility.  You are studying nutrition.  Where on the nutrition front do we need to go to help with sustainability?  What are we missing?

E: That’s a very good question.  So, one study we are going to do is about whether we feed corn distillers and typical corn-soy diet and low-protein diet, how is that going to really impact the nitrogen emission and stuff.  I think we need more of those kinds of studies to tell people, “hey, what we’re doing is not really polluting the environment.”  That’s what [17:00] we can do in the US. In China, for example, people blame the pork production a lot on damaging the environment.  The government is putting restrictions on where people can put their farms.  In Africa, that’s not what they’re concerned with yet.  In other countries, people are cutting down forests to grow crops.  There’s no one solution that I can say because every country is in a different stage.  For example, the US is a very mature industry, and now you can do a lot to entertain the customers.  But in developing countries, economic growth is still the priority.  So, I don’t have a solution that fits all.

Casey: You brought up a good point of looking at emissions.  To me, a lot of us will take certain segments of things and say, “Yeah, we lowered emissions,” and we did this, and we don’t look at the food circle of life or the food chain.  I’ve seen recent data out on the lab-grown meat that they’re really tooting their horns on reducing emissions and my question is – they throw up these graphs – have they truly done an LCA on that?

E: Right. I completely agree with you on this spot.  I read one report where they said it’s frondle.  They did LCA, but it’s from where they have the ingredients to where the meat is produced.  Well, if you look at pig from where the pigs are at the farm and where they get out of the farm, there is no emissions there, either.

Casey: That’s a totally different model.

E: Right. Most of the emission comes from growing corn and soy and all the crops.  So, they often need the crops and ingredients to get their product!  So, I think they are playing with the numbers and writing style to fool the customers.  But don’t quote me because I haven’t read the report carefully.

Casey: They are.  I’ve talked about this. I think you know where I am on lab-grown meat, but if we took it off the table that it was exactly the same safety, taste, texture, you know, sustainability, all those things, I don’t have a problem with it.  It could be the future, and we should embrace it.  But at the same time, we need to challenge them that if they’re going to condemn us – and ultimately their goal is to get rid of animals for food – that their judged to the same level, so we can make it a sustainable option when we do run out of land.  But, as you said, to put protein on you still need amino acids, so where are they getting their amino acids.  The energy to grow protein, where are they getting their glucose?  All that’s processed from crops, from maybe even livestock when we look at amino acids.  Would blood meal be a segment to grow that muscle, [20:00] right?  I see a lot of swine people saying “Oh, that’s just awful, and it’s just not right.”  And I say, well, they’re still going to need nutritionists to grow lab-grown meat.  It’s just growing meat in a different vector.  And you’re still going to need crops to grow it.  I think you’re still going to need some animals for the stem cells and things to grow it.  What is your thought on that future in embracing it to where we’re open to new ideas – not just closed minded – but also at the same time trying to all grow and understand together?

E: Casey, you brought up a really good point.  And before our discussion last week, I was one of those people who refused to accept the facts.  I had never tried the Impossible Burger before. Not yet.  After our conversation the other night, you mentioned well, what if they produced a similar product, with a lower price, would you accept it.  That hits me hard.  Maybe I will.  That will be a fact that I have to accept.  So, I kept thinking about this question the last couple days.  I agree with you that we have to be open minded.  IF whatever fake meat they can make will have the same taste and lower price, then it will have its fair share in the meat market.  Then it becomes our responsibility to form a marketing strategy or business strategy to convince the customers that our real meat market has a sweet spot that the fake meat cannot really achieve.

Casey: I think it goes back to why a lot of us are against it.  It goes back into the culture.  A lot of times for policy and people’s opinions, we get off of culture.  And livestock is part of culture. [22:00]

E: Yeah, it’s very important.  I’m going to say from my bias view, I’m a Chinese. I eat Chinese food. You cannot make a Chinese food like pork… In the US, we have burgers, patties, we use all this ground meat. That’s fine, you can make fake meat that looks like it and things.  In Chinese food, you cannot fake it up.  You have to use real meat.  Unless they will be able to do it in the near future, I’m still not a huge fan of the fake meat.  One of my friends told me yesterday, think about in nutrition: we have been looking for fish meal replacements for years. But still people put fish meal in the diet.  The food’s always there.  You might have a similar product or cheaper product that can do some of those things, but still people will still keep the fish meal In the diet. It’s going to be similar for the fake meat, I guess.

Casey: Yes, I agree.  I don’t think it’s going to go away.  I’m curious if we were to replace every animal on the planet, how much square footage of labs we would need to replace that meat.

E: Yes, having those labs will produce lots of emissions, I guess!

Casey: That’s why I’m saying we have to be on the same playing field of when we consider these alternatives. Everybody’s really great at manipulating data. I’ll be the first to tell ya, I’ve been taught how to manipulate data to make it look more appealing to the customer. But that’s obviously what they’re doing with cultured meat today.  They’re getting some basic data; it looks really cool, but they still haven’t shown me the cost analysis. Everybody’s into sustainability, they want to put a carbon emission on there, an ammonia emission, whatever we wanna call it – nitrogen/carbon.  Sustainability is also profitability.  Everything we look at in that area, we get lost – especially researchers in the lab; I’ve had this conversation a lot with different [24:00] companies I’ve worked with – it looks great, but it doesn’t pencil.  Unless you’re paid for sustainability, most of these solutions to reduce methane from cattle, for one thing – that’s where they’re really pushing it the most at the moment – just don’t pencil, unless they get performance benefits.  The dairy market is just as bad as the pork market.  Maybe even worse; 5 years negative margins right now in the US.  Sustainability has to pencil.

E: I completely agree.  When people didn’t see the profit, they wouldn’t go in there. That brings in other thoughts about technology on the farm, too.  If you bring me the technology and it doesn’t really bring me any profit immediately, I’m not going to buy it. For a lot of people, that’s how they think about it.

Casey: I know; it’s a disastrous thought process, though, at times, to make great steps.

E: I know.  But I do think, in the US, the farmers have a benefit over pork producers in China.  A lot of people still focus on short-term returns. More people look at the long-term effects than people in China. Especially the pork producers.  Many of them don’t really see that far.  They just want to make the money right now and that’s the biggest obstacle to moving the industry forward.

Casey: What’s the biggest disruptor technology you see for the Chinese pork industry?

E: So, there are a lot of things coming out. That’s another comparison.  I think the government is involved, so the big technology/huge IT companies in China are almost all involved in helping pig farmers to invent some new technologies.  Think about Amazon, Google, Facebook; everybody’s doing things for the pork industry. That’s amazing, right?  But we’re not sure what’s going to happen.  Some technologies I’ve seen are face recognition, using infrared images, then you can predicts the weights so you don’t have to weigh the pigs.  I haven’t seen a marketable product yet, but I’ve seen a lot of concepts on slideshows.  If you think of the mega-farms, the pig hotels where you can house 80,000 sows in a multi-floor facility, then you do need some technology to reduce the labor use I would say.  That’s a lot of pigs.  One thing I’ve seen, they have been using draw to move the semen, so less human involvement.  You don’t transmit diseases between barns.  I like that. Then you have all this technology trying to predict weight and predict abnormal behavior.  I think that’s going to help a little bit, but still we need to walk the barn.  You have to.  That’s only going to be a system, but not going to take over our job.  So, in short, I haven’t seen a really good marketable product yet, but there are a lot of good technologies moving forward.

Casey: Well, awesome.  Some great conversations.  Before we go, I always give my guests an opportunity to turn the table and ask me anything they want, usually, within boundaries, swine related. [laughter]

E: Casey, I do have this question.  You have a lot of farm experience.  We have a lot of students, interns, who did not grow up on the farm.  How can we help this industry grow, to where their value is?

Casey: It is interesting, and I don’t think I’ve shared this with you yet, Edward or any other students. Sometimes when I was a manager, either on a large farm for New Fashion Pork [27:30] or even at the University, taking somebody green was almost easier to train.  But unfortunately, I see, if you’re going on the farm to do work, we don’t always train them properly.  I don’t care what business you’re in, if you’re working at McDonald’s or the Shell Station or, you know, working on a pig farm, we don’t train employees. We kind of show them, “Here ya go, it’s up to you!” Right?  I think we need to get back to better training or change how we manage our kids from the beginning as a parent and not micromanage everything they do and let them learn independently.  So, I like the fact that we have people coming in without an ag background, because it’s like a new discovery of the passion.  It never failed when I taught Introduction to Animal Science and I had students that came out to the farm, 80% of them raised their hands to be pre-vet.  The other 10-15% were ruminant students, beef-cattle.  We look at our industry, we had poultry-beef and we had a separate poultry department in Arkansas.  Never failed that I recruit students to work on the farm.  They got out to see what it’s like, how fun it is to be around the animals, how rewarding the job could be.  I think that new fresh perspective, that new passion is there, as long as we do it right and promote them.  At the same time, a lot of us are always rushing through school, and we only do summer internships, and we get a brief discussion of what HR does, what purchasing does, what the sow farm manager does.  Or depending on where you go, you may get stuck in the farrowing house all summer. I almost recommend for students to take a year break, go get a job and learn about the industry you’re thinking about going into.  This is a constant conversation I’m having about what the students need.  I think some of them have unrealistic expectations about what their job’s going to be, what the industry’s like, but I always welcome fresh perspectives, because that’s a newfound passion, that new energy, and we don’t have this mindset of “this is how we’ve always done it.” So, I think new ideas are welcome and new opportunities will grow as we have a different type of employee entering agriculture.

We have to be welcoming.  We have to set up programs.  We have to also recruit these students, because my farm of tomorrow is having those people who really like the pigs, who like being with the pigs, regardless of the smells and the work.  [31:00] Most of the modern employees are sitting with drones and robots and computer screens, monitoring things and getting things done that way, who really like that stuff. We have so many younger people who I hear all the time from my husband, they just play video games and stuff, so I think our world is going to that mentality, so can we develop two types of employees that still get good animal welfare, profitability and have happy employees. I can tell you the days of working 12+ hours, 28 days in a row because you don’t have enough staff… you wanna burn anybody out?  That’s the way to do it.  Even with my passion and love, when you get to that point, because you have a sense of responsibility that you have to go do that job, you get burned out.  And I think agriculture is terrible about burning out their employees.  It’s the same when I was at AB Vista; I loved the job, but it got to the point it wasn’t sustainable for my family, so I had to make a choice.  So, I think the future is welcoming new students, but also our mindset as managers and companies that we need to give our employees a better lifestyle.

E: I like that.

Casey: Yeah.  There’s a lot.  We could go into that with policy or whatever.  But I think we do it better when we don’t need policy.  I think we do it better when it’s our choice to do that.

E: I never thought about what you said before til just now.  I think that people who don’t have a agriculture background might learn more detail because they don’t have a pre-existing image of what farming looks like. I really like that.  Can I ask another question?

Casey: Yeah.

E: I was doing a personality test the other day. There was a question, “Does your happiness come more from helping others accomplish things than your own accomplishments?”  I thought of you immediately.  Is that what you enjoy more, too?  [33:00] With what you’re doing now…

Casey: Definitely.  It’s never been about me.  It may have been at one time.  Obviously, that was a path for me that wasn’t happy.  I wanted to get my degree, I’m proud of having my PhD, I’m the first doctor in my family. That was a big thing for me.  I wasn’t a traditional student.  I worked full time to do that.  I had people saying my grades weren’t good enough and rejecting me.  Dr. Maxwell believed in me and I got it done.  It changed my mindset of having to work hard for that.  I’m proud of that personal accomplishment.  I’ve put boots on the ground. I’ve done the hard work.  Now I want to share the passion and help others.  It’s a global world.  I’ve met a lot of people who haven’t been out of their state, let alone the country.  You’re here in the US for 9 years.  I’ve traveled the world. It’s about the world, right? I wish we all could come together.  If it’s just me making little ripples turn into tidal waves, I tell everybody that’s my motto of helping others.  That’s my goal, that’s who I am and so I need to be in roles like that.  Some of the roles I was put in were probably not that type of role.  They were sales for the company.  I was successful because I found ways to sell product through service by helping others.  Once I learned that, that I needed to help people, people would buy from me in my different roles.  But yes, it’s always been about helping others.  I think agriculture trait for all of us, it’s not just us.  It’s bigger than us.

E: The world needs more people like you.

Casey: Thank you.  That’s the best complement I’ve gotten in a long time.  Thank you for your time and I hope you have a blessed week.

E: Yep.  [35:00] Thank you for having me.

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