Pork is an important part of the Chinese diet and economy and is likely to remain so in the foreseeable future given the increasing demand for meat because of rising incomes and urbanization. As the largest producer and consumer of pork, China accounts for half of the world's pork production and consumption.

In the coming decade, China's total pork production and consumption is projected to increase by a little over 20 percent based on new figures from the United States Department of Agriculture. While the increasing appetite for other meats, especially poultry, in China is expected to slow down the growth in pork consumption, its dominant position in the Chinese diet will remain intact for some time to come. In per person terms, the consumption of pork is projected to rise three times more than that of poultry and seven times more than that of beef.

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The structure of pig farming in China has been changing rapidly as part of the larger transformation of agriculture. There is a growing shift away from small-scale backyard farming to specialized and large-scale commercial farming. Rising production costs (due mainly to higher feed costs), greater demand for food safety (due to more outbreaks of animal disease and use of unsafe feed additives), shrinking farm workforce (due to faster rural-urban migration) and government policies to promote large commercial farms are some of the key factors responsible for the rapidly vanishing small pig farms.

Since 2007, government policy has favored large-scale pig production as a way of improving food safety and quality by providing grants and subsidies to large pig farms. These policies need to be re-evaluated. Many of these changes have led to increasing volatility of supply and prices in China's pork industry.

In the last few years, rising pork prices have been a major driver of food inflation in the country. But now a declining price trend has begun to emerge. Based on official data, pork prices in March 2014 fell by close to 7 percent year-on-year, though food price inflation rose by about 4 percent. The recent fall in prices has been widely attributed to consolidation in China's pork industry leading to cycles of rapid expansion in pork production. This periodic excess supply of pork can lead to a vicious cycle of reduced employment, production and profitability in the industry.

The transition from small to large pig farms should be a natural economic process. Small farms still have an important role to play in stabilizing China's pork production, and equally importantly in providing employment and income for many poor people in rural areas who will not be able to move out of the agricultural sector, at least not in the near future. This is especially true of farms in the central and western regions of China.