China's Fu-Hua Meat Company: From Feedlot to Hot Pot

China's Fu-Hua Meat Company: From Feedlot to Hot Pot

China's larger-scale beef operations face supply chain challenges

There are more than a few American cattle farmers on our tour of China this week, so it was fun to see them react when we pulled into our first real farm visit today: a 2,000-head feedlot.

By Chinese standards, the Fu-Hua Meat Co. is rare – only 10% of China's beef comes from larger-scale integrated farms such as this. Nearly two-thirds of China's beef is still produced by small (one acre) farms. But the Chinese government is determined to reform, privatize and scale up its agriculture, including pork and beef production. That point was reinforced this week at a session of the ruling Communist party congress here in Beijing.

The farm focuses mainly on Simmental and Luxi Yellow cattle, an original Chinese breed.

Privately-held Fu-Hua buys calves at 660 lbs. and fattens them to 1,100 lbs. before slaughter and resale. The company is vertically integrated: feedlot, slaughterhouse, refrigerated warehouse and restaurant, all in one place. The company slaughters several thousand head of cattle and sheep a year, a vast majority from outside sources.

Our visit started with a delicious lunch of hot pot beef at the company's restaurant in County Hebei Province, about an hour or so outside of Beijing. A pot of steamy broth was carefully placed on built-in stove top burners, about 10 per table with a big Lazy Susan dial in the middle. Waitresses brought out huge plates of rolled up beef. We each dropped slices of meat into the boiling broth for a few moments before clumsily fishing the slices out with our chopsticks. Good stuff!

Liu Chun Sheng, the sales manager for Fu-Hua, says when the restaurant and business opened in 1997 most Chinese preferred pork. But the hot pot idea caught on quickly, and now there are more than 200 hot pot restaurants around China.

China has a ready supply of skilled labor in agriculture. This farm employed 30 workers, and nearly everyone, including this cheerful lady, seemed happy to work there.

Beef and lamb from this region supplies most of the high quality beef market in Beijing, including five-star hotels and fast food joints. Even so, at present China's annual per capita consumption of beef is only 11 pounds, far lower than the world average of 55 pounds per person.

Fit to be tied

The first thing we noticed when we got to the feedlot next door is that every steer is tied to the feed bunk. "It must be some kind of rodeo around here when they get all these cattle tied up," one farmer remarked. The manager said the steers were tied to keep them from getting too much exercise. Fu-Hua feeds Simmental and Luxi yellow cattle, one of China's original beef breeds.

In China, manual labor is plentiful and cheaper than mechanization, so about 30 workers manage feeding, watering, manure removal and feed mixing. There's also a full time veterinary service available. Remarkably after each feeding the bunk is filled with water for drinking.

"Here, farmers don't care if they break a contract," says Liu Chun Sheng, sales manager for Fu-Hua Meat Company.

Growth implants are forbidden in China, and feed conversion at this operation is about 5 lbs. feed to 1 lb. gain, explains Sheng. It takes about 2 months to get cattle to market weight. Cattle are fed corn silage roughage and a concentrated feed, including cottonseed meal, mixed daily at the farm.  

China's growing legions of middle class consumers mean more beef demand overall. However, small scale farmers are leaving the business to find more lucrative work in the cities. Sheng says this exodus is creating a shortage of good feeder calves.

Why not just set up a contract with local farmers to supply good quality calves in your supply chain, I asked.

In China, the rule of law - including honoring contracts -- is fairly new, Sheng explained. "I tried working with other farmers on contract but when the price would go up, they would sell their calves and break their contracts with me," he says. "Here, farmers don't care if they break a contract."

Dwindling calf supplies and an unreliable supply chain has forced the farm to change direction. Next year, says Sheng, the farm will buy 100 high quality females to create a breeding herd, and begin supplementing purchased calves with their own stock. The goal is to double the number of cattle on feed.

"Having a cow herd will eliminate the problem of not having a good selection of calves," he says.

Hopefully those mother cows won't be tied to the feed bunks.

Look for more reports directly from China this week as we travel to grain terminals, farms and agribusinesses.

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