Vertical integration selection of Chinese pig industry chain under African swine fever - From the perspective of stable pig supply

Abstract

Vertical integration is conducive to the realization of complementary interests and sustainable development of pig industry. The outbreak of African swine fever (ASF) in 2018 has disrupted many activities along pig industry chain in China. The production capacity of breeding pigs has dropped rapidly, and the supply of pig is tight. The vertical integration of pig industry chain is the main driving force to ensure food supply. Based on the data of 12 listed pig companies from 2012 to 2019, we examine the ways and reasons for vertical integration of pig companies when external shocks increase by taking ASF as an example, breakpoint regression and Tobit model are used to analyze differences and determinants of the forward and backward integration of pig industry chain under ASF. The empirical results showed that the forward integration of the feed processing link and slaughter circulation link is higher than the backward integration. ASF had different effects on the vertical integration degree of each link. ASF promoted forward integration. The main factors have different influences on the vertical integration of pig industry in China. Forward integration increased mainly depending on previous asset specificity, legal system environment, market demand, and transaction frequency. The findings of the study imply that pig industry chain is taking the forward integration to cope with the ASF shock. The combination of feed link and breeding link reduces feed cost and ensures pig supply. Pig companies tend to reduce transaction costs by strengthening the control of downstream supply.