How will China feed its growing middle class?

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• NATHAN HALVERSON:

  Li grows crops on a few acres of land about 300 miles south of Beijing. Farmers like Li produce the bulk of China's food.

• LI:

  It has been the same way — wheat in the spring and corn in the fall. Always this way, it has never changed.

• NATHAN HALVERSON:

  But change is coming. Farmers like Li can no longer produce enough food to satisfy China's growing demand. The country is in the midst of the largest agrarian reforms in world history.

• LESTER BROWN:

  China is roughly the same size as the United States. The cropland area is similar. The grain harvest is similar. The difference is, in the U.S. we have 300 million people and there, they have 1.4 billion people.

• NATHAN HALVERSON:

  Lester Brown is a food economist and author of "Who Will Feed China?" He says China must now make the most of its limited farmland.

• LESTER BROWN:

  They're feeling very vulnerable at this point. They know that they can't feed themselves anymore.

• NATHAN HALVERSON:

  That fear has rattled the Chinese government. In 2011, it announced a five-year plan to radically overhaul China's farm system and relocate 250 million farmers to cities.

• LESTER BROWN:

  Keep in mind that most of the leaders in Beijing today can remember the great famine in 1959, 61 when 37 million people starved to death.

• NATHAN HALVERSON:

  Today the government is no longer worried about starvation, but satisfying an affluent and growing middle class that wants to eat like Americans. The government needs to keep people happy, says the former head of Goldman Sachs in China, Fred Hu, now an advisor to the Chinese government.

• FRED HU:

  The political system we have in China. We have a one-party state, and the party, the legitimacy depends on its ability to deliver economic prosperity and consumer satisfaction, if you will.

• NATHAN HALVERSON:

  Hu, a Chinese citizen, says that what consumers want to eat, increasingly, is meat. And meat is so resource intensive, it puts even more pressure on China's strained farms.

• FRED HU:

  It seems highly unlikely for China to be self-sufficient, so China will have to import a large quantity of foods from all over the world.

• NATHAN HALVERSON:

  Last year's takeover of Smithfield Foods – the largest-ever Chinese acquisition of an American company – was a significant part of the government's effort to acquire resources from outside its borders. Smithfield CEO Larry Pope is now an executive with the Chinese firm.

• NATHAN HALVERSON:

  China consumes 50 percent of the world's pork?

• LARRY POPE:

  Half of all the world's pork is eaten in that one country and growing, and growing steadily. Every two or three years, China's consumption demand grows by the whole size of the U.S. market.

• NATHAN HALVERSON:

  Pope says Smithfield is already gearing up to ship more pork to China.

• LARRY POPE:

  In many respects, this is carrying out the government's five-year plan, which is to improve the quality and the security of their food supply.

• NATHAN HALVERSON:

  Chinese consumers view American brands, like Smithfield pork, as safer than domestic products. After years of food scandals, they have become wary of Chinese brands.

• FRED HU:

  The last couple of years, there has been a string of food safety accidents. Baby formula or meat products, so that has caused a big scare and a concern among Chinese consumers.

• NATHAN HALVERSON:

  Officials are now taking a closer look at where the food is coming from.

• WANG:

  My name is Wang, I'm a pig farmer.

• NATHAN HALVERSON:

  Wang is a typical hog farmer, raising about 100 pigs in a barn attached to his house. Two hundred million small farmers scattered across the countryside raise most of China's livestock. The government knows food safety isn't always a priority on these farms.

• WANG:

  Raising pigs is actually easy. They can eat whenever they want. You just throw the food in the pen. When they're hungry, they will come to eat. If not, whatever.

• NATHAN HALVERSON:

  I noticed some open vials on a dirty table. Some farmers have been caught using illegal growth hormones. I asked Wang about the vials.

• WANG:

  A while ago, the pigs got sick and were coughing.

• NATHAN HALVERSON:

  Keeping tainted pork off Chinese plates has been a struggle in China's fragmented farming system. Scott Rozelle is an agricultural economist at Stanford.

• SCOTT ROZELLE:

  You have all these hogs coming from everywhere. They have hoof and mouth disease. They could have other pork diseases. You may have been giving the injections of hormones to make them grow faster and you don't know what you're getting. There's absolutely no way you can retrace any food safety from there.

• NATHAN HALVERSON:

  Modern facilities provide an easier way to monitor food safety, a key goal of the government's five-year plan. China is pushing to replace family farms with large-scale operators, like Shuanghui, the company that bought Smithfield Foods.

  We received a tour of a Shuanghui plant from its president, Zhang Taixi.

• ZHANG TAIXI:

  The current technologies of this factory are a little outdated. The new factories we are building will be state-of-the-art.

• NATHAN HALVERSON:

  With the takeover, China's largest meat processor acquired Smithfield's food safety technology. Zhang told us the government is rapidly overhauling China's meat industry, closing half of its slaughterhouses in the next year.

• ZHANG TAIXI:

  The number of slaughterhouses will be reduced from 20,000 to 10,000 by 2015 in order to meet the standards of food safety as well as environment protection.

• NATHAN HALVERSON:

  The rapid increase in meat production has resulted in devastating environmental damage, another issue rattling the Chinese government. It estimates that three-quarters of its waterways are polluted, and nearly half of that pollution comes from agriculture.

• NATHAN HALVERSON:

  Here in China small pig farms like this still account for about 70 percent of production. Each farm will have maybe about 100 pigs. Each pig producing about 10 pounds of manure every day. The downside of these operations are that the manure has nowhere to go except for in the local culverts like this.

• NATHAN HALVERSON:

  All the agricultural waste makes its way down China's rivers, into its lakes, and out into the ocean, leading to widespread and toxic algae blooms, affecting fisherman like Jin Tao.

• JIN TAO:

  It's got algae. A lot of the water has algae. It's scary. If you drink the water, you will get sick.

• NATHAN HALVERSON:

  Shuanghui hopes that Smithfield's modern waste management technology will help tackle pollution.

• NATHAN HALVERSON:

  Shuanghui says it is committed to building more environmentally friendly facilities like the one behind me, where the 28,000 head of hogs that are raised every year have their manure running off into the lagoons, capturing it and preventing it from going into the nearby river.

• NATHAN HALVERSON:

  How China deals with all these issues — from food shortages to the environment — will have a global impact. The Smithfield purchase included hog farms in Poland, Mexico, and the United States.

• PATRICK WOODALL:

  Over the long term, more hogs will be produced in America, but that would be more hogs produced in order to ship pork to China.

• NATHAN HALVERSON:

  Patrick Woodall is the research director at Food and Water Watch, an environmental advocacy group.

• PATRICK WOODALL:

  They get the meat, we get the manure. We export the best part of what rural America has to offer and we keep the waste.

• NATHAN HALVERSON:

  Protecting the environment is one of the challenges facing the U.S. as it supplies food to China.

• LESTER BROWN:

  No other country has ever had a billion people moving up the food chain consuming more livestock products, grain-intensive livestock products.

• NATHAN HALVERSON:

  In addition to shipping more meat to China, American farmers are sending it more livestock feed than ever. Two years ago, China became the largest importer of U.S. farm products.

• JIM CALL:

  When you're driving through the country right now, and you see these big fields out there, one out of four rows goes to China. So this is a huge market, and it's a market that I think is going to get even bigger their middle class hasn't stopped growing.

• NATHAN HALVERSON:

  Feeding China's middle class, which is now larger than the population of the U.S., is a growing challenge for the entire world.