* 16,000 dead pigs floated down Shanghai river in March
* Documents reveal massive overcrowding on hog farms
* Experts say overcrowding key factor in spread of disease
* Local authorities plan to force cuts to pig numbers
* Pressure on small farmers prompts some to cut corners
By Adam Jourdan
JIAXING, China, April 25 (Reuters) - Overcrowding on farms around Shanghai was the underlying factor that led to 16,000 dead pigs floating down the Huangpu river into China's affluent financial centre, according to an analysis of official documents and interviews with farmers in the region.
The appearance last month of carcasses of rotting hogs in a river that supplies tap water to the eastern Chinese city was a morbid reminder of the pressures facing China's mostly small-scale farmers as the country grapples with food safety scares, environmental pressures and, most recently, a bird flu outbreak.
Until now the main reason for Shanghai's startling outbreak of dead hogs appeared to have been a local government crackdown on criminal gangs that had been selling abandoned carcasses as meat on the black market, meaning fewer ended up in the river.
But a deeper look suggests that an unsustainable level of overcrowding -- a key factor in the spread of disease and death rates -- was the critical issue. Experts warn that if conditions are not improved the incident may not have been a one-off.
"We can't let things go on the way they are or it won't just be the 10,000 or so pigs in the river this year, we'll see more in the coming years," said Xu Yafeng, CEO of NX28, a specialist web platform for agricultural information.
In an acknowledgement of the problem, officials launched a plan late last year to slash the number of pigs in the region -- a drive that may have made things worse in the short-term by cutting the amount of land available for farming before there was a corresponding reduction in livestock.
The number of pigs in Jiaxing, a city just to the west of Shanghai identified as the main source of the dead pigs, more than doubled over the last two decades. It hit 7.5 million in 2012, even as the local government cut the amount of land available for farmers.
This overcrowding of pigs led to the city-wide plan to cut hog numbers to below 2 million within just two years.
" the winter to this spring, the trend of dead pigs has been particularly serious," Wang Xianjun, a local environmental official, told the Jiaxing Daily in March.
"We keep digging more pits to deal with the dead pigs, but if it carries on like this, they won't be able to take them."
Wang's words proved prophetic. Just four days later, the first reports emerged of pigs drifting down the Huangpu.
Local officials contacted by Reuters declined to comment.
China's booming demand for meat has the potential to create ever more crowded farms, ripe for the spread of disease. Pork demand is expected to grow around 20 percent from 2012 levels to 60 million tons by 2020, according to a recent Rabobank report.
The number of small hog farmers around Jiaxing climbed over the last few years as pork prices surged, resulting in far too many pigs for the land available.
Data from a Nanhu district government document in September shows in 2011 the key hog farming town of Xinfeng had a level of 15.3 pigs per mu (667 sq metres), three times higher than the level of five hogs per mu local officials recommended in August 2012. The nearby village of Fengqiao had levels of 10 hog per mu.
"Disease and mortality rates among the pigs have got worse every year," said one woman in the farming area of Henggang on the outskirts of Jiaxing. "In some areas this year mortality rates were probably as high as 30 percent."
The normal mortality rate for pigs in China is around 3 to 5 percent, Fang Yan, the deputy head of the rural department of China's state planning bureau, told a news conference in Beijing.
The high density of pig farms, and the poor farm management that is often associated with small-scale farming operations, are key risk factors for porcine circovirus -- a common disease among pigs that is the most likely killer of the floating hogs -- according to many academic and scientific papers.
Since 2012, however, oversupply has driven pork prices down sharply. Between the end of January and mid-March this year, prices tumbled 16.2 percent.
This had a further impact on disease and mortality rates --when prices are weak, farmers tend to take less care of their livestock, said Tao Shi, a Shanghai-based expert on hog farming.
Increasingly aware of the urgency of the issue, the Jiaxing government launched its plan last September to reduce the number of hogs by two-thirds and to slash the amount of land available for farming by around 40 percent.
"DESTROY THE PIG PENS"
Since the carcasses were discovered in the Huangpu, the response has accelerated. A visit to several farming districts around Jiaxing revealed empty sties, which locals said had been recently vacated for demolition.
Three local women in Henggang told Reuters that pig farmers were being given financial incentives to abandon the land, while one official sign, recently painted on the wall of a nearby factory, read: "Destroy the pig pens, lead a happy life."
Many farmers are not happy. One 40-year-old said he has been ordered to close down his farm, while another farmer Reuters interviewed was in the middle of selling his pigs at a loss of 150 yuan ($24) per head after being told his farm contravened the regulations. Neither wanted their names used.
"They can't just do it this way and wipe us out so fast," the farmer said, as all but one of his pigs were taken away in two crowded trucks over the space of 30 minutes.
The surge of dead pigs demonstrates the wider pressures China's farmers now confront. Limited land access, falling pork prices, tighter profit margins and the rapid spread of urbanization forces some farmers off the land entirely. Others are pushed to farm in ever more crowded conditions.
Many Chinese pig farmers use medicated feed containing antibiotics to help stave off disease, but cost pressures have led some to cut back on expensive vaccines in favour of giving medication later when illness strikes. Others skirt incineration costs by dumping livestock.
David Mahon, Beijing-based managing director of Mahon China Investment Management said the pressure on farmers' margins was huge, which could lead to some farmers cutting corners.
"If you push (farmers) to this point, they'll do anything to save costs." ($1 = 6.1791 Chinese yuan) (Reporting by Adam Jourdan and Jane Lee; Additional reporting by Anita Li in SHANGHAI and Eleven Du and David Stanway in BEIJING; Editing by Bill Powell and Alex Richardson)