African swine fever to upend markets

China is expected to import far fewer soybeans in the future as the pork sector declines and purchase much more meat

African swine fever will “shake up the basket” of global agricultural trade for years to come, says an industry analyst.

Arlan Suderman, chief commodities analyst with INTL FCStone, said his contacts in China tell him hog feeding is down 40 percent.

The contacts include INTL FCStone staff on the ground as well as Chinese feed buyer customers.

Total hog production in China is around 710 million animals a year, so a 40 percent reduction in feeding indicates 284 million in lost hog production.

There isn’t enough hogs in all of North and South America to make up for that shortfall.

“It’s just hard to grasp,” he said.

“The mind doesn’t want to believe it because it’s just so unfathomable that it could be that bad but that’s what they’re consistently saying.”

The disease outbreak is going to turn global agricultural trade on its head for years to come.

“It’s going to dramatically change what they trade. Instead of buying a lot of soybeans they’ll be buying a lot of meat,” said Suderman.

INTL FCStone estimates it will be five to seven years before China can rebuild its hog herd and restore the balance.

“China says it’s under control and it’s time to start restocking and the people we talk to just scoff at that and say it’s as bad as ever,” he said.

Suderman’s estimate of the carnage in China is at the high end but there are many other reports suggesting the damage is extensive.

The Dim Sums blog said China’s Ministry of Agriculture and Rural Affairs’ (MARA) investigation of the epidemic in seven provinces in February shows big reductions in sow inventories.

For instance, it found a 28 percent decline of productive sows in Jilin province and a 26 percent drop in both Henan province and Guangdong province year-on-year.

Many believe the government is under-reporting the extent of the damage.

Farmers and traders in Jilin province told a television station that swine inventories have been cut in half, according to the Dim Sums blog.

And the veterinary bureau in Shandong province reported a 41 percent “landside” decrease in sow numbers between July 2018 and February 2019 despite only two outbreaks of AFS officially reported in that province.

Suderman estimates there is already a 16 million tonne meat deficit in China and it is growing by the week.

“That’s going to have huge implications. That changes the culture. That changes the trade dynamic,” he said.

China is trying to source meat products from all over the world. U.S. cash hog prices shot up 51 percent in one month.

“If you call around to try to book pork supplies in the United States you just can’t find them,” said Suderman.

“Somebody has got them booked.”

China is also trying to source poultry and pork from other countries around the world.

“They seem to be quietly trying to buy up supplies,” he said.

China has also been purchasing U.S. soybeans as a good faith gesture in an attempt to help trade talks along. Suderman expects those beans will end up in the government’s reserves.

The 40 percent decline in soybean meal consumption in hog rations will be partially offset by an increase in poultry feeding but China’s agriculture minister said the maximum they can increase poultry feeding this year is eight percent.

Suderman forecasts a net reduction of 14.8 million tonnes of soybean demand in 2018-19.

He believes China will use 91.4 million tonnes of soybeans this crop year, well below the USDA’s 105.1 million tonne estimate. That number will drop to 88 million tonnes the following year.

About the author

Markets at a glance

Copyright © 2019. All market data is provided by Barchart Market Data Solutions. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. To see all exchange delays and terms of use, please see disclaimer.

explore

Stories from our other publications