USDA expects smaller ASF impact on China

The U.S. Department of Agriculture has a far more conservative estimate of the carnage that African swine fever has caused to China’s hog herd than most agricultural analysts and economists.

In a March 11 report, the U.S. agricultural attache to China forecasted a 13 percent reduction in the country’s swine herd to 374 million animals by the end of 2019 from 428 million at the start of the year.

Pork production is expected to fall five percent to 51.4 million tonnes.

That reduction of 54 million animals and the small drop in pork output is a far cry from other estimates.

Rabobank is forecasting the loss of up to 200 million pigs and a 30 percent decline in pork production this year.

Arlan Suderman, chief commodities economist with INTL FCStone, is predicting that China’s hog herd has already contracted by 284 million animals.

“It’s just hard to grasp,” he said in early April.

“The mind doesn’t want to believe it because it’s just so unfathomable that it could be that bad.”

The USDA is also at odds with other analysts when it comes to the impact on feedgrain demand.

Suderman believes it has already dropped by 40 percent because of African swine fever, but that is not the impression left by the attache report. It said swill feeding or garbage feeding was widely used across the industry before the African swine fever outbreaks. The Chinese government has now banned that practice.

“As more operations phase out swill feeding, the demand for commercial feed will increase,” the report said.

The disease has also caused a shift from small- and medium-sized farms to larger, more vertically integrated operations as low prices, the inability to adapt to regulatory changes and insufficient biosecurity force small hog farms to leave the market.

Larger operations are more likely to use commercial feed.

The USDA also believes a significant restocking or expansion of China’s hog herd will occur this fall, while Suderman thinks it will take five to seven years.

If the USDA is right, that should lead to renewed feedgrain demand in late 2019.

The ag attache expects Chinese pork consumption to be down four percent to 53.2 million tonnes this year as some consumers avoid eating pork despite government assurances that African swine fever-tainted meat is not harmful to humans.

Domestic pork production is anticipated to fall more than consumption, which is why 2019 pork imports are forecast at two million tonnes, a 33 percent increase over 2018 levels.

Demand for beef and poultry are on the rise in China. The USDA is forecasting a 20 percent increase in beef imports to 1.6 million tonnes in 2019.

The USDA is forecasting a six percent decline in the number of hogs available for slaughter in China this year, but an increase in carcass weights will offset that loss.

Farmers in some regions of northeastern China are holding onto their hogs because prices are low and slaughter costs have skyrocketed.

“Some farmers have allowed their herd to gain additional weight, resulting in a phenomenon known in China as bull pigs with some hogs reaching weights of 400 kilograms, or double the usual slaughter weight,” the report said.

One thing everybody is in agreement on is that China is grossly under-reporting the hog cull. The country claims there have been 123 outbreaks with slightly more than one million pigs killed.

“It is likely that this vastly underestimates the total number of outbreaks and animals culled across China,” the attache report said.

For instance, in October 2018, China reported to the World Organization for Animal Health that it culled 75 hogs on a small farm in Changqing township in Heilongjiang province that was infected with African swine fever.

What it failed to report is that a total of 8,103 hogs were killed in the area as a control measure.

Only one case has been officially reported in Shandong province despite industry reporting multiple cases in the major hog producing region and live hog transportation corridor.

Chinese farmers are reluctant to report the disease because government compensation for culled animals doesn’t come close to the market price.

In some instances, the government is actively discouraging farmers from reporting cases. A hog manager in Shandong province was allegedly arrested for reporting an African swine fever outbreak, according to the attache report.

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