CHICAGO, (Reuters) – China’s African swine fever outbreak is far more severe than previously thought and the full impact of the disease on animal feed producers has yet to be realized, U.S. agribusiness company Archer Daniels Midland Co said on Wednesday.
The fatal pig disease has slashed China’s hog herd by as much as half since August 2018 and has already lifted margins for processing soybeans into animal feed, Ray Young, ADM’s chief financial officer, told the Stephens Nashville Investment Conference.
Millions of pigs have died from or been culled to control African swine fever (ASF) in China and other Asian countries, such as Vietnam. China’s Ministry of Agriculture and Rural Affairs reported a new case of African swine fever on a farm in the southwestern province of Yunnan on Wednesday.
The spread of ASF in China, the world’s top pork consumer, has redrawn global food supply chains as the country has had to rely more on imported pork and less on domestic production.
That shift is reducing Chinese imports of raw soybeans, but ADM is expected to benefit as other countries expand livestock production to feed China. This boosts demand for ADM’s feed ingredients like soymeal. ADM operates 45 oilseed crushing and origination plants in Europe and the Americas, but none in China.
Annual pork production in China has likely dropped by 20 million tonnes this year, from ADM’s previous estimate of a 10-million-tonne decline, Young said.
“We thought that the impact on the global meal market would be felt by the end of the year, the fourth quarter, back half of the year,” Young said. “I think probably on a marginal basis, there’s been some positive impact. But the overall impact, we probably haven’t felt yet in terms of overall crush margins.”
That positive impact could add to the $500 million to $600 million in incremental pretax earnings improvements ADM has forecast for 2020, Young said.
ADM shares were down about 1% at midday trading on the New York Stock Exchange at $42.82.