China’s hunger for soybeans surprises Bunge executive

Company says Asian country’s rapidly recovering hog sector following African swine fever is behind increase in demand

Greg Heckman, chief executive officer of Bunge Limited, has been taken aback by surging global soybean demand.

“One of the big drivers is how quick China’s sows and hogs have come back,” he told investment analysts during a recent conference call.

“Their meal demand has recovered much more quickly than any of us thought.”

Historically high chicken and hog inventories in the United States are also fueling meal demand, although that has been somewhat tempered by cash-strapped hog farmers resorting to maintenance rations.

The opposite scenario is occurring in China, where soybean meal inclusion rates are on the rise.

China is rapidly increasing its hog herd as the country emerges from the devastation of African swine fever (ASF).

Heckman said the expansion is occurring at large commercial facilities that use more soybean meal in their feed rations than the backyard operations that used to be prevalent in China.

“It is the inclusion rate because it’s the professional commercial operations that are coming back up,” he said.

The United States Foreign Agricultural Service (FAS) recently released a report detailing the hog industry’s recovery from ASF in China.

It forecasts a 2020 ending inventory of 340 million hogs, up from 310 million animals in 2019.

That number is expected to rise to 370 million hogs by the end of 2021, which would be more than 80 percent of pre-ASF levels.

The amount of new ASF cases is slowing down. There have been 16 outbreaks in the first half of 2020, mostly on small, backyard farms. That is out of the 171 cases reported since the first outbreak occurred in August 2018.

The Chinese government says 14,594 hog farms have built new facilities or expanded, adding 120 million head to the inventory.

“Most of the newly added breeding sows and hog inventories are coming from large companies,” stated the FAS report.

That is causing increased feed use. Shandong province reported feed production reached 13.1 million tonnes in the first four months of 2020, a 19 percent increase over the same period a year ago. Swine feed was up 37 percent.

A large feed company in Liaoning province said feed sales were up 47 percent in the first few months of 2020 versus the same period a year ago.

China’s sow inventory expanded 23.3 percent between October 2019 and May 2020, according to the report.

Pork production will remain low in 2020 at 38 million tonnes due to slumping domestic demand but is expected to rise to 41.5 million tonnes in 2021 as the swine inventory recovers.

A record 4.3 million tonnes of pork is expected to be imported in 2020, a 76 percent increase over the previous year. That is forecasted to fall to 3.7 million tonnes in 2021 due to increased domestic supplies of the product.

The U.S. has been the main beneficiary with sales up 531 percent through the first five months of 2020 versus a year ago. Canada’s sales are up 27 percent by comparison.

The FAS report said pork production may not return to pre-ASF levels as other proteins like poultry, beef, seafood and mutton have seen sizable gains in their share of the Chinese diet.

Pork consumption is expected to reach 45.1 million tonnes in 2021, which would be seven percent higher than 2020 but 19 percent lower than pre-ASF levels in 2018.

Consumers are wary of consuming pork. In addition, pork prices are expected to remain high due to rising production costs caused by increased biosecurity measures and a shift from feeding animals food waste to more expensive commercial feed.

COVID-19 has also put a dent in consumption because when Chinese consumers face economic uncertainty they tend to cut back on eating meat, said the FAS report.

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