China warns of “serious” impact of swine fever, cuts meal demand 5%

28 Feb 2019 | Andy Allan, Johnny Huang

A Chinese government agency said on Thursday that the situation regarding the current outbreak of African swine fever (ASF) is more serious than initially thought, estimating demand for soymeal will fall 5% as replenishment of pig stocks is “very low”.

China’s National Grain and Oil Information Centre said in an emailed report that it had expected soymeal demand to fall almost 5% to 66.8 million mt this marketing year compared to last, mainly as a result of the outbreak.

“The situation is more serious and the rate at which pig production capacity is falling exceeds our expectations. Farmers have greater concerns about the epidemic and have strong uncertainty about the prospect for pig farming,” the agency said.

Outbreaks have been reported on more than 100 farms since August 2018, with many analysts predicting China’s pig population – estimated to be between 400-600 million heads – will fall by 15-30% this year as farmers become reluctant to breed the animals.

With soymeal the main protein source for pig-feed, soybean crush margins have remained in the red for the past three months, according to Agricensus data, which uses its own APM-6 assessment versus Dalian futures to calculate the profitability.

Such poor margins have also hit demand for soybeans, with Chinese imports down 22% this marketing year (October through January) compared to last, although some of that decline will be attributed to a hike on imported soybeans from the US.

Nevertheless, traders in Geneva and sellers in Brazil have expressed surprise at the lack of demand from China and some analysts expect soymeal demand to fall by 10%.

Not a year for the pig

In a sign of growing concern about the spread of the disease, Beijing is reportedly looking at plans to carve up the country into separate self-sufficient zones to contain the rate of infections.

According to Reuters newswire, which quoted draft plans that it has seen, the aim is to “further strengthen… prevention and control measures, establish long-term effective animal disease prevention system, protect the hog sector and stabilise market supplies”.

The move, which is planned to be trialled in the southern central zone of Fujian, Jiangxi, Hunan, Guangdong, Guangxi and Hainan, comes as further outbreaks of the disease were diagnosed on large-scale farms.

The move to contain the disease comes as dozens of videos emerge online of thousands of pigs being buried alive as farmers reportedly seek cheaper ways of mass culling.

Officially, China has culled more than 1 million pigs over the past few months, although analysts think this figure is much higher given the scale of the outbreak.

Analysts expect China’s pig herd to fall between 15-30% this year as farmers refuse to breed pigs due to the government culls, and are fearful of not being compensated adequately if their pigs contract the disease.

As well as feed for pigs, soymeal is used as animal feed for China’s vast poultry and aquaculture industries.