China swine fever outbreak to curb its soybean imports

China's imports of soybeans are set to drop as an outbreak of African swine fever hits its huge pig herd and saps demand for the animal feed ingredient
calendar icon 27 November 2018
clock icon 4 minute read

African swine fever, deadly to pigs but not harmful to people, has spread rapidly through China, with more than 70 cases reported across farms since early August.

That and already large soy inventories are curbing appetite for beans in what is by far the world's biggest importer of the commodity, traders and analysts said, meaning buyers are unlikely to need to return to importing US crops anytime soon.

"Had it not been for the swine fever, China would have faced a shortage of beans early next year," said a Beijing-based executive at an international trading company.

"Now it seems that soybean processors will be able to do without US beans," he added, declining to be identified as he was not authorised to speak with media.

Washington and Beijing have been locked in a trade war, with soybeans one of the commodities at the heart of the conflict.

After imposing retaliatory tariffs on US soybean imports, China has been taking mainly Brazilian beans, threatening to leave a bumper US harvest piled up in storage or rotting in fields.

But as overall Chinese demand for soybeans slows, Brazilian price premiums are also suffering, plunging to 85 cents a bushel <S-BRZPAR-B2> over the January Chicago contract from an October-peak of $2.75.

"China has not been taking US beans for months and now demand for Brazilian soybeans has also dropped significantly," said a Singapore-based trader at an international company which owns oilseed processing facilities in China.

Large domestic inventories are also playing a big part in the faltering appetite for soy.

China's soybean stocks <CFD-SBSTK-NATN> are at 7.45 million tonnes, the highest for this time of the year in a decade.

"The whole northeastern region has enough soybeans as there are lots of domestic supplies and crushers here have stored Brazilian soybeans," said a manager at a crushing plant in Liaoning province in the northeast, one of China's key areas for feed and pig production.

December drop

China's December soybean imports are expected to drop 37 percent to 6 million tonnes from 9.574 million tonnes a year ago, two of the trade sources estimated.

China brought in 6.92 million tonnes of soybeans in October, with 94 percent of that volume coming from Brazil.

Another trader, based in Beijing and who declined to be identified, estimated Chinese soybean arrivals in the first quarter of 2019 at 11-12 million tonnes, which would be down from 19.6 million tonnes at the same time this year.

"Farmers will be less willing to replenish their herds, with the African swine fever outbreaks spreading in China. Soymeal consumption next year will be affected as a result, said Yao Guiling, an analyst with consultancy China-America Commodity Data Analytics.

Although not all industry sources said the disease would have an immediate impact on demand for soy as restrictions on transporting livestock are making it more difficult for farmers in some areas to truck pigs to slaughterhouses.

Meanwhile, focus in global soybean markets is turning to this week's G20 summit in Argentina, with people looking for any signs the trade war could end or even escalate.

"It is a fact that demand for Brazilian beans has slowed down in the last 30 days but I would say this is much more due to expectations regarding the G20 meeting," said Frederico Humberg, chief executive officer of Sao Paulo-based grain sourcing company AgriBrasil.

Farmers in the South American agricultural powerhouse have boosted planting this year, eyeing Chinese demand.

Brazilian soybean farmers in the key state of Mato Grosso may start harvesting the crop before the end of December, agribusiness consultancy AgRural said, as the pace of sowing has been the fastest in history.

Reporting by Naveen Thukral and Hallie Gu. Additional reporting by Dominique Patton in Beijing and Ana Mano in Sao Paulo.

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Emily Houghton

Editor, The Pig Site

Emily Houghton is a Zoology graduate from Cardiff University and was the editor of The Pig Site from October 2017 to May 2020. Emily has worked in livestock husbandry, and has written, conducted and assisted with research projects regarding the synthesis of welfare and productivity of free-range food species.

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