April 9, 2019

China's soybean meal demand could fall for first time in more than 10 years


For the first time in more than 10 years, demand for soybean meal is expected to decline in China as the African swine fever disease continues to ravage parts of the country, Bloomberg reported.


The recent swine fever outbreaks could further push down Chinese soymeal futures, which have already dropped 25% from an October high. This development, along with shrinking hog herds and significant economic losses could inflict long-term damages on Chinese pork businesses.


Meanwhile, hog futures in Chicago, US, rose due to the increased possibility of import demand from China.


In the short term, supply and demand for hogs is balanced, but may not be so for the long run. The Animal Husbandry & Veterinary Bureau of China's Shandong province expected supply to tighten, a trend that would last for a long time.


The organisation also noted that farmers are selling pigs at a faster pace and not replenishing stocks. Darin Friedrichs, a risk management consultant in INTL FCStone's Asia commodities division, said that pig farmers in China are wary of restocking due to the fear of "getting hit again."


China's soymeal demand may drop more than 5% to 66 million tonnes in 2018-19, the first contraction after 11 years of growth, according to the China National Grain and Oils Information Center.


Consumption could potentially slow the drop as soy use in other types of livestock farming have increased, especially in the northern province of Hebei, said Li Xinxin, a soymeal trader at a Chinese crushing plant.


Internationally, the swine fever crisis threatens to worsen, with the disease already hitting Vietnam, which shares its northern border with China.


The livestock feed sector of Vietnam gets its supply of soymeal mostly through imports. The country had bought 4.8 million tonnes of the grain from overseas in 2018, according to Nguyen Quoc Dat, vice head of the Vietnam Animal Husbandry Association.


This year's purchases may be affected slightly if Vietnam is able to keep the spread of swine fever under control.


- Bloomberg