July 7, 2019

Cargill shuts China feed mills as ASF spreads

Cargill Inc shuttered feed mills in China in recent months partly because the rapid spread of African swine fever (ASF) has reduced demand, a company executive told Reuters last week.

The disease has killed more than a million pigs in China since the country's first reported case last August, cutting demand for feed ingredients such as soymeal and premixes sold by Cargill and other suppliers.

"This is not a six-month trend for China to recover," said Chuck Warta, president of Cargill's animal nutrition and premix business. "This is a 24-month, 36-month kind of resetting of the world's population of animals."

The outbreak accelerated closures of Cargill feed mills in coastal regions of China that were also prompted by a westward shift over the past decade of the areas in which livestock are raised, Warta added. Most of the facilities will not be re-opened even if China gets ASF under control, he said.

Three feed and animal nutrition plants were closed in the second half of the fiscal year ended May 31, representing an approximately 150,000-tonne reduction in capacity.

But Warta said that Cargill still sees a bright future for its animal nutrition business in China, Warta said. It is spending US$65 million to replace a premix plant in Nanjing and is also buying land for a similar facility in Henan province.

"We're idling some assets, but we're shifting those resources into a different type of production that is more positioned to serve the market," Warta explained.

Cargill reported earlier in the week that lowered swine feed demand in China, along with the ongoing US-China trade war and flooding in the US Midwest, led to a 41% slide in adjusted quarterly profits.

For the first half of 2019, China's soybean imports fell 14.7% from the same period last year as ASF reduced demand for swine feed, Chinese customs data showed on Friday.