Infographic - as China recovers from Asian Swine Flu pig herd rebuilds and soy demand rises

China set for record-busting soybean demand as African swine fever wanes

It’s hard to believe that a couple of years back, China was reeling from the African swine fever epidemic, a disease that is 100% fatal to the pig population.

With ASF relentlessly ravaging China’s pig herd, pork prices in the world’s second largest economy nearly doubled year on year on tight supply, and food inflation spiked 17% on the year in December 2019.

Pork is a staple food in China and a large segment of population was not able to consume it as pigs became too expensive to purchase. The surging pork prices quickly spiraled into a national concern.

This situation now seems like a distant memory in 2021 as China has swiftly recovered from the epidemic, amid the government’s strict quarantine measures and pig farming guidelines to control the disease. Consequently, pig numbers have increased remarkably.

According to China’s Ministry of Agriculture and Rural Affairs, or MARA, country’s live pig population is expected to cross 440 million heads in 2021, compared with 310 and 360 million heads in 2019 and 2020, respectively.

As China processes over 80% of imported soybeans into animal feed, the import demand forecast for the oilseed has shot up simultaneously with rising pig numbers. The world’s largest soybeans importer is embarking on a record-setting shopping spree for the oilseed, amid the abating ASF.

According to S&P Global Platts Analytics, China is forecast to import all-time high levels of 100 and 104 million mt in 2020-21 and 2021-22 marketing years (October -September).

ASF resurgence worries unfounded

ASF has not disappeared completely in China. Cases of this highly infectious disease have been reported at regular intervals in the past couple of years. But they have been labelled as isolated events by both the government agencies and private consultancies.

In addition, there were concerns among market participants regarding the resurgence of ASF in early 2021 as several cases were reported in China in the first four months of the year. However, agricultural consultancies have termed such concerns as purely speculative.

“We don’t see the 2021 ASF cases as a serious threat to China’s pig herd since the infections have not spread from farm to farm as they did in 2018-19,” Shanghai-based commodities consultancy JCI China said. Also, the government has become far more proactive on disease control, it said.

Infographic - as China recovers from Asian Swine Flu pig herd rebuilds and soy demand rises
Click for full-size infographic

According to the Chinese government’s guidelines, once an ASF case is confirmed, pig farms must report to the local authorities and quarantine the herd immediately.

In total, close to 15 ASF cases have been reported since early 2020 across China’s hog farms and only a few hundred pigs have been slaughtered as a precautionary measure so far, a Beijing-based agricultural consultancy said. Therefore, the epidemic has had a negligible impact on country’s swine population and animal feed demand since early 2020, it said.

This is in stark contrast to 2019 when the ASF epidemic devoured almost half of China’s pig population. The epidemic, which was first reported in Shenyang, a northeastern city of China on August 3, 2018, swept across the rest of the country at a ferocious pace and wiped out nearly 250 million pigs by the end of 2019. China’s soybean demand also witnessed a steep decline as consumption of soybean meal-based animal feed plunged to one of the lowest in a decade.

In 2018-19, China imported 82.5 million mt of soybeans, down 14% year on year, data from the US Department of Agriculture showed. And with collapsing soybean demand, prices of the oilseed tumbled as well. S&P Global Platts’ SOYBEX FOB Santos and SOYBEX FOB Paranagua prices dived to their lowest value ever of $325.66/mt and 326.02/mt, respectively on April 28, 2019.

Platts SOYBEX prices and China pig population are correlated

Farm consolidation to drive soy demand

The Chinese government realized in 2019 that the pork industry in the country were too fragmented and littered with small pig farms, which made them extremely vulnerable to diseases. According to a report from Barcelona-based Grain, a non-profit organization, nearly 40 million small-scale pig farmers were the hardest hit from the ASF in 2019.

In addition, these small farms were believed to be swill feeding their pigs, a root cause of ASF. Swill feed consists of food waste and is prohibited in China.

The government came to the conclusion that the disorganized structure of pig farming in China was a major reason behind the ferocity of the ASF outbreak in the country, and in response aggressively pushed for pork industry consolidation.

“Over 15,000 large-scale pig farms resumed operations in 2020, with another 13,000 newly-built large farms added into the production chain,” a MARA official said.

China’s pig farming sector has witnessed rapid consolidation since late 2019 as small-scale farms were amalgamated into big entities under a government directive and over $30 billion were invested in the consolidation process, a market source said.

China is aiming for at least 65% of pork from industrial-scale farms by 2025, a government council report said in September 2019.

With rapid pork industry consolidation in China, the large-scale pig farms will need more protein-rich soybeans in the animal feed, the USDA said. That means the country’s soaring soybean demand is expected to be sustainable in coming years, it added.

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