USDA’s Foreign Agricultural Service staff in Beijing recently released a report detailing some of their observations from the China Feed Industry Expo and Conference, held earlier this year in mid-April. FAS reports that African Swine Fever (ASF) outbreaks were a hot topic, with several reports of the disease gaining a stronger foothold in northern provinces. I’ve summarized the key takeaways and included additional information below, which also covers the accuracy (or lack thereof) of Chinese data, evolving feed trends, and moves to diversify supply chains. The full report is HERE.
African Swine Fever: FAS staff says contacts noted steep declines in sow herds in the northeastern provinces of Henan (-40%) and Shandong (-50). They also attributed recent decreases in pork prices to producers selling their animals, some still underweight, in an effort to reduce their risk of losses from ASF. Post says reports indicate southwest China is less impacted by ASF currently. FAS contacts suggest the heaviest losses from the most recent round of ASF will be felt by small and family-sized swine operations, which face numerous other hurdles. Amid falling pork prices, high feed prices, and pig losses, smaller farms will make no profit according to meeting participants. While larger operations will suffer losses, their larger capital reserves will allow them to continue expanding their market share over small farms. Additionally, some operations that haven’t grown since the first ASF outbreaks may choose to do so now.
Statistics: A speaker from the Ministry of Agriculture and Rural Affairs (MARA) said damage from the ASF resurgence has not been severe, claiming instead that some regions suffered from piglet diarrhea in early 2021. According to MARA, this resulted in a month-on-month decline of -9.9% in the new-born piglet survival rate in January and an additional -1.35 in February. However, the survival rate increased +4.4% in March compared to February 2021. MARA indicated that the number of new-born piglets was more than 30 million head in March 2021, compared to 16 million head in March 2020. MARA data also showed the national sow inventory had recovered to 95% of pre-ASF levels by the end of 2021, with more than 400 million head. The agency expects the hog herd to fully recover to pre-ASF levels by June or July, with slaughter pace resuming normal levels by November.
That speaker also stressed that the agency’s swine data is reliable, which comes amid a high degree of skepticism about China’s official numbers. Critics of MARA’s swine data believe the numbers are inflated and point to things like a +22% rise in pork imports in Q1 2021, a continued high pace of frozen pork reserve injections, sustained high prices for piglets, and persistently low sow productivity. It’s worth noting that a government investigation into China’s Ag Ministry last summer uncovered widespread statistical fraud. The Ministry was chastised for erroneous statistical surveys and a lack of standardization, among other things.
Feed Trends: China produced 252.8 million metric tons (MMT) of feed in 2020, up +10.4% from 2019. Out of China’s total feed production, compound feed and concentrate feed production accounted for 230.7 MMT and 15.2 MMT respectively, or +9.8% and +22% higher than in 2019. MARA attributed this increase to swine herd recovery following the ASF outbreak, along with an increasing proportion of large-scale swine farms in the sector which is pulling along professional feed utilization.
Trading company representatives shared that they are diversifying their suppliers due to concerns about U.S.-China relations as well as potential supply chain disruptions. One example is the continued import of whey powder from the U.S., supplemented by the addition of EU suppliers to reduce both political and commercial risk. Traders also reported importing record volumes of U.S. feedstocks, including soybeans, corn, and sorghum. However, feed companies report they are substituting more wheat and rice for corn. The substitution rate of wheat is reportedly as high as 30% in some areas. (Sources: USDA, DimSums, Bloomberg)