African Swine Fever continues to spread through China, but the tallies on death tolls are misleading to some analysts. The disease hit a major livestock production province of Shandong. Even though there’s been one reported case, Arlan Suderman of INTL FCStone says the official reports aren’t accurate.
“We see the breeding herd in Shandong down 42%, even though they’ve only had one reported case in Shandong,” said Suderman
Suderman said the larger loss numbers aren’t coming from the Chinese government, but from private sources, and INTL FCStone sources in China show cuts to the hog herd in the country could be steep.
“We’re looking at hog feeding right now being down at least 30%, some of the numbers suggest a lot more than that, we’re (INTL FCStone) going with 30% right now,” said Suderman. “That’s equal to the number of hogs we feed in Canada, United States, Mexico and Brazil on an annual basis.”
As numbers continue to roll out, and the impacts of ASF are fully realized, it could be a bullish demand story for all proteins as the industry could face a protein shortage this year.
“It really creates a meat shortage globally of around 12.3 million metric tons, if we’re right on the 30 percent reduction—the reduction may be more than that,” said Suderman.
Suderman said with that type of reduction in meat around the globe, it will be hard to replace what’s lost. The shortage could also bode well for beef.
“You can’t lose sight of the fact the Chinese have increased their meat production significantly in the last six or seven years,” said Matt Bennett, of AgMarket.Net. “USDA told us 20%, and so obviously as they (Chinese consumers) get a little bit more money in their pockets, their taste preferences have shifted to beef.”
Bennett said the beef market is heading into a time period where demand picks up in the summer months, so the bullish story could continue to brew for cattle prices. The anticipated support could start hitting the markets in the next 6 to 12 weeks.
While INTL FCStone is forecasting poultry production in China to grow 8% in 2019, he says it’s not such good news for soybean farmers. Suderman said the severe cuts to hog breeding farms in China will continue to weigh on soybean demand, even if poultry production grows.
“You put the two together and that still suggests a 22 mmt reduction in soybean demand,” said Suderman. “Some of that is being masked by China buying soybeans to influence trade talks to go into their reserves.”
Suderman thinks if the most recent soybean purchases go toward China’s reserves, China’s appetite for soybeans could fall again next year, even if the current trade disputes are resolved.