Few might be aware of the impact African swine fever has on international commodities markets, but the deadly pig disease is spreading across the world and it will have a major impact on global soybean demand. In particular, China has seen an outbreak in the condition, drastically impacting the nations pig herds which will, in turn, cut down on soybean imports from the U.S.
As a nation which consumes half of the world’s pork supply, getting rid of the spreading disease and rebuilding existing pork herds could take several years according to some analysts. With China being the largest importer of soybeans mainly from the U.S., the demand for the commodity as a feed for pigs is expected to decline drastically according to Bloomberg.
While soybean has been seen as the poster-child commodity between the ongoing trade conflict between Washington and Beijing, the spread of the African swine fever will end up impacting overall soybean consumption much more than any trade war would have otherwise done. Both the U.S. Department of Agricultural and other groups are warning of significant declines in Chinese imports.
“African swine fever is the bigger story as it relates to demand. It will impact us for a crop year or more. This is not a 2019 event,” said Corey Jorgenson, president of The Andersons Inc, a major buyer of corn, soybeans, and wheat.
The disease, first spotted in Africa, kills most pigs within ten days of infection. Over a million hogs have been killed as a result of 122 outbreaks across 30 provinces, with the disease showing little signs of slowing down. Globally, the swine fever was a problem in Russia and eastern Europe for most of this decade, but so far, the past couple of years has seen a drastic explosion in the number of outbreaks in Asia.
Pork production in China is expected to drop around 30 percent this year, a figure equivalent to Europe’s entire annual production. With the number of breeding sows already declining 21 percent in comparison to last year, many agriculture giants are expecting the worst in terms of their exports.
“We are seeing that the Chinese hog producer today is not repopulating those facilities because either they are afraid they are going to get African swine fever from a neighbor or it’s still in the building and they can’t get it cleaned,” added David Williams, director at Informa.
Chinese soy imports have declined 14 percent in the first quarter of 2019, partially fueled by the ongoing trade dispute between the two nations. Soybean imports in China are also expected to decline for the first time in 15 years down to 88 million tons, with that figure potentially dropped to as low as 71 million tons in 2020.
However, while soybean markets will be hurt by the lack of Chinese buyers, domestic pork production is expected to increase around 20 percent this year, while shipments from the EU are expected to rise between 10 to 15 percent. China’s appetite for pork, which is already strong, is expected to pick up as well, having already purchased a record 77,700 tons of U.S. pork despite the 25 percent tariffs. Overall, hog futures are already up 21 percent this year in response to this rise in demand.