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Fortunes of U.S. soybean farmers tied to health of China’s pig industry

Article cover photo
ISA leaders believe China’s hog industry will evolve rapidly as it adopts more efficient production practices and races to keep up with changing consumer demographics.(Photo: Aaron Putze/Iowa Soybean Association)

By Aaron Putze, APR, ISA communications director

   

(Editor’s note – Several Iowa Soybean Association leaders recently participated in a week-long trade mission to China. Data and insights included in this article were obtained from discussions held in urban centers. No farms were visited by the delegation while in China).

China’s hog industry – regardless of trade disagreements and impasses – will evolve rapidly as it adopts more efficient production practices and races to keep up with changing consumer demographics and preferences.

Iowa soybean farmers, in recent meetings with oilseed, grain and meat industry officials in China, were reminded that America’s farmers have a lot riding on these changes.

“The pace and scale of growth is stunning,” said Lindsay Greiner, one of four Iowa Soybean Association (ISA) representatives who engaged in a week-long discussion with key soybean, grain and meat industry officials while in China last month.

“Given how quickly the industry is evolving, you have to spend time here talking and meeting with the people who live and work here,” Greiner added. “That’s because you’ll learn things that won’t be broadcast on the evening news.”

ISA Vice President Tim Bardole and ISA Market Development Director Grant Kimberley joined Greiner for discussions with Chinese business leaders representing more than 50 percent of the country’s total soybean purchases.

While every interaction was meaningful, it was a conversation with Chinese meat and poultry producers and feed suppliers in Guangzhou (a city of 13-million-plus residents) that proved to be the most insightful.

Wu Qiu Hao, immediate past chair of the Guangdong Province’s livestock association, said African Swine Fever’s (ASF) impact on the country’s pork industry will have tremendous reverberations on the fortunes of U.S. farmers.

He said much is riding on how the province – a major importer of soybeans, manufacturer of soybean meal and meat producer – and the country manages and adapts to the disease.

In 2018, Hao estimated nearly 420 million hogs were on feed in China. Nearly 700 million head were marketed, or roughly one pig for every two Chinese residents. Each sow farrows an average of 17-18 hogs per year; five more per sow on more efficient farms.

Estimates vary

ASF, a virus spread swiftly by ticks and the movement of animals, vehicles and humans, has decimated China’s hog herds and the families who raise them. While estimates of the impact vary, the consensus was as least 12 percent of the nation’s pigs have been killed by the disease. The nation’s sow inventory has been similarly affected.

The numbers will likely get worse before they get better, officials fear.

When ASF was discovered in northern China in August, it took just three months for it to migrate to the country’s southern region, or a distance of almost 2,000 miles. Hogs on small farms are at most risk to contract ASF. The disease can kill within two days of symptoms first appearing. There is no effective vaccine to treat or prevent the disease.

The country is working diligently to limit the spread of the disease, say officials with keen understanding of the meat industry. Efforts include reducing the distance live animals can be transported and enhanced vigilance and biosecurity measures around unaffected herds.

Since meat can also transport ASF, the government is recommending pigs be slaughtered where they are raised, thereby shipping frozen rather than fresh pork to retailers.

No safeguard, however, is 100-percent effective.

As a result of ASF’s impact, Chinese feed producers estimate the country’s output of fresh pork will decline from 54 million metric tons (mmt) in 2018 to around 50 mmt this year due to ASF.

The impact of the disease in Guangdong province, a major pork producing region located in south China, has been particularly severe. Hao said plans to expand hog production from 37 million to 50 million head in the province by 2025 have been shelved as the industry focuses all its resources on minimizing ASF’s severity and spread.

Less soy demand

Fewer hogs to feed means less demand for raw materials like soybeans, Hao said. This will affect the price of feed materials, with soybean meal prices turning lower.

Analysts said China’s need for soybeans could drop by at least 5 million metric tons – or roughly 5.5 percent – this year due to ASF.

But not all will be losers as the country battles ASF.

Chinese farmers whose herds remain healthy “will make a lot of money this year,” said Hao.

So, too, will U.S. pig farmers as they help fulfill China’s needs for protein. As much as four million pounds of pork may be sourced from America this year, with domestic pork prices responding to the increased demand.

The downside and duration of ASF’s impact on the country’s need for soybeans and soybean meal could also be limited, Hao noted.

Soybean inclusion rates in pig feed rations are typically 18 percent and rarely less than 15 percent. The amount, Hao said, is driven largely by the market price of pigs. Higher pork prices stimulate higher soybean meal inclusion rates as the feed ingredient is the most efficient feed source.

Meanwhile, farmers with healthy herds will be inclined to feed animals to heavier weights to capitalize on higher pork prices. That will boost soybean meal consumption and prices.

Poultry, fish demand grows

When it comes to meat consumption in China, pork is king. It accounts for roughly 63 percent of total Chinese meat consumption.

As consumers shy away from pork due to concerns about ASF, protein preferences may turn to other sources.

Poultry currently accounts for around 25 percent of meat consumption with beef and lamb totaling a combined 7 percent. As pork production remains pressured, poultry and fish will likely see the biggest gains in market share. The trend will be fueled by an increasingly urbanized population.

“Consumption of pork per capita has gradually decreased in urban areas – it’s a change in the consumption structure as living standards improve,” Hao said. “For whatever the reason, there’s a correlation between people moving to the cities and eating more chicken and fish.”

No one knows the future of ASF presence in China and how the nation’s hog herds will ultimately be impacted.

But one thing Hao does know for certain is that soybeans will remain a key ingredient for the nation’s meat industry.

“So keep raising soybeans,” he added with emphasis.

   

Contact Aaron Putze at aputze@iasoybeans.com.

For media inquiries, please contact Katie Johnson, ISA Public Relations Manager at kjohnson@iasoybeans.com or Aaron Putze, ISA Communications Director at aputze@iasoybeans.com

For permission to republish articles or to request high-res photos contact Aaron Putze at aputze@iasoybeans.com. Iowa Soybean Association | 1255 SW Prairie Trail Pkwy | Ankeny | IA | 50023 | US

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