In this file:
· How China’s ASF crisis could affect the global pork sector
· Chinese pork production shortfall will require global production response
· ASF China: Global agribusiness suffers; estimates vary
· What's Bad for Pigs Is Good for Chickens?
How China’s ASF crisis could affect the global pork sector
Pig World (UK)
May 10, 2019
The sheer scale of China’s African swine fever crisis is already having a big impact on the global pork markets. Alistair Driver looks at how this could change the long-term global dynamics of the industry.
China’s African swine fever crisis is set to deliver a significant boost to the global pig industry, including, we hope, eventually in the UK. But while the impact on the market is already being seen, at least in most parts of the world, the long-term implications are less clear, as the Chinese authorities, industry and public try to get to grips with this unprecedented situation.
The numbers that have emerged over the past few weeks are staggering – official figures suggesting around 130 outbreaks, with just over one million pigs culled, do not do justice to the scale of a problem it is now evident has been massively under-reported.
Figures from China’s agriculture ministry show the sow herd was 21% down in March compared with a year earlier, while the overall herd has declined by 10% year-on- year to 375.25 million head and slaughterings are down by 5%.
It is not just the direct impact of the virus that is taking its toll. More than 80% of farms that have been hit are deciding not to restock as ‘panic’ hits farmers, Chinese Agriculture Ministry official Wang Junxun told a conference in Beijing, Bloomberg reported.
And the disease situation is only getting worse, sources from inside China are saying. Another indication of what is happening on the ground is that pig feed volumes are estimated to have dropped by 40%, equivalent to 300 million pigs, according to commodity markets analyst Arlan Suderman.
Official figures in major pig-producing region Shandong suggest a 33% decline in pig feed volumes, but the true figure, based on sources in China, could be higher than 50%, Mr Suderman said.
“I have never encountered anything of the scope of African swine fever before (in 40 years),” he told Bloomberg.
As a result of the shortages, wholesale pork prices in China are currently about 20% up on a year ago and are forecast to reach record levels in the second half of the year.
IMPACT ON PRODUCTIVITY ...
UNCERTAIN LONG-TERM EFFECT ...
Current situation ...
China projections ...
Chinese pork production shortfall will require global production response
May 9, 2019
The spread of African Swine Fever (ASF) into every province in China and throughout Southeast Asia in the last quarter has generated new concerns over the industry’s ability to respond to world demand warns latest Rabobank pork report.
Structural constraints on production growth in some regions, along with infrastructure and logistics capacity constraints, may leave the world with limited supply and mounting competition for potential trading partners.
“Mounting losses in the Chinese pig herd due to African Swine Fever are expected to drive a 16m metric ton deficit in pork supplies by year-end 2019,” according to Christine McCracken, Senior Analyst – Animal Protein. Until China gains control of the disease and is able to rebuild, however, it will need to look to other protein sources to meet consumers’ needs. China will need to expand its production of other proteins and ratchet up imports in an effort to fill the gap. Ongoing trade disputes and infrastructure limitations, however, may limit China’s options.
Other highlights from the Pork Quarterly Q2 2019 included:
China: Producers Remain Cautious on ASF Risk
As the industry surveys the full extent of ASF losses, the challenges of rebuilding its herd, and the potential for reinfection, markets are growing increasingly concerned with projected production shortfalls. Estimated production losses of 25%-35% are expected to create a supply gap that will be impossible to fill in the short run.
US: Industry Takes Precautions – Prepares for Strong Export Demand
After several months of disappointing returns, US hog producers are realizing a nearly USD 50 per head rebound in profitability. This reversal of fortunes is leading some top producers to reconsider expansion plans. While profitable, the industry remains exposed to potential disruption should ASF enter its borders, or should future access to China not be forthcoming.
Europe: Belgian ASF Outbreak Ongoing – Industry is Focused on Containment ...
Brazil: The Light at the End of a Long Tunnel ...
more, including link to report
ASF China: Global agribusiness suffers; estimates vary
Vincent ter Beek, Pig Progress
May 10, 2019
It is no secret that African Swine Fever (ASF) is having a considerable impact on the pig population in China. The global agribusiness is also starting to feel the consequences of the outbreaks. Experts disagree, however, as to how big the impact will be exactly – from 13% to over 50% reduction.
Over the last few weeks, it has become clear that the internationally operating supplying agribusiness is feeling the effects from the ongoing outbreaks of ASF in China.
Profitability will be zero due to ASF
For instance, the Netherlands-based animal nutrition company Agrifirm reported to feel the effect of ASF. In an interview to a Dutch radio station, the company’s CEO Dick Hordijk said that in his opinion the country’s pig inventory is down 50% in China. He said, “This is going to take years. China has always been an important market for us, also for our growth.”
Referring to the company’s activities in China he added, “For a couple of years, our profitability will be zero.”
He continued to say, “We’ve been surprised that China hasn’t been able to control this. Transports just kept going, even though those were amongst the first that needed stopping.”
The company has been active in China for over 20 years. In China, Agrifirm will now focus on other animal species, like dairy cattle, Mr Hordijk said.
Phibro: Weaker sales expected in China
Similar sounds from the United States where heard, where animal health company Phibro reported quarterly figures. In its review, Jack Bendheim, the company’s president and CEO, looked into the near future, saying: “Our business in China continued strong in the March quarter, as customers took programmed deliveries. Looking ahead, we do expect substantially weaker sales in China as African Swine Fever reduces demand. We have reset our expectations for our fiscal year ending June 2019 to reflect the headwinds we are facing, including, among other things, the disruption of African Swine Fever in China.”
In an interview with the US swine title Farm Journal’s Pork, the president and CEO also shared his opinion about the impact of ASF on China’s pig industry. In the interview it was stated that Mr Bendheim’s sources estimate more than 50% of losses in China’s herd.
What is the correct estimate? ...
FAO describes extent of the problem ...
Losses in Henan, Jilin, Shandong and Guangdong ...
USDA estimates: more conservative ...
China’s reporting? ...
more, including links, outbreak map
What's Bad for Pigs Is Good for Chickens?
By Motley Fool Staff, Motley Fool
via Nasdaq - May 09, 2019
The flu that's threatening half the world's pig population has driven sales of chicken 70% higher in China. Demand could rise in the U.S. as pork prices increase and the shorter span it takes to raise a chicken makes it easier for companies to capitalize on increased demand. That has led to major increases in stock price for some of the U.S.' bigger chicken producers.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center . A full transcript follows the video...
This video was recorded on May 7, 2019.
Nick Sciple: We've seen these restaurant companies talk about their commodity prices going up. Obviously, these folks that are downstream, that are selling these commodities, are benefiting from the increased prices. Particularly, as you mentioned, these chicken producers have been the ones who have benefited the most because they can ramp up their production to meet this demand the quickest. Chickens are the quickest to grow and bring to market. We've seen... these chicken producers have really surged. Just since the start of the year, you've got Sanderson Farms , one of the largest chicken producers in the U.S., up 55% year to date. Pilgrim's Pride , up 85% year to date. Tyson also heavily exposed to chicken, but more of a diversified meat producer, up 44%. And then JBS , which is traded on a foreign exchange, but also owns Pilgrim's Pride, based in Brazil, largest global meat packer in the world, up 86%. So you're seeing all these producers benefiting from this supply coming off the market. We talk about it on the Energy show sometimes, when oil supply comes off the market, obviously, the producers of oil really benefit. This is yet another example of that. These meat producers, really, the market has really come to them in a really nice way. They're starting to invest, to build up their supply. And there's a chance that going forward, they could take meaningful market share in China. These U.S. and Brazilian producers do have a cost advantage. Now that supply's off the market, there's a chance they could gain a foothold there. Really interesting!
Dan Kline: Yeah. It also becomes a matter of education. Now you're going to have people who were eating pork be forced into trying chicken or ground beef or fish or whatever else it is. Chicken is likely going to be the cheapest there. People might find that they're just as happy eating chicken as they were eating pork. There could be some long-term benefits of this.
The other issue is, when you're manufacturing and you have to increase capacity, there's a huge expense to that. If volume doesn't keep up, then you end up with idle factories. All you need to raise more chickens is space. You can adjust your production from a year-to-year basis based on needs without there being huge cost. Because at the end of the day, you hatch a chicken, raise a chicken, and then eat the chicken. There's no more chicken, it's gone.
Sciple: Right, yeah. This trickles down all over the market. This could be a multi-year, lingering issue. The breeding sow population in China down 21% year over year. But that doesn't mean rush out and buy these chicken producers right now. In the short term it's great for these folks if they can ramp up production quickly. However, the other side of the coin is true -- competitors can also ramp up their production quite quickly. Some other companies that could benefit, though you haven't seen a pop yet, you've got feed producers like Archer Daniels Midland and Bunge . As these chicken and hog producers in the U.S. ramp up their production, they're going to need to feed these animals. So there's some chance that we could see some trickle down.
But really, the best bet that I would see is going to be these diversified meat producers like Tyson and JBS. And Tyson has been putting some investment into that. Just last month, they secured approval for two plants in Iowa to begin shipping pork to China. That's the first such approval since 2016, according to the FDA. Really interesting opportunity for these meat producers, an industry that's really under-followed. Something to pay attention to for investors.
Kline: It becomes a race. We know there's X amount of pigs that aren't coming to market. If you can start today... but again, it's not a simple process. You have to produce the pigs and raise them and grow them, and there's actually a significant investment in feed and care and all the other things, and then you have to hope that a year later, whatever the exact life cycle is, there's still going to be that demand. So I think there's going to be some caution, and you're probably more likely to have a shortage of pork and higher prices, for the next couple of years, probably.
more, including audio [4:44 min.]