Soybean demand may fall due to the crisis in Chinese pig farming

Grain producers and exporters are closely monitoring the problems in China’s hog farming industry. Pig farmers in China are suffering significant losses, which bodes ill for global demand. The crisis has already impacted various estimates of the country’s need for supplies from abroad. The Chinese government forecasts soybean imports of 95.8 million tons, while the US Department of Agriculture estimates 112 million tons.

According to analyst and former USDA economist Fred Gale, producers are incurring losses of approximately $25 per head when fattening hogs. By comparison, a year ago, when pork prices were high and feed prices were low, profits were $45 per head. These losses are due to low prices due to ample supply and weak demand.

Currently, Chinese hog farming companies are playing a survival game; those that can survive the downturn will remain in business, Gale said.

Over the past year, Chinese companies have canceled dozens of major pig farming projects, signaling a retreat from last year’s “rapid expansion plans.”

Furthermore, back in 2018, the Chinese government announced plans to reduce the use of soybean byproducts in pig feed in order to reduce dependence on imported American soybeans. At that time, the share of soybean meal in pig diets in China was estimated at 20%. This is significantly higher than the pork production rate in Europe and the United States.

However, some analysts believe that more important factors are currently influencing the international soybean and rapeseed markets. They are paying attention to changes outside of China.

In particular, Rich Nelson, an expert at Allendale Inc., emphasizes that Brazilian soybeans will sell at a lower price than American soybeans in the near future. If delivered three to four months after the Brazilian harvest, American soybeans will cost “several times more” than Brazilian soybeans.

Nelson is also concerned by reports that the US Environmental Protection Agency may reconsider its decision to exclude imported vegetable oil from the biofuel tax credit. If this happens, it could lead to a glut of oil on the US market, putting downward pressure on canola prices.

This is in addition to the pressure already being placed on canola producers by blocking them from the Chinese market due to a punitive 75.8% anti-dumping duty.

Tags: prices, soybean, rapeseed, China, pork