Cargill takes action in China as African swine fever shows no sign of abating

Cargill takes action in China as African swine fever shows no sign of abating
Sam Chambers July 16th, 2019 https://splash247.com/cargill-takes-action-in-china-as-african-swine-fev...

The raging African swine fever that has already seen hundreds of thousands of China’s pigs culled shows no sign of abating with dry bulk supply chains facing changing global trading patterns on the back of the deadly disease that is now spreading across other parts of the globe.

Latest data shows that China’s hog herds, the world’s biggest, shrank the most in June in at least a year, plunging 26% from a year earlier, the largest contraction since the country first reported an outbreak of the virus in August last year.

A report released earlier this month by the Organisation for Economic Co-operation and Development (OECD) and the United Nations’ Food and Agriculture Organization (FAO) forecast a 5% fall in Chinese pork output this year, while pork imports were forecast to rise to almost 2m tonnes from an average 1.6m tonnes per year in 2016-2018, potentially good news for those in the reefer trades. Other analysts have predicted a fast more steep drop in Chinese pork output this year.

Dutch lender Rabobank has forecast the Chinese swine herd will decline between 20% and 30% in 2019 from the previous year.

Noel White, the boss of Tyson Foods, America’s largest meat-packing firm, said in Maythat in his 39 years in the business he had “never seen an event that has the potential to change global protein production and consumption patterns” as much as China’s epidemic of African swine fever.

China has 56% of the world’s pigs, according to data provider Statista.

“From a dry bulk shipping perspective, this is a significant amount of lost soya bean tonne-miles, mainly from Brazil and the US. On the other hand, reefer containers may benefit from increased imports of pork to make up for the lost domestic production at an unchanged level of consumption,” BIMCO said in a recent report.

A recent report by the United States Department of Agriculture (USDA) estimated China’s soybean imports are estimated to fall to 84m tons in marketing year 18/19 and 83m tonnes in 19/20, compared to 94.1m tonnes in 17/18. Meanwhile, China’s rapeseed imports from Canada are expected to fall by almost 40% during the second half of 18/19 compared to the same period in the previous year, due to reported phytosanitary concerns.

Agribusiness giant Cargill has closed several animal-feed mills in China in recent months.

“This is not a six-month trend for China to recover,” Chuck Warta, president of Cargill’s animal nutrition and pre-mix business, said in an interview with Reuters earlier this month. “This is a 24-month, 36-month kind of resetting of the world’s population of animals.”

Warta said most of the shuttered facilities will not be re-opened even if China gets the disease under control.

Cargill closed three feed and animal-nutrition plants in recent months, representing an approximately 150,000 tonne reduction in capacity.

The disease has spread across Southeast Asia and is now entering Europe with cases being reported in Belgium and Bulgaria