China’s pig farmers grapple with soybean price spike as coronavirus hammers global commodity trade

Only a few months ago, Chinese farmer Fang Xinlun was focused on protecting his 4,000 pigs from African swine fever, a disease that has decimated the country’s hog herd. Fearful of contamination, he would not let relatives or friends visit his farm, nor would he eat at restaurants in case the food contained traces of the disease. But now he has a new and more pressing challenge: the skyrocketing price for soybeans that are the main ingredient in livestock feed. “We pig farmers are feeling an obvious price rise in pig feed. Since April, the price of feed has risen by about 5 per cent,” said Fang, who runs a small pig farm in Zhumadian in Henan province. Feed prices are expected to rise in the coming months. In short, they will be very unstable this year Fang Xinlun Fang’s farm sells about 300 live pigs every month at about 32 yuan (US$4.50) per kilogram. A successful sale of the herd would net him around 10 million yuan (US$1.4 million) this year, though his return on investment is growing more uncertain. “Feed prices are expected to rise in the coming months. In short, they will be very unstable this year,” he said, adding he also had rising staff costs. China’s agriculture ministry last month warned about the increasing cost of pig feed due to tighter supply of soybean meal and corn. Soybean prices in China jumped 22 per cent from 4,100 yuan to 5,000 yuan per tonne in March, according to a report by freetrade.com.cn, a website run by the Ministry of Agriculture’s Feed Industry Centre. Prices have remained volatile over the past few weeks, dropping slightly to around 4,800 yuan per tonne, data from the National Bureau of Statistics showed. Pan Chenjun, senior analyst for animal protein at Rabobank, said the spike in soybean prices in China was caused by an imbalance between supply and demand, as well as disruptions to global supply chains caused by the coronavirus. China imports more than 80 per cent of its soybean from abroad. “It is difficult to forecast [how long the high prices will last], in particular, how it develops in South America and the US in the coming weeks and months,” Pan said. The global trade in major commodities has taken a beating because of the coronavirus, with export restrictions imposed on commodities from rice to sunflower seeds to soybeans. Darren Cooper, senior economist at UK-based research firm International Grains Council, said China was suffering from a “lag effect” as soybean shipments were disrupted for a time by the rainy season in Brazil, while tight domestic supply of soybean meal was contributing to high prices. “April exports of soybeans by Brazil totalled a staggering 16.3 million tonnes,” he said. “This is an enormous number and highlights that the coronavirus pandemic has not had too big an impact on soybean exports from the world’s major sources – especially Brazil, with the bulk of supplies headed to China.” China’s soybean imports in the first quarter rose 6.2 per cent year-on-year to 17.792 million tonnes. But only 4.28 million tonnes were imported in March, the lowest level since February 2015, according to customs data. China bought 2.1 million tonnes of soybeans from Brazil in March, a fall of 24.8 per cent from the same period a year earlier. Data from the US Department of Agriculture (USDA), meanwhile, showed China bought just 882,000 tonnes of soybeans from its second biggest supplier, the United States, in the first three months of the year. The figure was a dramatic fall from the 6.21 million tonnes bought in the same period a year earlier. Analysts said that China’s soybean demand would be influenced by how fast its hog herd has recovered from swine fever. Livestock feed accounted for about 83 per cent of China’s overall soybean consumption, while soybean products such as tofu only made up about 14 per cent in 2019, according to data from the agriculture ministry. African swine fever destroyed as much as 60 per cent of China’s pig population last year, weakening consumption of soybean meal and causing demand for the legume to fall. But China's pig population has begun to rapidly recover since then. China’s state grain stockpiler Sinograin released 500,000 tonnes of soybeans from its reserves last month to state-owned crusher COFCO to sustain output of soybean meal amid delays in shipments from Brazil, Reuters reported recently. There are also signs that China’s soybean importers have been strengthening their purchases from countries other than Brazil in the past few weeks. Under the terms of the US-China phase one trade deal, Beijing is expected to lift its purchase of American soybeans. Chinese importers have ramped up their purchases of US soybean since April, data from the USDA showed. Chinese buyers booked deals to buy 1.41 million tonnes of US soybean between the start of April and May 5, according to USDA data.