ASF China: Global agribusiness suffers; estimates vary

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?

Having given the estimate of 50% (or worse), both captains of industry paint a substantially grimmer picture than e.g. the Rabobank or the United States Department of Agriculture (USDA).

This week, agribusiness bank Rabobank produced a new update on the impact of the disease the swine population in China, in which it repeated its estimate of a reduction by 25-35% of the swine herd.

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The new update also included an expectation that this will all lead to a deficit of up to 16 million metric tonnes of pork by the end of the year 2019.

The poultry industry, according to Rabobank, is likely to benefit from these developments, with a 10% growth in poultry supplies in 2019. That is despite the fact that China is also suffering from outbreaks in highly-pathogenic Avian Influenza (HPAI). The bank does not expect a large contribution from other protein sources ‘to offset the protein shortfall’.

FAO describes extent of the problem

Another more conservative estimate came from the UN Food and Agriculture Organization (FAO). In the FAO Food Outlook, released this week, the FAO stated that the viral disease “could cause a near 20% decline in China’s hog inventories”, adding that the global impact is likely to be complex.

In the outlook the FAO wrote how its monitoring efforts are undertaken in close cooperation with local authorities and China’s Ministry of Agriculture and Rural Affairs (MARA).

In the report, the FAO said, “While official sources confirm a rapid spread of the disease, both the speed and severity of the spread could prove more pronounced than currently assumed. For instance, reports by government officials, industry sources and news media suggest that around 20% of China’s pig inventories had already been culled in the 1^st few months of 2019, amid fears of ASF spreading more rapidly. In many provinces, cull rates in excess of 20% have been reported.”

African Swine Fever now resulting in pig meat shortages in China as the cold storage reserves are depleting. This video shows consumers at empty shelves in Hainan China queuing for their pork at empty shelves. #AfricanSwineFever pic.twitter.com/rL9Wgbdp5C

— GLEN ILLING (@GI_RTech) May 8, 2019

Losses in Henan, Jilin, Shandong and Guangdong

The outlook reports a year-on-year reduction of the sow inventory in Henan province by 26% late January. In addition, in Jilin province, the MARA team found the swine inventory to be down by 28% from the previous year. On top, the Veterinary Bureau of Shandong province reported a 41% ‘landslide’ decline in sow numbers between July 2018 and February 2019 at the 33 breeding farms monitored by the bureau. Last but not least, in Guangdong, hog inventories are now reported down by 20% from a year earlier.

In an accompanying press release, the FAO stated: “Trends point to likely higher pigmeat prices and lower feed prices. This ‘rare combination of events’ stands to benefit the farm sector in Europe, which will benefit from lower feed prices, as well as pork producers in the US where export capacities are in place to increase supply swiftly. At the same time, the ASF crisis is a boon for those who raise chickens, particularly major exporting countries such as Brazil.”

These estimates would be corroborated by indirect evidence from national output statistics, the FAO said.

African Swine Fever is having a large impact on the country’s swine business. Photo: Henk Riswick

USDA estimates: more conservative

Earlier, in March, the US Department of Agriculture’s GAIN Report, usually very well informed, expected a mere 13% hog inventory drop, leading to a 33% increase in pork exports from the USA.

China’s reporting?

The uncertainty about the real impact is a result of the lack of a proper identification and registration system for livestock in China – plus the existence of many backyard farming. In addition, the Chinese authorities have reported only 133 outbreaks to the World Organisation for Animal Health (OIE) since the outbreaks started in August 2018. It is commonly believed that that those figures are only the tip of the iceberg.