The most actively-traded soymeal futures’ contract on China’s Dalian Commodity fell by almost 5% today, to Yuan 3,162 ($486.51) per tonne.
One reason for the drop given by a local Chinese analyst is that "demand is quite weak" because "the market expects that African swine fever" (ASF) in the north of China will soon spread.
Does this portend a slower pace of soybean imports (with the consequent implication of lower prices) from Brazil, the US and elsewhere this season? Much depends on how bad this latest outbreak of ASF, which is lethal to pigs but harmless to humans, will be.
It is too early to tell whether China is facing the kind of devastation that wiped out half of its 400m-stong pig herd in 2018-19; precise information will be kept under wraps by the Chinese authorities for as long as possible.
The preferred animal feed for pigs is soymeal. Stock rebuilding in 2020 was a major factor behind China’s record soybean imports in 2020, of more than 100m tonnes, 13% higher year-on-year. Expectations that 2021 could see another record high might need to be reconsidered - fewer pigs means less animal feed.
The Chinese pork-producing industry has largely been a backyard, smallholder-dominated sector, where hygiene is not a high priority. ASF spreads very easily; the virus is highly contagious.
In addition, many pork producers are understandably anxious to prevent ASF from infecting their animals and have been using unauthorised privately-developed vaccines. Scientists believe these unauthorised vaccines have given rise to a new strain of ASF which, although not lethal, is more difficult to detect and reduces the size of healthy litters.
China’s agriculture ministry said this week said it would take tougher action to "prevent hidden risks caused by fake" ASF vaccines.
But according to one Beijing-based veterinarian the current ASF problem has been "quite seriously out of control for a while."
For China’s crucial pork industry - pork being the preferred meat on Chinese plates - 2020 was a year of recovery. It’s pork output fell by 3.3% last year and 21% the year before. In the first two months of this year its meat imports rose by more than 27% year-on-year, showing there was still a local meat shortage.
Last September China suspended pork imports from Germany, its biggest overseas’ supplier, after wild boars in east Germany were found to be infected with ASF. Several Asian countries followed suit but have now relaxed the import bans - but not China.
A report this week from the Beijing office of the USDA Foreign Agricultural Service stated that China’s pork production in 2021 will rise by 14% year-on-year which - if it comes to pass - should help the futures’ price of both soybeans and soymeal stay strong.
Over the past 12 months the continuation front-month Chicago soybean contract has risen by more than 65% and that for soymeal by more than 34%.
The platform on which this exuberance was based could however this year prove more fragile than expected, thanks to China’s ongoing ASF problems.