The African swine fever (ASF) outbreak in China’s impact on Archer Daniels Midland (ADM) will likely be felt more in 2020 than it has to date in 2019, ADM Chief Financial Officer Ray Young said.
Young, speaking on November 13 during the Stephens Fall Investment Conference, addressed the ASF situation, which is said to have caused China, the world’s largest producer and consumer of pork, to have lost half or even 60% of its pig herd.
Young noted that the pig losses appear to be greater than ADM had earlier projected near the beginning of the year, and evidence of that is being seen in the global protein industry.
“You’re starting to see, as an example, a lot of the U.S. packers converting their plants in order to ship carcasses over to China. You’re starting to see China now starting to purchase meats from Canada,” said Young.
“You’re starting to see significant export activities of meats coming from Brazil and coming from the EU into China. The deficit situation in China, in terms of pork, is in my mind starting to result in a significant pull of animal protein from around the world, and that should translate into incremental soybean meal demand.”
While animal protein production in China has declined, it is expected to expand in the United States, which will be good for soybean meal markets. The gradual rebuilding of pig herds in China will also be a positive, Young said.
“As we begin to rebuild herds, and feed more animals, we’re going to see an uptick,” Young said, which he added is “giving us some optimism for 2020.
Young believes as the losses continue to mount in 2019, he expects the situation to at least stabilize in 2020.
He also anticipates that as the Chinese rebuild their herds, the facilities there will be “more professional farms as opposed to backyard farms.”
“They want to make sure they make some structural changes in terms of the sanitary conditions of how they raise animals to avoid these types of diseases in the future and how rapidly they spread,” Young said.