ASF Causes Train Wreck in Slow Motion in Soybean Market

April 9, 2019 01:43 PM
The April 9 World Agricultural Supply and Demand Estimates (WASDE) report came in a little friendlier than some of the more bearish estimates INTL FCStone Financial, Inc., expected.

The April 9 World Agricultural Supply and Demand Estimates (WASDE) report came in a little friendlier than some of the more bearish estimates INTL FCStone Financial, Inc., expected.
USDA barely touched the soybean balance sheet and did not make any changes to their export estimates reflecting Chinese demand, says Nick Buyse of INTL FCStone Financial, Inc. USDA’s Ag Forum estimates for the 2019-2020 new crop projects soybean acres about 5 million lower from last year at 84.6 million acres. 
Buyse says the Ag Forum estimates for soybean exports next year at 2.025 billion bushels is extremely optimistic.

“This completely ignores the demand destruction taking place in China today with the African swine fever (ASF) epidemic devastating their hog herd,” he adds.
He believes the evidence is clear when you look at the sharply negative soybean crushing margins in China. (see chart) This would indicate soybean meal demand in the country is drastically lower. 

China Soybean Crush Margins

“In one of the most intensive hog production regions in China, Shandong, our colleagues are estimating feed demand is down by a shocking 50%. It’s short-sighted to think that there’s only been one case of ASF made public by Chinese officials in the Shandong region,” he says.
He easily sees a 2 billion bu. carryout in soybeans for the ’19-‘20 new crop as being a possibility. 
“The reality is this soybean market is a train wreck in slow motion,” Buyse says. “Our Shanghai colleagues are saying Chinese hog farmers are killing more sows to prevent ASF from spreading. They are hanging onto the existing piglets and attempting to fatten them 30% to 50% more than normal to get as much pork off their carcasses as possible.” 
If they are killing off the sows, Buyse says, that will be to their long-term detriment. FCStone expects China’s herd to take at least four to seven years to recover back to normal, and that may be optimistic.
“China will see their peak pork shortage in 2020 as we will simply have less sows available for breeding down the road,” he adds.

Corn futures were trading about four cents lower coming into the report this morning and were up slightly a few hours later. In addition, USDA raised their corn carryouts by 200 million bushels to 2.035 billion bushels from March’s report. This was accounted for by a 75-million bu. cut in exports and a 75-million bu. cut in feed demand. Finally, with the horrible ethanol margins this year, demand was cut by 50 million bu. 

Comments in this article are market commentary and are not to be construed as market advice.

More from Farm Journal's PORK:

Homeland Security Ramps Up African Swine Fever Vaccine Research
Sánchez-Vizcaíno Tells How Spain Stopped African Swine Fever

AgriTalk: ASF Vaccine Development is a Tough Order

Back to news


Spell Check

Skeptical Realist
Jacksonville, IL
4/10/2019 09:43 AM

  Like CK of Mi I too am skeptical of any articles that tout extreme estimations. However, I also believe there is some truth in the message. AFS is a serious & incurable disease that just has to works it way until it literally dies out. Demand has been affected. For how long no one really knows but can only be estimated. So between Trumps Tariffs & now AFS - there appears world surpluses of inventory isn't likely to go away until one or both of the hemispheres has a drought. Otherwise I am afraid our industry is in decline (participants).

aug, ME
4/10/2019 11:44 AM

  I just read an article (just one of many) that claim the rate of world population growth is slowing and will likely stabilize and possibly even reverse at some point as more of the countries responsible for the growth improve economically. And thank goodness for that because the planet can barely sustain (and remain healthy) with what we have now, especially with everyone wanting to live like millionaires and resisting living sustainably.

4/10/2019 06:39 AM

  What ever happened to population explosion for the last 40 years, that's all we ever heard from the so called experts. Couldn't produce enough to keep up to demand. Another blowing smoke up article.


Corn College TV Education Series


Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!


Market Data provided by
Brought to you by Beyer