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At a recent conference, Mu Yan Kui, the vice chairman of Yihai Kerry, a Shanghai-based commodity firm, outlined the manner in which China will attempt to weed itself from reliance on imported U.S. soybeans. While some of his comments and projections may be little more than rhetoric and may prove difficult to implement but one comment he made I believe really strikes a note of truth; “Many foreign business people and politicians have underestimated the determination of Chinese people to support the government in a trade war.” I believe as a society or maybe better stated, culture, it seems the Chinese are much more disciplined at taking a very long-term perspective than we here in the west who always want immediate results. Regardless, part of the strategy that he shared was to reduce the use of soymeal in hog diets. For us in the U.S. who have for years been fine-tuning hog rations and using alternative sources of protein when economically feasible, this sounds unrealistic, but when you consider that China is transitioning from small farms that may not have been using the latest science to determine diets, to large commercial operations comparable to here, this is quite believable. Slashing the amount of soy meal in the diet to 12% from the currently typical 20% would potentially eliminate the need for around 27 MMT of beans per year, which would be equivalent to over 80% of the beans imported from us. Even in the shorter-term, if you consider that the most recent (August) hog numbers from China report 4.8% fewer sows than a year ago and 2.4% lower overall herd, demand is already shrinking.
None of this seems to have discouraged farmers in Brazil who are moving ahead quickly with planting. Technically, producers are banned from planting until the 15thof September as a means to avoid rust issues, but as of last week in Parana, which is the second largest producing state, it is estimated they have reached 9%, compared with 1% a year ago at this time. There are no numbers from the top state, Mato Grosso but both are reporting generally favorable conditions.
This certainly comes as no surprise, but Informa released projections for the spring 2019 U.S. planting and expects to see a big shift away from beans and into corn. The initial estimate projects 82.27 million acres of beans, down 7.3 million or 8.1% from this year and 93 million acres of corn, which would be up 3.9 million or 4.4%.
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