African swine fever - which is fatal to pigs but cannot be passed on to people - has been sweeping across many pork-producing provinces in China since the first outbreak in late 2018.
Since the first confirmed case in August, the virus has spread to all 31 Chinese mainland states in just nine months. ASF has a 90 per cent mortality rate within pig herds and no vaccine exists, making it the biggest global animal health story of 2019.
Why is this worth mentioning regarding the grains sector? It is so important for grains due to how large the issue is. China itself has half of the world's domestic pigs - about 428 million head - and is considered likely to lose at least a third of the population, possibly more.
China is the world's largest consumer of pork products, accounting for 60pc of their protein consumption. At 34 kilograms of pork consumed per person each year, their diet for pork is growing, tipped to reach 50kg by 2026.
The marketplace we live in is very interlinked, with any issue occurring overseas having an impact on pricing here in Australia.
The sudden decrease in production capability from China would require all the annual production of Canada, the United States, Mexico and Brazil to replace it. This loss of production would take China at least three to five years to overcome. The disease is difficult to eliminate, and in this time the Chinese population is expected to reach 1.4 billion.
What this means for grain markets is still unknown. The supply and demand of feed grains has been flung off kilter with a major buyer of feed grains, including feed barley, sorghum, corn and soybeans, suddenly reducing where feedstuffs are going by 30pc.
Related reading: SA pork could meat demand created by ASF
The feed demand within the pork sector in China is expected to decrease by 30pc. Much of the feed going to pigs will instead be diverted into other sectors, such as chicken and aquaculture feeds. Figures out of China put animal feed production in the country at 200m tonnes, or a fifth of global feed output.
How does this affect grain markets in Australia? The marketplace we live in is very interlinked, with any issue occurring overseas having an impact on pricing here in Australia. China is the largest importer of Australian feed barley, much of which ends up being fed to pigs. This is not likely to be a large issue if Australia has another year of production issues. But, if it is another three or more years until the demand is there, we may need to find new export opportunities for our feed barley.
The US will also be affected by this huge upset to global markets. China is the largest soybean importer, much of which had been coming from the US to be used in stock feeds. Due to trade wars with the US and now a decrease in demand due to lower pig numbers in China, soybeans are in plentiful supply in the US.
Related reading:African swine fever could lift beef demand
The oversupply will only get larger with widespread wet and stormy weather delaying the sowing of corn and wheat throughout the Midwest. This indicates that many producers will switch to soybeans, which have a slightly longer sowing window.
The positive side of this is the movement of feed grains into other markets. With a reduction in pork production, other proteins and countries will benefit. Chicken meat and beef in particular will replace pork as the main animal protein source. In turn, much of the soybeans that would otherwise be imported into China for pork production will be sent to other countries, such as Brazil and the US, to feed beef, chicken and pork.
It is expected that US pork exports will increase by 20pc and European Union exports could increase by 10pc to 15pc. All of this movement takes pork out of already established markets, indicating an expansion of pork herds in these countries. This then has implications on the movement of soybeans, corn, wheat and feed barley, all components of pork feed rations.
If the wet weather continues in the US and reduces corn production, the price for this commodity will increase beyond what is economical.
There is also a link to wheat futures and the impacts of a wet season in the US on feed demand into poultry, pork and beef operations. If the wet weather continues in the US and reduces corn production, the price for this commodity will increase beyond what is economical. A movement away from corn is a swing towards wheat in most feed mixes. This puts pressure on wheat pricing and could lead to a rally for wheat futures.
The relationship between a livestock and biosecurity disaster on this scale and grain markets is not as distant as many might think.
ASF will have an impact on feed grains both here and overseas, as the fallout of a reduced herd size in China redistributes where feed grains are exported to.
This is a story that illustrates the importance of livestock to the grains sector and that importance should not be underestimated.
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