Date: Wed 22 May 2019 [accessed] Source: FAO 2019 Food Outlook - Biannual Report on Global Food Markets. Rome, May 2019. License: CC BY-NC-SA 3.0 IGO [abridged, edited] <http://www.fao.org/3/ca4526en/ca4526en.pdf> Shared also on Promed: African Swine Fever: Challenges for some, opportunities for others? (pp 65-72). By Josef Schmidhuber <[log in to unmask]<mailto:[log in to unmask]>> [For figures and footnotes, please refer to the source URL.] ------------------------------------------ The outbreak of African swine fever (ASF) in East Asia is likely to have a noticeable impact on meat and feed markets worldwide. The extent and speed of the spread and the number of countries affected are still uncertain. FAO monitors the outbreak, providing regular updates through its Emergency Prevention System for Animal Health (EMPRES-AH). It also provides detailed recommendations on how to curb the outbreak and assists governments in their implementation. The FAO-EMPRES-AH update of 2 May 2019 [see commentary of http://promedmail.org/post/20190506.6456376] suggests that ASF continues to spread within China. The actions taken by the country notwithstanding, ASF continues to spread. The disease has also extended to neighbouring countries, notably Viet Nam, Mongolia, Cambodia [and, possibly, North Korea]. By April 2019, the disease had reached all major regions of China, most recently also spreading into the northwestern provinces. The unabated spread of ASF poses a number of questions, relevant beyond the confines of East Asia and its pig meat market. These include the impacts on global markets, challenges to maintaining adequate meat supplies in affected countries, impacts on other types and sources of meat and protein, as well as the opportunities arising for pig meat producers in ASF-free areas. This note attempts to address some of these issues. It looks at the impacts of the proliferation of ASF on global feed markets, focusing on feed grains and protein-rich oil-seeds. It attempts to distinguish between macro and micro impacts, and the effects on consumers and producers; it discusses the need to adjust farm structures and the adjustment process required to improve the biosecurity of pig production systems, especially in the affected countries. The extent of the problem ------------------------ Official FAO monitoring efforts are undertaken in close cooperation with local authorities and China's Ministry of Agriculture and Rural Affairs (MARA). While official sources confirm a rapid spread of the disease, both the speed and severity of the spread could prove more pronounced than currently assumed. For instance, reports by government officials, industry sources and news media suggest that around 20 percent of China's pig inventories had already been culled in the 1st few months of 2019, amid fears of ASF spreading more rapidly. In many provinces, cull rates in excess of 20 percent have been reported. In Henan Province, for example, the sow inventory was down 26 percent year-on-year at the end of January 2019. A team of experts from the Ministry's animal husbandry bureau found considerable cutbacks in herds by backyard farmers, large commercial companies and key provincial nucleus breeding herds. A separate MARA investigation of the ASF situation in 7 Chinese provinces also found "irrational" culling of sows on breeding farms in February [2019], reducing the sector's core production capacity. In Jilin province, the MARA team found the swine inventory to be down by 28 percent from the previous year, and some reports are pointing to an even higher drop. Likewise, the Veterinary Bureau of Shandong Province reported a 41 percent "landslide" decline in sow numbers between July 2018 and February 2019 at the 33 breeding farms monitored by the bureau. Herds on 1100 commercial finishing farms were down 18.8 percent between July 2018 and February 2019. In Guangdong Province, while the impacts of the disease were not very serious until ASF began to spread in the 1st months of 2019, hog inventories are now reported down by 20 percent from a year earlier. Some of the reduction was due to direct culling after disease outbreaks, with reports that some farmers were liquidating herds to prevent infection and/or in order to wait-and-see how the market develops. Indirect support from official meat and feed statistics ----------------------------- The above estimates are corroborated by indirect evidence from the industrial output statistics of the National Bureau of Statistics, showing that production of "fresh and frozen meat" by processing plants was down by 17.3 percent in January and February 2019, compared with the same periods in 2018. These high cull rates are supported by reported feed sales. In Guangdong Province, for example, pig feed sales were down by 10 to 50 percent. By contrast, poultry feed sales were up by 10 percent, although environmental regulations are forcing chicken and duck farms to close. Likewise, pig feed production in Shandong Province saw an accelerated decline, reaching a level of just 67 percent compared with February 2018. The high cull rates in some of the key producing areas suggest that the extent and the severity of the ASF outbreak in China will pose a major challenge. This is also evidenced by the fact that pig meat prices have begun to soar, increasing up to 50 percent, both domestically and at the Chicago futures exchange. Beyond China ------------ While developments in China's agriculture do not always percolate fully into global markets, ASF impacts are likely to be different. They will be felt more noticeably than other changes. China accounts for about 50 percent of the global pig herd, which means that a massive decline of the country's pig inventories will inevitably be felt abroad. This is particularly so as the disease spreads into East Asia, and is already endemic in sub-Saharan Africa as well as many countries of Central and Eastern Europe. The effect of ASF will be felt all the more since pork is the preferred meat in China. For this reason, demand does not always respond directly to changes in prices, which may see a sustained increase as a result. To avoid soaring pork prices, with potential impacts on the overall consumer price level and on general inflation, China may have to turn further to the world market to cover some of its domestic production shortfalls. To what extent is a question that is impossible to answer precisely, but given the size of China's meat market and the production shortfall now caused by ASF, repercussions for the global meat markets could be significant. Finally, China is the largest importer of soybeans in the world, accounting for about 2/3rds of all international purchases. Around half of these imports end up as feed for the country's domestic pig herds, so lower pig inventories should translate into lower demand for feed grains in general, and lower soybean imports in particular. What are the impacts on global feed markets? ---------------- With the sharp decline in pig inventories, the exponentially rising import trend, especially of soybeans, over the past 2 decades could come to an abrupt halt. Indeed, the 1st signs of a slowdown in soybean imports were already evident in 2018. Initial estimates for 2019 suggest that this trend would continue. The following analysis will first gauge impacts on the global soybean market, before expanding its scope to assess the likely impacts on feed grain markets. Soybeans ------- When considering the recent slowdown in China's soybean imports, it is important to take into account a number of factors that are behind this change. Firstly, consumption levels of meat have reached high levels of about 55 kg (beef, chicken, pork and sheep/goat) per person per annum. These high levels of meat consumption come on top of high levels of farmed fish and egg consumption. With the ongoing trade dispute with the United States of America, China has sourced a growing amount of its soybean imports from suppliers elsewhere. Its monthly imports shown in Figure 4 [see in source URL] illustrate this shift. >From November 2018 to March 2019, monthly imports declined from more than 8 million tonnes to less than 6 million tonnes. At the same time, China shifted its imports from the United States of America to Brazil and Argentina, as well as countries subsumed in the "rest-of-the-world" (RoW) aggregate of Figure 4. Whether or not that shift will continue in 2019 remains to be seen. Flows could reverse again as the trade talks between China and the United States of America advance, with United States of America soybeans potentially replacing shipments from Latin America. Against the backdrop of China's shrinking soybean market, this could result in even stiffer competition with suppliers from Latin America. Eventually, that could lead to their shipments redirected to Europe and other markets instead. >From soybeans to the broader feed market --------------------------- While the decline in overall feed requirements in China may not be as pronounced as for soybeans, other feed ingredients could also see lower demand. This could affect not only feed grains but also grain substitutes such as cassava. A number of factors support this hypothesis. Firstly, there seems to be ample domestic supply of feed grains. The results of the 2017 agricultural census released by China's National Bureau of Statistics (NBS) suggest that over the past 11 years, China has produced a cumulative volume of nearly 309 million tonnes of cereals in excess of the hitherto estimated quantities. Maize accounts for most of the additional cereal production, i.e. some 266 million tonnes. While it is estimated that about half of the additional grain has already been fed, the other half is assumed to have ended up in China's grain 95 kg per caput per annum. At the same time, growth in meat consumption has been slowing for nearly a decade. Secondly, as a result of slower growth in demand for animal products, feed requirements rose less rapidly. Moreover, feed operations have attained high intensity rates (high shares of compound and concentrate feeds, negligible shares of roughage) and reasonably high efficiency rates, leaving less room for further grain and oil meal feeding. For example, intensity rates for poultry production are estimated to have reached almost 90 percent, and those for pig production around 85 percent. These levels are on a par with those of very advanced feeding systems. Thirdly, soybean feed use and imports have slowed since China embarked on reforms of its maize sector in 2017. Prior to these, the elevated local maize prices attracted not only imports of barley and sorghum into China's feed grain market, but also boosted demand for soybean meal. In effect, relatively inexpensive soybeans have not only supplemented maize, but have also substituted some of the energy provided by maize and other feed grains. With lower maize prices setting in 2017, soybeans became relatively expensive, and imports slowed. The outbreak of ASF could take a further toll on soybean feed. This is particularly so as the government decided in October 2018 to reduce the protein requirements for pig feed by 1.5 percent and for poultry feed by one percent, in order to suppress domestic demand for soybeans in the wake of the United States of America-China trade tensions. Driven by a lack of domestic demand and lower maize prices, by the end of last year [2018], barley imports had come to a complete halt, and sorghum imports had declined to a token level. As exporters of barley, farmers in Europe stand to lose, and the same holds for Australian producers, whereas the lower sorghum demand will mainly be felt by producers in the United States of America. ASF starts to encroach on dairy markets --------------- The ramification of ASF on feed markets may not be limited to the grain and oilseeds sector. Also, the market for milk powders largely used for animal feed is likely to be affected. China is the world's largest importer of whey powder, nearly 60 percent of which is used as animal feed, notably to raise piglets and to provide post weaning rations rich in lactose and protein. As ASF takes a toll on China's pig inventories, it also affects the number of piglets to be fed and the required feedstuffs. An inspection of the current trade situation suggests that the 1st impacts on whey powder imports are already becoming visible. Two basic changes stand out. One is a decline in overall imports, reflecting the slowdown in feed needs. Another is a more noticeable decline in imports from the United States of America, reflecting the additional tariffs of 25 percent on United States of America shipments as of July 2018. Both changes mirror the shifts for soybean imports, albeit the amounts at stake for whey powder are much smaller and the impacts observed so far much more muted. ASF is spreading to other countries in East Asia ---------------------------- ASF is now also making inroads into other Asian countries with significant pig herds, notably Viet Nam, but also Cambodia and Mongolia. While Cambodia's and Mongolia's production levels are small by global standards, Viet Nam is the 5th largest pig meat producer worldwide, exceeding, for example, the production level of Brazil in 2018. There are also concerns that the current husbandry practices implemented in many East Asian countries fail to provide the required biosecurity standards to contain the disease: pig production is dominated by small, backyard operators, keeping their sows and hogs outside in confined production environments, feeding them with table scraps or uncooked organic refuse (swill). There is also a lack of vertical integration, which means that piglets and sows need to be transported between farms and sometimes even across regions. This is further supporting a rapid and far reaching spread, either from the introduction of infected or ill animals or the entry of contaminated vehicles and equipment (inanimate objects known as fomites). And finally, also intra-regional trade could be an important vector for the disease to spread. There is a lively exchange of all sorts of pork products within the region, including sausages, cured meats and other processed pig meat products. They may all contain the ASF virus, which is highly resistant to temperature and other treatments (salting) and can persist for months or years. This means that the chances of ASF to spread far and fast are not only high, but the disease may resurface in the region even years after the initial outbreak. Good news for pig producers in Europe and the Americas -------------------------------- The unfortunate prospect facing Asian producers could bring opportunities for producers elsewhere, particularly those in Europe, the United States of America, and Brazil. It is a rare combination of events that presents pig producers with higher prices, higher export volumes and lower feed prices. But the data available for the spread of ASF so far would indicate that in Europe and the Americas, pig producers may be about to enjoy precisely this situation. However, much still depends on how quickly and effectively China will be able to contain the ASF outbreak. The outbreak of ASF in Viet Nam, Cambodia and Mongolia could add to pork production shortfall in Asia, further aggravating feed grain and oil meal requirements of the entire region. Under this scenario, producers from Europe and the Americas stand to benefit the most. They are among the largest exporters of pig meat and, at the same time, the leading importers of soybeans. Poultry exporters worldwide to benefit ------------------------- While producers in Europe and the Americas could stand to gain the most in terms of pig meat markets, others are poised to benefit in the poultry market. As China may make efforts to supply consumers who normally purchase pig meat with alternative proteins, it will have to resort to other meats, notably poultry meat. The largest poultry producers are Brazil, the United States of America and Thailand as well as some EU countries. Within the EU, the Netherlands, Poland and Belgium could benefit from higher exports and higher export prices. They also stand to benefit from lower soybean prices. Macro versus micro, sector versus farm -------------------------- In most major exporting countries, farms producing pig and poultry meat are highly specialized. They buy most of their inputs from other farms or countries and sell their produce at home or abroad. This means that from the perspective of the individual farm, producers in Europe are unlikely to benefit more than their peers in the Americas or Thailand. Both stand to benefit from higher product prices, lower feed prices and potentially higher sales volumes. However, at a macro level, the farm sector in Europe will see greater benefits than those abroad, as there is practically no internal soybean production, and hence no burden to be borne by soybean or other protein feed producers. By contrast, in the United States of America and Brazil, the sectoral benefits will be limited to the sales side of pig and poultry meat. At the macro level, the lower input costs for meat producers will be offset by the lower revenues of crop producers. How long will the adjustment process last and how fast will the gaps be filled? ---------------------------------------- This is no doubt the hardest question to address. Be it in China or any other country, containing the ASF outbreak requires radical changes to pig production systems and stringent adherence to farm biosecurity practices. In the case of China, a country with a sizeable share of backyard production, such requirements may not be easily achieved in the short term. While a rapid structural change in China's pig meat sector is already evident, the outbreak of ASF may go some way to accelerate the process and that not only for livestock production but also for crops. Just how these changes will affect the future of China's agriculture, and eventually farming worldwide, is likely to be the subject of intensive analysis and research in the future. -- Communicated by: ProMED-mail <[log in to unmask]<mailto:[log in to unmask]>> [Since 3 Aug 2018, when ASF was reported for the 1st time in China (in the northeastern province of Liaoning), and as of 22 May 2019, a total of 135 outbreaks have been officially reported in China in 32 Provinces/Autonomous Regions/Municipalities out of China's 34 [including Macao SAR and Hong Kong SAR]. According to official reports, more than 1 026 000 pigs have been culled in an effort to halt further spread. As indicated in the above article, the actual numbers of outbreaks and of killed and culled animals are, most likely, multi-fold higher than reported. Some examples are included in a recent media report at <https://www.usnews.com/news/world/articles/2019-03-20/piles-of-pigs-swine-fever-outbreaks-go-unreported-in-rural-china>. In Viet Nam, ASF was reported for the 1st time on 19 Feb 2019, in Hung Yen and Thai Bin provinces. Since then, and as of 22 May 2019, more than 2300 outbreaks have been reported in 30 provinces/cities out of 64. As of 17 May 2019, more than 1 300 000 pigs have been culled. ASF, currently spreading in 3 continents, has become one of the world's biggest panzootics ever. While popular media applies the sexy terms "pigs' Ebola", "pigs' BSE," etc., these terms are definitely misleading. ASF is a deadly animal disease, against which no vaccine is available; it is highly infectious for porcines, not for humans, killing domestic pigs and wild boar, causing immense economic losses, as described in the above article. Humans, breaching bio-security requirements, may have contributed to its spread. FAO and the World Bank are planned to present a report on ASF and the need for its control at the G7 CVO meeting, to be held in Paris on 24 May 2019. The economic data and views, as discussed in the above article, may be visited during the meeting. ASF will be one of the topics to be addressed during the 87th annual General Session of OIE in Paris (26-31 May 2019). - Mod.AS Katinka de Balogh Senior Animal Health and Production Officer Regional Office for Asia and the Pacific Food and Agriculture Organization of the United Nations (FAO) 39 Phra Atit Road, Phranakon Bangkok 10200 THAILAND Tel: +66-26974326 Mob. +66-614123524 e-mail: [log in to unmask]<mailto:[log in to unmask]> [esignature-en] ######################################################################## To unsubscribe from the VPH-L list, click the following link: &*TICKET_URL(VPH-L,SIGNOFF);