In the Dark: Why China’s Feed Needs and ASF Recovery Will Continue to Be a Mystery

Conflicting reports continue to surface about the status of China’s hog herd and feed demand. China says the herd is well on its way to recovering from African swine fever (ASF), which wiped out more than half of its hog herd. China also has a robust start on feed demand, booking a record amount of corn for this time of year. Yet, 2020 went down in the record books of historic pork demand from China, a sign the country didn’t produce as much pork as Chinese officials led other countries to believe.

Reuters reported in May that, "Beijing-based Cofeed, a private consultancy set up almost 20 years ago, had established itself as what many in the market regarded as the most comprehensive supplier of information on grains and oilseeds in the world’s biggest buyer of soybeans. It stopped updating data on its website and in feeds to clients on April 29 without explanation."

While some signs point to a recovery for China’s hog herd, Christine McCracken, senior analyst, animal protein, for RaboResearch, says reliable and consistent data out of China is more like a black hole.

“Part of the challenge right now is some of the traditional sources that we've used, are no longer available,” she says. “China really has clamped down on a lot of those traditional sources. And as a result, the flow of information is obviously slow. And you don't necessarily have the same confidence in that data maybe that you used to have.”

This week, reports showed China’s producer prices were rising at its fastest pace in 13 years, with China’s producer price index (PPI) climbing 9% in May. That marks the largest year-over-year increase since September 2008, and blew past economists’ forecasts.

The opposite is happening for pork. Pork prices, which have risen sharply in recent years because of widespread culling due to ASF, dropped 24% year-over-year.

“What I can tell you out about China is that it continues to be very volatile,” says McCracken. “Prices, as reported, are down some 50 plus percent. And actually now, most of those producers there are operating below breakeven. So, it is a bit of a struggle to piece it all together, especially with less reliable data.”

Dermot Hayes, an economist with Iowa State University, says the Chinese used that tactic to their advantage recently. He says China’s strategic decision to protect market intel helped the country buy grain at a cheaper price.

“China bought almost a billion bushels of corn from us at a relatively low price, or prices much lower than we would have sold it to them if we knew that they were going to buy a billion bushels, so it's playing to their advantage and our disadvantage,” he adds.

So, is China’s pork industry well on its way to recovering from the ASF outbreaks as the country stated last year? Hayes says there are a few metrics he keeps his eye on closely.

“What I watch is the price of piglets, and they're down, and the Chinese futures markets, which was way high until a couple of weeks ago, is now down, too. So, that suggests to me that they are making progress,” says Hayes. “But that's progress that's coming nine months after they claimed they were making progress.”