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February 14, 2019 | FBN Insights | Kevin McNew

China Hog Diet Moving Away from Soybean Meal

News is bearish to soybeans but it could be supportive of the corn complex

China Hog Diet Moving Away From Soybean Meal

China's commercial hog industry and government are working to put the nation's vast pig herd on a low-soymeal diet to reduce the country's reliance on U.S. soybean imports.

Currently the basic feed ratio for China's hogs contains about 20% soymeal and 70- 75% corn. In the past, the ration has been reliant on rice hulls and other inputs.     

The current commercial “generic” hog ration has a higher soymeal ratio than what pig farmers use in the United States, where farmers have cut the ratio of soymeal over time as DDG’s have become more available and cheaper.

Currently the Chinese have placed a non-science based ban on U.S. DDG and sorghum exports.  

How Does This Impact the U.S. Farmer? At the moment, this news is bearish to soybeans but it could be supportive of the corn complex. The Chinese hog herd is the largest in the world and the hog industry has been moving away from the small “back yard” type of farms to a more biosecure commercial model. Modifying the ration away from meal does not come as a surprise given the rise in domestic prices. The reality is that hogs need to eat and the U.S. is a key supplier of DDG, sorghum and soybeans to the world.  Expect the U.S./Chinese trade talks to contain some language regarding exports for U.S. feed inputs.

  

          

Argentina’s Grain Exchange: Soybean Crop at 52 MMT

Argentina's soy crop is expected to reach 52 million tonnes during the 2018/19 season.  

The current 52 MMT forecast is +2 MMT from the previous forecast even though 700,000 hectares was lost to rains.

The USDA is forecasting Argentina’s 18/19 crop at 55 MMT in the February WASDE.  

The 552 MMT crop is +14.2 MMT YoY as Argentina went through a drought but behind the 55 MMT crop that the country harvested in the 16/17 marketing year.  

What Does This Mean for U.S. Farmers?  Big crops in Argentina keep getting bigger and small crops in Brazil keep getting smaller.  The 2 MMT increase in production is not enough to offset some of the recent estimated production declines in Brazil.  However supplies in the southern hemisphere should be approximately +22 MMT YoY which is still accommodating and can pressure U.S. prices and the export program.                   

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

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