China's Pork Imports May Hit Record 4.6 mln T in 2020
China's pork imports could reach record levels of as much as 4.6 million metric tonnes (MMT) during 2020 as domestic output is expected to fall to a historical low.
China's pork imports, including offal, during 2019 are set to surpass previous records reaching between 3.1 MMT and 3.3 MMT.
In 2019, China's pork production is expected to decline by 25% from 2018 to about 40.5 million tonnes, and by another 10-15% in 2020.
Record high market hog prices are causing gilt retention as commercial producers to begin restocking.
Hog supplies are estimated to expand in 2020 and pork supplies are expected to rise in 2021.
Domestic Chinese poultry production meanwhile has jumped by around 10%.
FBN’s Take On What It Means: We believe that the latest Chinese data on pork imports is not a surprise as the domestic supply constraints are well known. We believe that increased domestic pork demand from China is a positive for the global and the U.S. hog markets. With the US and China moving ahead with a Phase-1 trade deal, we expect that U.S. pork exports to China to increase which should support growth of the US hog herd which can be supportive demand for corn and soybean meal in 2020.
Demand Pushes Brazil's Ethanol Output to Historical Levels
Brazil's 2019/20 center-south sugar cane crush is expected to rise to 590 million metric tonnes (MMT); +2.9% higher than the previous year.
Brazil crushes raw sugar cane for two uses: sugar and ethanol.
Brazil is the largest consumer of fuel-based ethanol in the world.
Production of ethanol is projected to rise 7.1% to 33.1 billion liters in 2019/20, as Brazilian demand and prices are strong.
The larger sugar cane crush is due to favorable weather conditions which helped yield grow by 4.2% to 76 tonnes per hectare.
Sugar production is expected to grow, 0.72% from 2019 to 26.7 million tonnes, as mills are expected to allocate only 34.29% of the cane to produce sugar using all the rest to make ethanol.
FBN’s Take On What It Means: We believe that increased Brazilian ethanol production amid strong domestic demand for fuel can be a positive for the U.S. farmer. U.S. ethanol exports to Brazil have been strong during 2019. As Brazil fuel demand continues to expand, we believe that any supply hiccups with the spring sugar harvest could be supportive for U.S. ethanol exports which can be supportive for U.S. corn prices.
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