The other side of the soybean price decline: a sharp decline in pig grazing and pork consumption in China

China is the world’s largest importer of soybeans, accounting for 61% of total overseas sales per campaign. But demand tends to contract, impacting global prices. In the first half of 2024, China’s soybean imports fell 9% compared to the same period in 2023, to 48 million tons, mainly coming from Brazil and taking a share from the United States.

Speculation about an eventual “trade war” between the US and China depending on the end-of-year elections in the Nordic country is keeping Chicago soybean operators on alert. At the same time, these speculations tend to gain strength when at this point only 1 million tons of 2024/25 soybeans have been shipped from the US to the Asian giant; since it is normal at this time of year for new commodity commitments between the two powers to reach 7.6 million tons given the average of the past four years,” said a report from the Rosario Exchange (BCR).

In this context, China maintains its demand focus on South America, but the shift of purchases from this region to North America should have already taken place, due to the arrival of the new crop expected. However, there is a feeling of declining demand for soybeans from this country.

In addition, “supply levels are expected to be good in the United States and other major producing countries, resulting in a panorama of strong downward trend for oilseeds in recent times,” the work by Matthias Contardi and Bruno Ferrari.

However, there is another factor that the market is watching: the low intensity of pork consumption within this country.

It turns out that China accounts for half of the world’s pork consumption. Soybean meal represents a large proportion of the diet of livestock.

According to the latest available report from the United States Department of Agriculture (USDA) for 2024, Domestic pork consumption is expected to shrink by 3%.This is partly explained by the economic slowdown that the Asian giant is facing this year.

In addition, the BCR report noted that belly stocks have suffered a significant decline from the high levels reached in previous years. During 2023, with more than 717 million heads, ample pork supplies have led to lower prices throughout the cycle, and according to China’s Ministry of Agriculture and Rural Affairs (MARA), Pork producers would not have suffered such large, sustained losses since 2014..

This situation was exacerbated by the outbreak of African swine fever, which together led to a high rate of livestock culls last year, a trend that has continued through the first six months of this year.

Between January and June, The slaughter of pigs reached 160 million heads.These are the same numbers as during the first half of last year, and therefore the most significant liquidation rate in at least 15 years.

In this context, and due to the reduced need for livestock feed, in the Chinese futures market, soybean meal prices have fallen by 23% since the beginning of the year and were at their lowest levels since August 2020.

In addition to the low demand, the Asian giant has high levels of soybean stocks at major ports; in total, they have held between 7 and 7.7 million tons of soybeans per day so far in 2024. BCR stressed that these numbers, if not for 2021, would be the highest in a decade.

“The impact of the Chinese situation on the international soybean market is more than significant, and in fact largely explains the sudden corrections in oilseed prices in recent months. Given the start of the new global campaign, with the northern hemisphere harvest starting in September, speculation on bean demand tends to discount increasingly low prices, confirming the validity of the lowest levels in more than four years.”

Salvador VitelliThe head of research at the Romano Group confirmed that soybeans fell in real terms to their lowest value in 18 years, excluding the depreciation of the dollar due to inflation in the United States.

This will have repercussions on the Argentine economy. According to estimates by Aurum Valores, with last year’s prices, the harvest was expected to reach US$18.5 billion; with this week’s figures, that value drops to US$14.2 billion.

This difference indicates that A smaller amount of $4.3 billion will enter.That is equivalent to 38% of what the state must pay in private debt in 2025. Eliminate a $1.4 billion set of deductions.

It is worth noting that in 2020, the then Argentine President, Alberto FernandezThe model initiative was supported. Liz Solari To reject the final pork agreement between Argentina and China. This included investments to create huge farms in the country.

Fernandez received at Casa Rosada Argentine Vegetarian Union and They gave him a signing ceremony under the slogan “No to the pork deal with China,” as shown in the photographic record of that meeting at the Casa Rosada.

This caused dismay and surprise because since 2018, a series of agreements had been concluded with the Asian giant to turn Argentina into a supplier of pork. Finally, the project, which had met with many opponents, did not materialize.