International market of corn still struggling to assess China

    108

         Porto Alegre, March 9, 2021 – A new surge of information on pig production in China emerged last week. According to genetics companies, African swine fever (ASF) would again be shaking South China and Asia. This week’s report from the OIE must address the issue of ASF, since so far there has been no signal by the agency. The FAO confirmed the presence of new cases. However, what most leaves the markets uncertain is the size of the numbers. At the same time that the recovery of herds seems to have been too fast, a new outbreak of ASF seems to cut herds at the same speed and in extraordinary volumes.

         A new outbreak of ASF is being confirmed by the FAO, and the OIE must show the Chinese health reality this week. Since December, rumors about the emergence of a new strain of the ASF virus have surfaced on the international market, however, without confirmation by China or the OIE. Now, genetics companies are starting to show that ASF has resurfaced not only in China but in South Asia.

         Pig prices in China have fallen in recent weeks due to meat reserves placed in the market by the government and another phase of herd losses caused by ASF outbreaks in Guangdong and Xinjiang provinces. At the end of 2020, the Ministry of Agriculture and Rural Affairs of China stated that the stocks of matrices reached 41 million. However, new outbreaks of ASF, some with new strains, have forced farmers to slaughter some animals on farms, according to the latest global market report from Genesus Inc., not to mention other unofficial reports on recurrent outbreaks and problems associated with the experimental vaccine.

         Moreover, it was an exceptionally cold winter in parts of the country that aggravated the problems. Last year, Chinese authorities banned antibiotics in feedstuff, which reduced weight gain, and pigs are more susceptible to diarrhea and respiratory diseases during the cold weather. The seriousness of the situation of these challenges and the effect they may have on the herd recovery are uncertain. A daily futures report says the stocks of matrices fell in January for the first time in 13 months, and the slaughter of matrices is faster than normal due to outbreaks of ASF and low productivity.

         According to recent research on the swine industry, the proportion of low-weight pigs reaching the market hit the worst level since November 2019. Moreover, there is information that up to 15 million head of the national pig herd may have been lost due to illnesses during the winter, and the full recovery to the level existing before the emergence of ASF will probably be postponed until the second half of 2022. “If that is true, and if 15% of China’s stock of matrices (6 million) were slaughtered, [?] which would be equal to the entire US production base.”

         This configuration of distorted and uncertain information causes international insecurity, in both the grain market, due to the profile of China’s needs, and the demand for meat. Corn prices surged again at the end of the week, after a quiet return from a local holiday. The news on ASF and the decline in prices in China ended up causing some pressure on the CBOT. However, as soon as prices on the Dailan Exchange rose again, the CBOT reacted.

         This tells us that the international market will continue regarding China as a global component in corn until the country demonstrates it will depend less on imported corn. Thus, the profile of the 2021 US crop is essential to slow down or not the international market. USDA projects 66 million tons of corn in this business year ending in August. Prices are high. Growers may decide to sell old stocks with the arrival of the new crop sending prices lower. However, for that, the planting intention report will have to show a good area to be planted with corn. Then, the climate at planting will have to enable a good window and expect good productivity. Technology is fundamental for corn, and the results may come with a favorable climate.

         The USDA’s March report with a consensus about some reduction in stocks, climate in Argentina until April, and planting intention in late March. These are the relevant points, besides prices in China, to assess the international context.

         Agência SAFRAS Latam

    Copyright 2021 – Grupo CMA