World’s Largest Fertilizer Firm Sees Boon From China Hog Farming

(Bloomberg) -- Changes to China’s hog-farming practices may prove to be a boon for fertilizer companies and farmers around the world, according to Nutrien Ltd.’s top executive.

China is rebuilding its hog herd after last year’s African swine fever outbreak prompted the Asian nation to cull hundreds of millions of animals, Nutrien Chief Executive Officer Chuck Magro said Tuesday in a phone interview. The livestock is now going into larger feed centers and more commercial operations, increasing demand for feed crops that should benefit growers and fertilizer firms.

“We’re going to see strong Chinese demand for corn and soybeans and other crops,” Magro said. “It’s good for the farmers around the world but also good for companies like Nutrien.”

Read More: China’s Headlong Rush into Hog Farms Sparks Boom-Bust Fears

The fertilizer industry is poised to benefit from this shift from smaller farms to mass production since commercial-sized hog feedlots will use more crops that require nutrient inputs. Nutrien, the world’s largest crop-nutrient supplier, expects demand for all fertilizers in China to increase in 2021 due to tight domestic crop supplies, demand balances and higher crop prices.

Magro also highlighted China demand during a conference call to discuss third-quarter results, noting that tight supplies in the Asian nation are pushing up prices.

“We believe the increased demand for both Chinese feed and food is structural and we expect elevated grains and oilseed imports into 2021 and beyond that,” Magro told analysts on the call.

Nutrien executives also said the business fundamentals for the Saskatoon, Saskatchewan-based company strengthened during the past quarter.

“U.S. grower margins for key crops are up close to 50% compared to the previous three-year average and are the strongest they have been in many years,” Magro said. “This will create incentive to increase planting and crop input applications in the U.S. and other regions next year.”

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Nutrien reported a quarterly net loss of $587 million after markets closed Monday, with earnings hurt by a $823 million impairment charge on its phosphate operations.

The company’s shares fell 7.8% to C$50.73 at 1:55 p.m. trading in Toronto, the biggest intraday decline in seven months. The shares have fallen 18% this year.

©2020 Bloomberg L.P.