Brazil Farmers to Reap Benefits From Deadly Pig Epidemic

(Bloomberg) -- A deadly pig disease spreading throughout Asia will boost demand for soybean meal in Brazil as the South American nation increases meat production to feed China, according to Cofco International Ltd.

Consumption of soy meal, a key ingredient in pig feed, will rise by 1 million metric tons next year as Brazilian producers seek to export more meat to China, said Carolina Hernandez Tascon, head of commercial and trading for grain and oilseeds in Brazil for the trading arm of China’s largest food company. That’s an increase of about 7% from a year earlier.

Expectations the spread of African swine fever in the world’s top pork consumer China will create a global protein shortage has already boosted the shares of Brazilian meat companies. JBS SA, the world’s largest meat packer, has seen its stock price more than double this year while BRF jumped 77%.

“We are planning at least a million tons more of soy meal consumption next year,” Hernandez said in an interview at the Financial Times Commodities Americas Summit in Rio de Janeiro. “Will it all be due to exports? Maybe not. We are also plugging in a little bit of domestic growth as we see a stabilization in economic growth, but certainly exports will see a push.”

More Meat

African swine fever, which kills most infected pigs in 10 days, has already sent Chinese pork prices soaring 77% this year. While pork consumption has gone down, a part of it is being replaced with an increase in demand for chicken, Valmor Schaffer, managing director for Cofco in Brazil, said in the interview.

“We cannot forget that people keep eating meat,” Schaffer said. “It’s just different meat.”

Cofco’s total soybean exports from Brazil dropped 1.5 million tons for the 2019 year as demand for crushing in China declined due to the disease, the executives said. On the other hand, corn shipments increased by 1 million tons, leaving Cofco with exports that were 500,000 tons smaller than a year earlier. The company expects to see a rebound in its soy shipments next year.

“You can start seeing a recovery by mid next year if ASF is fully controlled,” Hernandez said. “Today, what we hear from our people in China is that the coastal areas are a little bit safer, but inland you still have some presence so you still have to fully control the environment. If that happens by the end of the year, then we think by April, May, June, you can start seeing some pick up.”

Still, “to restore the entire herd that was killed with the disease, it’s going to take at least 2 to 3 years,” she said.

To contact the reporter on this story: Isis Almeida in Chicago at ialmeida3@bloomberg.net

To contact the editors responsible for this story: Tina Davis at tinadavis@bloomberg.net, Anna Kitanaka, Atul Prakash

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