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Brazilian farmers face the challenge of African Swine Fever impact in China

Wednesday, September 25th 2019 - 09:04 UTC
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The ASF outbreak has killed millions of animals in China and caused soybean import demand to plunge The ASF outbreak has killed millions of animals in China and caused soybean import demand to plunge

Chinese commodities trader COFCO said it expects a sharp drop in the number of soybeans it will source for export from Brazil this year due to an outbreak of African Swine Fever (ASF) in China that has hurt demand for animal feed.

In an interview. Valmor Schaffer, managing director for grains and oilseeds for COFCO in Brazil and Carolina Hernandez, grains commercial director, said the trader will partially compensate for the drop in soybeans with higher sourcing and exports of corn.

The two executives said they expect soy sourcing in the Brazil to fall to 5 million tons in 2019 from 7 million tons in 2018. Corn sourcing will jump to 3.8 million tons from 2.5 million tons, they said.

The ASF outbreak has killed millions of animals in China and caused soybean import demand to plunge. The oilseed is a key ingredient in animal feed. Brazilian meat processors have benefited, but soy farmers and grain traders have suffered.

“Obviously the whole grain trading industry reduced soy exports to China due to the ASF, and so did we,” said Schaffer.

Schaffer said the successful Brazilian corn crop harvest when prices for the cereal in Chicago were high also played a role, as farmers and traders focused on corn over soy.

Brazil is COFCO’s main area for international expansion, home to 7,500 of its 11,000 global workers and its main grain sourcing operation, together with crushing facilities, port terminals, sugar and ethanol mills.

Hernandez said COFCO estimates the new Brazil soy crop at 122 million tons versus 118 million tons in the previous crop (2018/19).

“For the corn crop, we see it again surpassing 100 million tons,” she said, despite excessive dryness potentially posing delays to soybean planting that has just started and might bring challenges to the second corn crop, planted right after soybean harvesting.

Despite recognizing gains for the Brazilian operation due to the U.S-China trade war, Schaffer said a possible deal would not harm growth.

“If there is a solution, we would go back to trade based on origins’ spreads. We believe Brazilian soy could compete well in markets other than China,” he said. If the trade spat continues, he said, the close soy relationship with China would continue, boosted by the expected end of the ASF outbreak.

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