INTERVIEW: Pork sector modernization to boost China's feed grain demand: USGC

The modernization of pork production in China, expedited by African swine fever, is likely to boost the country's demand for feed further going forward, US Grains Council senior director for global programs, Cary Sifferath, told S&P Global Platts.

China, which has emerged as one of the world's largest feed grain importers, especially corn, had imported 56.0 million of corn, wheat, barley, and sorghum in 2021 as of November, compared with 32.6 million mt in the whole of 2020, customs data showed.

The Chinese hog industry has seen the organized sector's share of pork output increasing as ASF necessitated better bio-security measures in pig farms to control and prevent the deadly disease that wiped out nearly half the country's pig population.

Traditionally, pork production was dominated by back-yard farms run by farmers, who fed hogs household and other food waste. However, industrial-scale pork producers use manufactured feed.

Some of the large swine companies are building more modern hog operations, so there will be a huge demand for the typical westernized diet of soybean meal, corn, or other feed grains, Sifferath said in an interview.

"The fact (is) that they outlawed or banned the food waste from restaurant and household food waste feeding to hog operation," Sifferath said.

"Even our own internal numbers, we were estimating on the low side of about 30 million mt of food waste that is going into swine feeds had to be replaced by some type of feeding, predominantly a lot of that was you know, scrapped rice and wheat maybe even vegetable oils and other things."

Little room for grain output expansion

China expects corn imports in 2021-22 (October-September) to be around 20 million mt, below the 29.6 million mt estimated for 2020-21, as it expects output in 2021-22 rising to 273 million mt from 261 million mt in 2020-21.

Despite the reported increase in China's corn output in 2021-22, it is unlikely China could see a similar increase in production every year.

"They are up 10 million mt (in 2021-22 output) and part of that, I am sure, is on better weather. But does that mean every year from now China is going to jump 10 million mt of corn production? That is hard to say," Sifferath said.

"They have room to grow on yield but much like the US they cannot necessarily expand the production area too much."

Feed imports to remain strong

China has imported record volumes of corn in 2021 even after selling 27.8 million mt of wheat as of May 6 in government auctions conducted in 2021, already surpassing the 23.2 million mt sold in the whole of 2020.

Last year, wheat prices were trading lower than corn in China, and feed millers were outbidding flour millers. However, that has all changed as the market enters 2022.

Feed market dynamics may make it difficult to substitute corn with other feed grains in 2022.

"The world is quite tight on wheat supplies, especially for high quality (wheat). I am sure that is even affecting wheat prices inside China to some degree," Sifferath said.

In China, wheat prices are now trading above corn, making it expensive to replace corn with wheat in animal feed.

Feed grain demand overall is still strong inside China and they will easily import 20 million mt in 2021-22 and probably hit the 26 million mt that the US Department of Agriculture has pegged, Sifferath said.