Caged pigs in a Chinese animal truck. By ebenart @ Shutterstock.com
Soybean prices are low, and many in the media are blaming President Trump’s trade war with China for the slump, but in a worldwide market like that for soybeans, customers can choose where they buy a product, but not necessarily impact the price. Demand is the only thing that will really affect a commodity price like that for soybeans, and the problems with demand for soybeans do emanate from China, but they have little to do with political maneuvering.
At the heart of low soybean demand is China’s infected population of pigs. African Swine Fever has run rampant in China’s pig herd, already claiming a sixth of the world’s stock. The disease is the same strain that was found in Russia in 2017, and gruesomely causes pigs to hemorrhage blood. So while the media spins a narrative attempting to create a rift between President Trump and the farmers who support him, the reality is that, as Willis Krumholz explains in The Federalist, “if oodles of Chinese pigs are slowly exploding, China is going to need less soybeans.” He writes (abridged):
China long ago restricted imports of U.S. pork. According to Bloomberg, since 2011, America’s share of China’s pork imports fell from about 50 percent to less than 13 percent by 2016.
China blamed this on “unsafe” U.S. pork, because most American pork producers supplement pigs’ diets with ractopamine, a safe additive fed to hogs several weeks before slaughter to help them bulk up with more lean meat.
Really, there are plenty of safety concerns with Chinese pork, and American pigs are raised and slaughtered in much more clean, controlled, and humane environments than are their Chinese cousins. In other words, China was long ago playing protectionism and attempting to boost its own hog production—so even here, Trump had a point all along.
There’s a big reason that China is buying less soybeans, and it has nothing to do with the trade war. China’s pig population is being rocked by a terrible pig disease called African Swine Fever (ASF).
What is ASF? ASF was first detected in Africa more than a century ago, but it has been spreading like wildfire in China since at least last year. There is no cure for ASF, and it kills well more than 90 percent of the pigs it infects in less than a week, via massive hemorrhaging.
This is a gross, messy disease—think of Ebola, but for pigs.
Experts say it could take years to control the disease in China. It spreads easily between pigs, and historically Chinese pork producers have used cheap feed that contains pork meat, which spreads the disease even further.
The combination of these bad pork production practices, bad incentives provided to farmers, a cover-up culture, and corruption and mismanagement at the local and national government levels have impeded China’s ability to control the disease.
Already, China, home to about half of the world’s pigs, has lost about a third of its hog population—the size of the entire pig population in the European Union.
The problem could even be worse, but it is impossible to trust Beijing to honestly report how bad it really is. China’s Ministry of Agriculture and Rural Affairs says the disease is “under control,” but there is much evidence to the contrary.
Quite obviously, if oodles of Chinese pigs are slowly exploding, China is going to need less soybeans.
If anything, China’s demand for soybeans has been temporarily supported by Chinese farmers switching away from cheap pig feed—which as mentioned earlier is contaminated with pig meat—to feed based solely on soybean meal.
To recap, AFS is the primary reason China is buying less U.S. soybeans. Why isn’t the media reporting on this, and the risk that this disease comes to America? What is your congressperson or the White House doing to make sure contaminated Chinese meat—through accident or even sabotage—doesn’t harm the U.S. pork industry?
Next, the big drop in soybean prices was in 2014, not 2018.
Farmers truly are hurting, and that is almost entirely due to the consequences of the Fed’s QE programs.
First, the Fed made it too easy to borrow and tricked farmers into thinking that long-term demand for their goods was much higher than it really was. Later, when QE ended, farmers were left overextended.
Read more here.
