Global soybean crush margins are expected to be supported over the next couple of years as China continues to rebuild its pig herd and professionalises its livestock sector, with the industry drawing from an ever-increasing demand for protein, Archer Daniels Midland’s (ADM) CEO said Friday.
The trader has crushed a record volume of soybeans so far this year, supported by surging demand for soymeal by China, while its US export margins widened on the back of Chinese demand for US soybeans and corn.
China’s economy has roared back from the effects of the Covid-19 pandemic that struck it earlier this year and is rebuilding its pig herd at the same time after it was hit by an African swine fever (ASF) outbreak in 2018-2019.
“We think there are probably a couple of years ahead of us for China to recover the herd completely as I think they are going to build their self-sufficiency. So, we’re going to see continued strength in crush margins and we feel that this will be driving demand,” Juan Ricardo Luciano said during an investor call Friday.
Luciano added that while there is a “big effort” in China to rebuild the pig herd, it is professionalising the animal husbandry sector at the same time, which is further increasing the demand for soybean meal and corn.
“That’s why you see so much pull from China for imported corn,” he said.
The demand for the pork sector has been supplemented by China’s poultry sector, which surged during the ASF outbreak and has continued to expand even with the pig herd expanding again.
“We certainly see 2021 with a lot of optimism, conditions are there for us to have good times. And we don’t see at this point in time that this will change. Demand is strong,” Luciano said.
He added that demand from key importers has outstripped previous years following the pandemic as “governments are more concerned about food security now”.
Finally, ADM’s CFO Ray Young said that China has started looking at potential imports of US ethanol, with one vessel having already sailed.
“They are making a lot of enquiries about US ethanol,” Young said.
