The changes to the market caused by the African swine fever may be beneficial for U.S. grains exports and livestock production in Mexico.
The increase of 30 percent or more on the demand for pigs in China due to the decrease of the national herd because of the African swine fever (ASF) will affect the demand for grains and oilseed meals.
There will also be more demand for pork in the rest of the world. "I believe the United States is in a good position to supply pork to China or other countries that need it," said Ryan LeGrand, director of the U.S. Grains Council (USGC) office in Mexico.
So, this is also positive for the demand for the U.S. grain industry because the U.S. will have to produce more pork, and therefore will need more feed ingredients. In this way, there will be a recomposition of the export market with the domestic consumption of U.S. grains to produce feed.
LeGrand also believes that, as long as there's anthe ASF crisis, the Chinese consumer will have to start eating more chicken. "They love pork, but if they have no other choice [they will have to look for other options]." What is not known is that once the problem is solved, if the Chinese will continue with chicken or return to pork.
The Mexican and Brazilian markets
Mexico is the largest importer of U.S. grains and Brazil is a major player in both grain production and animal protein production. "Something similar could happen to what I said about the United States," said LeGrand. Mexico already exports pork to China from the states of Sonora and Yucatan, so it could have the same effect because of the need to export, which would, therefore, increase grain consumption.
In this way, Mexico could be an important player in pork exports to China. The Mexican companies that export pork are vertically integrated and import grains directly from the United States.
In addition, there are large swine producers in Veracruz and Jalisco, some of which are also very important poultry producers, which can export at any given time.
Mexico, the largest importer of grains
Exports of grains from the United States to Mexico go extremely well, said LeGrand. With respect to corn, in the commercial year (September to August) from September to date, corn exports to Mexico are 20 percent higher compared to last year. "And last year we broke records for the third consecutive year, with 14 million [metric tons of corn], then 15 million and then last year with 16 million metric tons," added LeGrand.
LeGrand, who will now be the new president and CEO of the USGC, pointed out that the growth of the livestock sector in Mexico is impressive. It is the driver of the demand.
Compared to other countries in Latin America, Mexico progresses more and could be further profiled as a great producer of animal protein.
More corn in the world
For the future, "it is difficult to know how prices are going to be, because every day we have more competition. Every day there is more corn in the world," he said. If there is a severe drought in Brazil, in Argentina or the United States, it can completely change the outlook very quickly.
Currently, the problem is when planting will start in the United States. Fields are humid, cold and covered with ice. "Farmers should already be sowing." That could start to disturb yields, which could obviously upset prices.
View our continuing coverage of the African swine fever outbreak.