Vietnam to delay, re-route soymeal cargoes on swine fever outbreak

Vietnam's feed industry, which typically consumes around 6.5 million mt of soybean meal and 10.25 million mt of corn each year, is reported to be delaying purchases of soymeal amid the ongoing outbreak of African swine fever – a move that could hit Argentinian crush spreads.

According to several market sources, demand for April cargoes onwards is disappearing and part cargoes of March shipments are being diverted or delayed as buyers fear demand for feed ingredients will dissipate as the size of the country's pig herd will shrink.

“Most consumers with opened contracts are trying to roll over their purchases,” said one market source, adding that swine fever has now spread throughout the country.

Line-up data shows that almost 300,000 mt either has loaded or will be loaded over the course of March and is destined for Vietnam, with Marubeni and LDC selling the bulk of the meal.

Three other market sources confirmed the rumour with two claiming that part cargoes of soybean meal that will load out of Argentina in March have now been sold on to neighbouring countries.

“Some are diverting part of their Vietnam cargoes into Indonesia,” said a source at an international trading house.

Emergency

The African swine fever outbreak in Vietnam was confirmed by the government in mid-February and since then neighbouring China has closed its border to the transfer of pig and pork in a bid to halt the spread of the disease, which is harmless to humans but fatal to pigs.

On Tuesday, the UN urged Vietnam to declare a state of national emergency over the outbreak, which is estimated to have slashed the size of China’s pig heard by 15-20%.

“Hearing that the problem in Vietnam could make (soybean meal) demand drop by 20% or so,” said an Argentinian-based source that deals with exports of feed to Vietnam.

Unlike China, Vietnam does not have a big soybean crushing industry, producing around 1.3 million mt of soymeal each year versus annual demand of 6.3 million mt.

That means any reduction in the size of the pig herd will have a direct impact on soymeal prices rather than soybean.

Lower prices

The price of soymeal cargoes loading out of Argentinian Up River ports in April has fallen 4% since the start of February from just over $330/mt to just under $320/mt, according to Agricensus data.

However, that reduction can be atrributed to other factors, including a weaker domestic currency versus the US dollar.

Argentina, which is the world’s largest exporter of soybean meal, sold 2.85 million mt of soybean meal worth more than $1 billion to Vietnam in 2018.

The total sales account for about 10% of the nation’s soybean exports and more than 50% of all of Vietnam’s imports, meaning Argentinian crush margins are particularly vulnerable to the outbreak in Vietnam.

Official figures point to an outbreak that is largely in the north of the country, but corn traders have told Agricensus their clients say it is much more widely spread and could impact the heath of all of the country’s 50-60 million pigs.

A falloff in demand for soymeal may be hard to replace, according to European brokers, as most of the meal volume coming into Europe is on longer-term contract.

"It would surprise me to see extra volume coming from Argentina (to Europe), those volumes will have to go elsewhere, and the Black Sea is saturated as well,” a Dutch broker said.