AMINO REPORT

August 2019

Indication Prices

(average cost and freight to Durban)

L-Lysine HCI

R17,81

L-Lysine sulphate

R11,00

L-Methionine

R32,78

L-Threonine

R19,28

L-Tryptophan

R86,25

L-Valine

R44,41

L-Arginine

R99,85

Headlines

China and South East Asia

  • Fall armyworm is continuing to spread across northern China, reaching several counties in Hebei province this month.
  • China has stated that it will not be blackmailed and warned of retaliation towards the United States (US) after President Trump vowed to slap a 10% tariff on USD 300 billion (ZAR 4,6 trillion) of Chinese imports from next month, worsening an already tense trade situation between the two countries. This marked an abrupt end to the truce in a year-long trade war that has slowed global growth and disrupted supply chains. China made no concessions to the United States after Trump postponed threatened tariffs on Chinese imports until mid-December, adding that talks aimed at resolving the trade war would continue.
  • China has banned imports of pigs, wild boars and related products from Slovakia to prevent the spread of African swine fever (ASF) from the European country.
  • China detected African swine fever in pigs being transported to Guangxi region from outside provinces. The disease was found in 52 pigs in a truck in the city of Fangchenggang in the southern region.
  • China’s customs have stated that imports of eight categories of Australian beef had reached the safeguard amount and would resume levying most-favoured nation tariffs on the goods. Under the 2015 free trade agreement between China and Australia, imports of chilled and frozen beef cuts currently carry a 6% tariff, while carcasses are charged at between 10% and 12,5%, lower than the most-favoured nation rates.
  • China’s south-western province of Sichuan, which is the country’s top pig-farming province, is removing some restrictions on hog production to re-stabilise supply. Sichuan produced more than 65 million pigs in 2017.

Headlines

Europe

  • Shipping has returned to normal after water levels on the Rhine in Germany began to rise back to normal levels. Rain in past weeks has raised water levels on most of the river enabling vessels to take on full loads.
  • Bulgaria’s veterinary authorities have said that they would cull 8 253 pigs after detecting an outbreak of African swine fever at a breeding farm in the north-east of the country. The Bulgarian prime minister has said the Balkan state’s government will compensate owners who voluntarily cull their domestic pigs, as the country works to stamp out an outbreak of the highly contagious African swine fever. Experts say that Bulgaria could lose its entire pig breeding industry if the outbreak is not contained and its 600 000 pigs are culled, while industry officials fear it could cause damages of up to USD 1,15 billion (ZAR 17,25 billion).
  • Spanish food safety officials have informed the European Commission of a discovery of high levels of lead residues in a shipment of Indian manganese oxide. Lead traces found by the border control authorities in samples amounted to over 500 mg/kg. The Spanish officials said that parts of the cargo, which was estimated at 75 t, were distributed in the country. The risk status is classified as ‘serious.’
  • Serbia, Russia and Ukraine have reported new outbreaks of ASF among pig stock. Around 100 000 animals have been marked for slaughter after ASF was detected at one of Ukraine’s largest pig farms.

Headlines

The Americas

  • A federal judge has dismissed antitrust lawsuits accusing several US pork companies of conspiring to limit supply in the USD 20 billion-a-year (ZAR 300 billion) market. The lawsuits accused the companies of doing this in order to inflate prices and their own profits at the expense of consumers and other purchasers. The defendants included Hormel Foods Corp, the JBS United States’ unit of Brazil’s JBS SA, WH Group Ltd’s Smithfield Foods Inc., and Tyson Foods Inc., among others, as well as data provider Agri Stats Incorporated. They said the plaintiffs failed to allege any agreement to rig prices, and that supply and capacity actually increased.
  • Flooding of springtime plantings has seen a considerable increase in the price of US corn. This has caused US farmers to look elsewhere to cut costs. Farmers have begun feeding their livestock everything from outdated pet food and leftover bakery rolls to crops imported from South America.
  • In the “largest, single state worksite enforcement action,” United States immigration officials raided several food-processing plants in Mississippi, detaining 680 people suspected of being in the country illegally.
  • The political situation in Argentina is going to have a major impact on the soybean situation in the country. How farmers react to political events remains uncertain, but it seems they will probably hold back soybeans until after the country’s election in October due to the possibility that the Argentine peso will continue to fall.
  • President Trump said on Thursday his administration is planning a “giant package” related to ethanol that would please US farmers angry over the government’s expanded approval of waivers freeing oil refiners from obligations to use the corn-based fuel.

Markets

  • United States (US) pork exports totalled only 6 300 t for the week ending 25 July with export beef sales totalling 11 300.
  • President Trump announced a deal on Friday to sell more American beef to Europe, in an attempt to continue deals amid the China trade war. The European Commission has stressed that any beef deal will not increase overall beef imports and that all the beef coming in would be hormone-free, in line with European Union (EU) food safety rules.
  • The European Commission’s “Short-Term Outlook for EU Agricultural Markets in 2019 and 2020” has shown that EU pork exports to China have grown by 37%, year-on-year, in the first 4 months of 2019. In that same period, China accounted for more than 43% of EU pork exports, while Vietnam grew its share to 2%. The increase in exports can be explained by the spread of ASF in China, which has created a gap between production and consumption levels.
  • Brazilian pork exports in July reached 67 900 t, a 0,4% drop compared with the same month of 2018, but still the largest monthly volume this year. Shipments have been growing this year due to increased demand from China. In the first seven months of the year, Brazil’s pork exports reached 414 500 t, 19,62% higher than in the same period of 2018.
  • China is expected to increase production of chicken meat by up to 14% (15,8 million t). Consumption trends for primarily chicken meat, will increase for the remainder of 2019 and carry into 2020 as a result of declines in domestic pork production. The United States Department of Agriculture (USDA) says the biggest noticeable change will be among Chinese institutional entities, hotel and restaurant institutions, as well as the food-processing sector. It forecasts imports will increase to 600 000 t in 2020 from 342 000 t in 2018.
  • Many livestock traders are maintaining some level of optimism as the situation continues to progress in China. Even if the Chinese refuse to import pork from the US, they are going to have to get it from Brazil or the EU. This would mean that they could empty Brazil or the EU of all their hogs, forcing the customers of those countries to the US to secure supplies. Combined, the EU and Brazil are projected to produce nearly 28 million tonnes of pork this year, with the US expected to produce close to 12,6 million tonnes.
  • China’s pork imports more than doubled in July from the same month a year earlier. China brought in 182 227 t of pork in July, according to data from the General Administration of Customs, up 107% from July 2018. That was up from the160 467 t imported in June, and close to May’s 187 500 t. China’s pig herd shrank by 32,2% in July compared to the same month a year ago, with the number of sows declining by 31,9%; this decline in supply has pushed the pork price up to its highest since 2016.

Corporate headlines

  • MHP, the parent company of a leading international agro-industrial group with headquarters in Ukraine, has announced its decision to cease production of goose meat and foie gras at its Snyatynska poultry farm by the beginning of September 2019.
  • Phibro Animal Health Corporation has acquired Florida-based Osprey Biotechnics, Inc., a privately held developer of microbial products, enabling Phibro to bolster its portfolio of nutritional specialty products.
  • Tyson Foods, Inc. said it received a subpoena from the United States Department of Justice (DOJ), signalling an expansion of the agency’s criminal investigation into chicken pricing. The biggest US meat company disclosed that it had received a grand jury subpoena from the DOJ seeking documents and information related to the chicken industry. In the filing, Tyson said it was cooperating with the DOJ request. The government probe into the pricing of the country’s most-consumed meat comes after restaurants, retailers and consumers launched lawsuits alleging that poultry processors worked together to keep supplies artificially low, and push prices higher. Chicken companies like Tyson, Pilgrim’s Pride Corp., Sanderson Farms, Inc. and Perdue Farms, Inc. reject those allegations and are contesting the lawsuits.
  • Almarai Company has announced that it finalised the acquisition of Pure Breed Poultry Company from various shareholders for a total consideration of USD 14,1 million (ZAR 211,5 million). Almarai now controls 93,5% of Pure Breed’s share capital. Pure Breed’s main operations are focused on poultry broiler grandparent farming. The increase in shareholding will add to Almarai’s on-going efforts to further strengthen the poultry industry in Saudi Arabia.
  • Elanco Animal Health, Inc. has agreed to acquire Bayer’s animal health business for USD 7,6 billion (ZAR 114 billion). The combined entities will create the world’s second largest animal health company.
  • Ridley Corporation Limited has announced the appointment of Quinton Hildebrand as its new chief executive officer and managing director.
  • Mowi ASA, the world’s largest salmon producer, could stop buying Brazilian soy for its fish farms unless the South American country curbs Amazon deforestation. Wildfires raging in Brazil’s rainforest surged while environmental protections were cut, triggering an international backlash. The treatment of the Amazon is unacceptable. Nestlé S.A. are also reviewing its meat and cocoa purchases from Brazil amid heightened concerns over the fires in the Amazon rainforest. A combination of tools, including supply chain mapping, certification, satellite monitoring and on-the-ground verification are being used to monitor the situation. The Swiss food giant sources palm oil, soy, meat and cocoa from Brazil.
  • Yum! Brands, Inc. has announced it will be testing Beyond Meat’s plant-based chicken nuggets and boneless wings at an Atlanta Kentucky Fried Chicken restaurant, the latest fast-food chain trying new options to attract vegan diners. The quick-service restaurant will roll out its vegan menu items nationally based on the customer feedback from the Atlanta test.
  • According to Fitch Solutions, Inc., the biggest winner from the US–China trade war in the agricultural sector has been, and will likely remain, Brazil due to higher demand for its soy and more livestock exports to China. African swine fever could reduce pork production in China by 30% this year leading to a significant ramp-up in Chinese imports of all proteins.
  • Finland, which holds the European Union’s rotating chairmanship, called on Friday for the EU to look into the possibility of banning Brazilian beef from its markets due to devastation caused by fires in the Amazon rainforest. Brazilian agriculture minister, Tereza Cristina Dias, reacted to say that agribusiness should not be blamed for the fires sweeping through the Amazon rainforest and that potential trade barriers are unjustified.
  • Canada’s Sure Good Foods Limited and Latvian Bridge Holdings are planning a new USD 30 million (ZAR 450 million) halal beef production and processing operation in Kazakhstan, supported by the public investment body, Kazakh Invest. The vertically integrated project will include a feedlot, an abattoir, and facilities for packaging, freezing, and storage. Kazakh Invest reports that the plant’s planned production capacity is 15–20 thousand tonnes of meat products per year, derived from 42 000 head of cattle. 
  • Chinese commodities trader, COFCO, plans to increase investments in Brazilian operations as the business environment in the country is likely to improve after approval of economic reforms. These investments will be aimed at warehousing and transportation systems. COFCO is a major soybean and corn trader in the country, as well as a large producer of sugar and ethanol.
  • Global Bio-chem Technology Group Company Limited (GBT) has issued a profit warning for financial performance for the first half of 2019. GBT said it anticipates a sharp drop in gross profit of as much as 70% due to the increase in price of corn starch, as well as the decrease in sales of amino acids caused by the ASF crisis.
  • Fane Valley Co-operative has officially completed the acquisition of Robert Smyth & Sons Limited (trading as Smyths Daleside Animal Feeds) from Donegal Investment Group.
  • Alliance Group is investing USD 1,2 million (ZAR 18 million) in its Smithfield plant in Timaru in order to fulfil the needs of farmers on New Zealand’s South Island. The 100% farmer-owned cooperative is installing additional vacuum packaging, co-products processing technology and extending the secondary processing area at the South Canterbury plant, which will boost the processing efficiency by up to 20 per cent. The project is set to begin next month.
  • The closure of Yara’s 130 000 t per year phosphate plant in Helsingborg, Sweden, has some phosphate buyers concerned with the plant expected to close at the end of 2019. However, it has been suggested that Yara’s Kokkola plant will be able to cover the shortfall created by the Helsingborg closure.
  • Danish Crown chief executive officer, Finn Klostermann, has announced that the European pork and beef processor plans to add a completely plant-based burger to its portfolio of products before the end of the year.
  • Russian state-controlled bank, VTB Bank, has completed its purchase of a 70 per cent stake in local grain trader, Mirogroup Resources. Mirogroup has an extensive network of regional representative offices, long-term partnerships with agricultural producers and infrastructure enterprises.
  • Denmarks Premium Porc has built a new EUR 32,5 million feed mill in Avrig, central Romania. The feed produced at the new site will be mainly supplied to the company’s pig farms. The new feed mill reportedly has an annual production capacity of 80 000 t.
  • Pilgrim’s Pride Corp., announced that it will be acquiring Danish Crown’s British subsidiary, Tulip Limited, for USD 354 million (ZAR 531 billion). The acquisition will help solidify Pilgrim’s as a leading European food company and will help create one of the UK’s largest integrated prepared foods businesses.
  • BASF has confirmed that the production of feed grade vitamins Lutavit® A 1000 NXT and Lutavit® A/D3 1000/200 will restart in November 2019, after a workplace incident shutdown production in June.  
  • Dutch animal nutrition company, Royal De Heus Group will be entering into a joint venture with Vietnam’s Hùng Nhơn Group for the construction of a USD 49,4 million (ZAR 741 million) poultry farming complex that will focus on exports. The facility will apparently have the capacity to export around 10 million birds a year. It will also feature a processing facility that will handle around 5 000 birds per day. 
  • Some 3 800 workers at a Tyson Foods, Inc. meat-processing plant in Kansas will be out of work after a night fire caused significant damage to the plant. A prolonged closure could force the company to move cattle designated for slaughter to another facility, which will result in additional cost. The plant will be down indefinitely, with plans to rebuild on-site. The plant processed approximately 6 000 cattle per day, representing around 5% of the total industry and a bit over 20% of Tyson’s capacity. The fire has caused cattle prices to tank due to the elimination of a key livestock buyer. United States agriculture secretary, Sonny Perdue, ordered an investigation into these widening prices between cattle and beef, as farmers are worried that meat packers such as Tyson, Cargill, Inc. and JBS USA would take advantage of the situation by dropping their offering prices.
  • The USDA has approved a key ingredient in plant-based burger patties made by Impossible Foods allowing direct consumer sales. The Food and Drug Administration concluded that, soy leghaemoglobin, a protein-based colour additive that Impossible Foods uses to make its burgers look and “bleed” like real meat, was safe.
  • Brazil’s JBS, the world’s largest meatpacker, announced that its acquisition of local pork processor, Adelle Foods was approved by the country’s antitrust authority. The deal, which was first announced in April, is worth USD 59,8 million (ZAR 897 million) and will see JBS take control of Adelle’s pork processing plant in Seberi in Rio Grande do Sul state, including its integration system. 
  • Perdue AgriBusiness, the grain handling operation of US poultry giant Perdue Farms, has announced the purchase of oilseed assets belonging to Hart AgStrong in the south-east United States. The purchase includes two oilseed expeller crushing facilities in Bowersville, Georgia and Trenton, Kentucky, processing organic and non-genetically modified organism soybeans, HEAR (high erucic acid rapeseed), canola and high oleic sunflower, as well as an organic specialty oil refinery at the Bowersville facility.
  • Specialty meat company Strauss Brands has been acquired by PE (Private equity) firm Insight Equity Holdings, LLC, with the capital from the investment going to build a new processing facility in Franklin, Wisconsin. The companies plan to break ground on the new facility in the final quarter of this year, with USD 58 million (ZAR 870 million) being invested in the project.
  • Alliance Feed, LLC has opened its USD 13,7 million (ZAR 205,5 million) feed mill in Columbia City, Indiana. Around 13 people will be employed at the facility. The Alliance Feed mill design is based on the Co-Alliance feed mill in Reynolds, Indiana which is currently producing 275 000 t of feed supplied to over 800 000 pigs annually.
  • Brazilian food processor BRF S.A. said it will reopen a plant in the southern town of Carambeí in September, earlier than planned.
  • Bunge Limited, a leader in agriculture, food and ingredients, today announced that it is relocating its global headquarters from White Plains, New York, to the St. Louis, Missouri metropolitan area. This move allows the company to leverage shared capabilities and enhance collaboration.
  • Tyson Foods, Inc. is recalling nearly 20 t of frozen chicken patties because they could be contaminated with extraneous materials. The recall involves 39 078 pounds of Weaver brand frozen chicken patty products that were produced on 31 January and shipped to retail locations nationwide.
  • Darling Ingredients will be building a new beef carcass rendering plant in Fresno, California. The new plant will take approximately 2,5 years to build and will boost Darling Ingredients’ processing capacity in Fresno to 4,5 million kilograms per week. 
  • Costco’s new chicken plant in Fremont, Nebraska will reportedly begin operations in early September and hold its official inauguration in October. Ultimately, the plant will process some two million chickens per week. The complex also includes a hatchery and feed mill owned by Costco, for a combined investment of over USD 450 million (ZAR 6,75 billion) by the company. 

Research and technology

  • Unibio and Saudi-based Edhafat have signed a memorandum of understanding with Saudi Arabian General Investment Authority (SAGIA) beginning the preparations for the establishment of a protein production plant that will produce protein from methane gas in Saudi Arabia. This forms part of the Saudi 2030 Vision project, which aims to transform the economy using local investment power to create a more diverse and sustainable future, while also using the strategic position of the Kingdom to build a role as an integral driver of international trade bringing Africa, Asia and Europe together. This production plant will target issues such as food security in a region lacking an abundance of fertile soil and water. By using local resources such as natural gas, cheap electricity, and chemicals, proteins can be produced without adding stress to the agricultural system. The technology allows the decoupling of protein production from farming and fishing.
  • DSM Nutritional Products, a Dutch health and nutrition company, has filed a Brazilian registration for a new bovine feed additive that can cut methane emissions by around 30%. The European registration of the product called 3-NOP was filed last month. Approval for the product is expected by late 2020 or early 2021.
  • For meatpackers, this summer’s must-have accessory is a plant-based meat replacement. Smithfield Foods, Inc., the world’s largest pork producer, is the latest to debut an animal-free product line that it’s calling Pure Farmland, built around soy-based burgers, meatballs and breakfast patties that Smithfield says are gluten and dairy-free as well. Smithfield says it’s targeting ‘flexitarians’ who aim to reduce but not eliminate their meat consumption.
  • Scientists have discovered thousands of microbes in the cow’s stomach which could improve meat and dairy yields, as well as overall health. The findings build the clearest picture yet of how the microbes in a cow’s rumen help cattle to digest and extract energy from their food. They studied samples from 283 cows, identified almost 5 000 new strains of microbe and more than 2 000 novel species.
  • Conagra Brands, Inc. is taking steps to implement higher standards for the treatment of broiler chickens in its supply-chain sourcing practices. This is being done in collaboration with the Humane Society of the United States to expand its existing broiler-chicken policy. Conagra s goals include improving lighting and litter quality as well as providing its birds with more space to perform natural behaviours.

Charts

The theme throughout August continued to be low demand and depressed prices. Many producers are incurring losses and are using production halts to try and limit costs. With demand falling due the continuing spread of ASF, Chinese prices will remain weak, but stable. The continued weakening of the global market was seen most throughout the US and Europe with prices continuing a downward trend.

Demand from Chinese poultry producers have stabilised methionine prices, although the market remains vulnerable and at record low levels. In Europe, volumes traded have remained quiet with sellers noting reduced output from Chinese producers, which has tightened the market up slightly but is seen to be a backdrop for major new capacities that are expected to come online in China. Supply, however, remains abundant, and no major price moves are expected.

Global threonine markets are taking a hit with oversupply and poor margins taking their toll. The continued ASF outbreak crisis is severely eroding demand which can be seen with falling prices. Prices reached a record low in early August but seem to have stabilised somewhat at those low levels. With global oversupply and poor demand, prices should remain soft.

Valine prices have continued to remain fairly stable and seem to be holding at the current levels, after a gradual fall in prices. With the forecast of improving demand and continued stability, prices should remain in a narrow band.

Tryptophan prices have continued to decrease throughout August, despite a stable start. Oversupply in China and shrinking demand will keep prices low, although the downward scope is limited at the current levels. With no new business being confirmed in Europe there is a sentiment of weakening prices in the market.

For more information

contact Heinrich Jansen van Vuuren
heinrich@chemunique.co.za

This report contains information supplied by and compiled from eFeedLink and Feedinfo.
Detailed reports and references are available on request.