AMINO REPORT

February 2020

Indication Prices

(average cost and freight to Durban)

L-Lysine HCI

ZAR 16,74

L-Lysine sulphate

ZAR 14,09

L-Methionine

ZAR 35,34

L-Threonine

ZAR 18,85

L-Tryptophan

ZAR 140,25

L-Valine

ZAR 94,85

L-Arginine

ZAR 99,60

Headlines

CHINA, SOUTH EAST AND CENTRAL ASIA

  • Agricultural production in Hubei Province, China, is facing serious difficulties. Due to the quarantine measures put in place to control the spread of the coronavirus disease (COVID-19), shipments and deliveries of feed, feed raw materials, and livestock have almost come to a standstill. In late January, the Hubei Poultry Association issued an urgent call for 30 000 t of feed ingredients in order to keep local poultry operations running, which would last only about 10 days. Some farmers were forced to euthanise birds due to a lack of feed. In response, the Chinese Ministry of Agriculture instructed local authorities to ensure the free flow of feed, animals, and animal products to maintain agricultural output and prevent shortages. Slaughterhouses were also forbidden from closing. Pork prices have risen across China to near record levels seen last year. Transport restrictions and roadblocks have held up the movement of pigs and poultry to slaughterhouses, while a lockdown on many cities and counties has left too few staff to operate them. Chinese poultry production, which has seen enormous growth to fill the gap left by African swine fever (ASF), is expected to experience a tough time over the next six months due disruptions in supply chains. Farmers have been left with large inventories of eggs and live birds as restaurants, canteens, and food markets have been shut down, resulting in plummeting prices and further curbing production.
  • Efforts to curb the spread of COVID-19 have slowed down and, in some cases, prevented the much-anticipated recovery of pig production in many areas. Various newly built pig breeding facilities and farms had to postpone start-ups, while restocking of existing farms have been delayed by up to a month.
  • In response to high pork prices and to alleviate potential shortages, 20 000 t of frozen pork and almost three million tonnes of maize have been released from the state reserves in February.
  • Some positive news out of China is that sow herd had increased by 1,2% in January from December, the fourth consecutive month of growth in the breeding herd.
  • In early February, Chinese state media announced that China will diversify import channels and increase imports of agricultural products to meet domestic demand. By late February, imports of all live poultry and poultry products from the United States (US) were approved, and restrictions on certain beef and pet food products were lifted. Import duty exemptions on 697 products were also announced and went into effect on 2 March. This is also in line with China’s commitments under the Phase 1 trade deal with the US. However, questions remain regarding China’s ability to honour its commitments due to the COVID-19 outbreak and the wider effect on the US and global economy.
  • Adding to the nightmare start to the new decade for Chinese poultry, H5N1 bird flu outbreaks have been reported in several parts of the country. The outbreaks were not serious though and were quickly contained.
  • China also banned poultry imports from Slovenia, Hungary, Germany, and Ukraine due to outbreaks of bird flu.
  • China has allocated CNY 1,4 billion (ZAR 3,1 billion) for the prevention and control of pests including fall armyworms and locusts. The government has set aside CNY 490 million (ZAR 1 billion) to combat fall armyworms in 21 provinces, including Yunnan and Guangxi, and CNY 30 million (ZAR 67 million) for locust control efforts in 15 provinces, including major wheat producers Shandong and Henan. The rest of the government funds will be used to control pests damaging vegetables in Hubei Province and other pests threatening grain output.
  • China’s gridlocked ports are starting to make headway as port workers started to return to work in late February. As the world’s largest cargo handler, with 715 000 containers per day (30% of global container handling), severe congestion in Chinese ports caused havoc for shipping lines with ripple effects felt throughout the world. The majority of workers have returned; however, it will take weeks to clear the backlog and for operations to get back to normal.
  • Nearly 3 000 pigs died in Indonesia’s province of East Nusa Tenggara after an outbreak of African swine fever. Regulations on the transport of live animals and pork products have been tightened in response. This latest outbreak follows an earlier outbreak in the province of North Sumatra, which killed more than 47 000 animals.
  • The Philippines has reported an outbreak of ASF in the province of Davao Occidental. The area has been placed under quarantine and more than 1 000 animals have been culled. According to the country’s Department of Agriculture, the outbreak could be the result of Chinese pork being smuggled into the country.
  • Indonesia announced a temporary ban on imports of live animals, certain foods and beverages from China over COVID-19 concerns. There are no confirmed cases of infection in Indonesia. The government will also encourage tourism from countries other than China. Entry has been barred to visitors who have been in China for more than 14 days and all flights to and from China have been cancelled. Migrant workers have also been banned from going to China, and tighter measures will be put in place for workers heading to Hong Kong and China.
  • Vietnam has been hit by several small outbreaks of H5N6 bird flu. To date, almost 30 000 birds have been culled and biosecurity measures around affected areas have been tightened.
  • Malaysia’s Ministry of Agriculture and Agro-based Industry (MOA) is banning six antibiotics for growth promotion and disease prevention purposes in food producing animals as of 31 August of this year. The antibiotics in question are erythromycin, enrofloxacin, tetracycline, ceftiofur, tylosin, and fosfomycin.
  • On 17 February 2020, Kazakh media reported that the central Asian country’s public investment body, Kazakh Invest, plans to participate in several projects to boost the country’s feed production and meat processing capacity. The projects include a 60 000 t, R312 million compound feed plant in the Almaty region, as well as various meat processing plants, worth R2,5 billion, alongside Chinese, European and Australian investors.
  • India’s poultry sector has fallen victim to fake news. A rumour that COVID-19 can be transmitted by chickens went viral and has caused people to avoid chickens and poultry. Sales of chickens dropped by nearly 50%, from 75 million birds to 40 million birds per week. Prices for commodities used in animal feed have dropped by almost 8%. It is estimated that the industry has already lost nearly INR 13 billion (ZAR 2,8 billion) in lost sales.

Headlines

Europe and Russia

  • A case of atypical bovine spongiform encephalopathy (BSE), commonly known as mad cow disease, has been reported in a 13-year old cow in Einsiedeln, Switzerland.
  • Greece recorded its first ever case of African swine fever (ASF) when a single pig died of the disease in the Serres region in the north of the country. All farmed pigs in a radius of 3 km were culled and the movement of animals within a 10 km radius of the site has been banned.
  • Scottish salmon producers warned the British government that Brexit could place a burden of up to GBP 8,7 million (ZAR 135 million) on them if they were forced to provide export certificates for farmed fish sold to the European Union (EU). If no agreement is reached, Scottish-farmed salmon will need export health certificates from 2021 to export to the EU.
  • Germany has reported an outbreak of the highly pathogenic H5N8 bird flu virus in a flock of backyard birds in Bretzfeld, in the Baden-Wurttemberg region. All were culled. In response to the reports from Germany, the Dutch Ministry of Agriculture has ordered commercial poultry farmers to keep their birds indoors to prevent wild birds from infecting commercial flocks.
  • The EU has lifted the ban on Ukrainian poultry, although it is unclear when exports can recommence. The ban was implemented after a virulent strain of bird flu was reported. Ukraine is a major exporter of poultry meat in Europe.
  • The Czech Republic reported an outbreak of H5N8 east of the capital of Prague. 140 000 turkeys and chickens have been culled. This is the second outbreak this year reported by Czech authorities.
  • Bulgaria also reported three outbreaks of H5N8 in the south of the country. One farm housed 55 000 layers, while the other two farms had ducks, 11 000 and 6 000, respectively. All the birds were culled, and a 3 km protection zone set up around the farms with restricted movement of all poultry within the zone.
  • Taiwan banned imports of all live pigs and pork products from Italy after Italy suspended all flights between Rome and Taiwan in response to the spread of COVID-19. Taiwan summoned the Italian representative in Taipei to relay their disagreement with the decision, but to no advantage thus far. Taiwanese officials sighted the spread ASF on the island of Sardinia for their decision.

Headlines

The Americas

  • The United States (US) has lifted a ban on fresh Brazilian beef. The ban had been in place since 2017 due to safety concerns after a corruption investigation involved JBS S.A., BRF S.A. and Brazilian meat inspectors.
  • According to the US Department of Agriculture (USDA), US corn stockpiles are projected to grow sharply by the end of the 2020/2021 marketing year, while soybean stocks are expected to tighten. The corn crop is forecast to rise by 12,9% to 15,460 billion bushels, with ending stocks for the 2020/2021 crop year pegged at 2.637 billion bushels, up 39,4% over the previous marketing year. Corn exports are expected to rise to 2,1 billion bushels, up from 1,725 billion. The USDA estimated the soybean crop at 4,195 billion bushels, 17,9% higher than the previous marketing year and ending stocks falling to 320 million bushels, down 105 million bushels from a year earlier.

Middle East and Africa

  • Saudi Arabia has reported an outbreak of H5N8 bird flu virus on a poultry farm in the central Sudair region, killing 22 700 birds. The remaining 385 300 birds in the flock were culled.
  • Turkey has temporarily stopped imports of livestock and animal fats from China due the COVID-19 outbreak. All Chinese citizens coming to Turkey for employment will be considered on leave for 14 days until the health ministry grants them permission to work.
  • South Africa’s Department of Agriculture, Land Reform and Rural Development (DALRRD) has lifted a two-month ban on livestock auctions that halted trade in cattle, sheep and other animals following an outbreak of foot-and-mouth disease (FMD) in Limpopo late last year. South Africa’s livestock auction industry is estimated to be worth around R81 billion a year.
  • Namibia became the first African country to export red meat to the United States after it sent 25 t of beef to Philadelphia, following two decades of haggling over safety regulations and logistics. A total of 860 t of exports are planned for 2020, rising to 5 000 t by 2025. Under the deal, exports will include boneless, raw beef cuts in frozen or chilled form. In 2019, Namibia exported approximately 12 400 t of meat to Norway, Britain, the European Union (EU), and China.
  • Botswana’s Minister of Agricultural Development and Food Security announced that beef farmers will be allowed to export their product directly. The state-owned Botswana Meat Commission (BMC) is currently the sole entity licensed to export beef. Farmers are forced to sell to the loss-making organisation at low prices, while payments are often delayed. Despite government bailouts, the BMC is insolvent and earmarked for privatisation, with operational inefficiency, aged equipment and low output, as well as its financial problems weighing on the country’s beef industry. The BMC will be replaced by a meat industry regulatory authority to facilitate the liberalisation of exports. This process should be finalised by July 2020. Botswana was the ninth largest beef exporter to the European Union in 2019, though its earnings from beef exports have dropped from USD 130 million (ZAR 2 billion) in 2010 to USD 80 million (ZAR 1,2 billion) in 2018.

Markets

  • World food prices rose for the fourth month running in January, boosted by jumps in quotations for vegetable oils, sugar and wheat. The Food and Agriculture Organization of the United Nations (FAO) food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 182,5 points in January, up 0,7% on the previous month. The FAO also predicted that cereal production would hit a new record in 2019 and come in some 2,3% higher than the 2018 crop. The FAO cereal price index climbed 2,9% month-on-month in January, to record its highest value since May 2018, with the prices of all major cereals rising, led by wheat. The vegetable oil index jumped 7,0% last month to reach a three-year high and the sugar price index climbed 5,5%, while the dairy index was up 0,9%. In contrast, the meat price index fell 4,0%, ending 11 consecutive months of increases, with the price quotations for all meat categories showing declines. The FAO also issued a new forecast for world cereal production, predicting a record high of 2,715 billion tonnes this year.
  • According to a Rabobank analyst, China’s pork production could take another hit from the coronavirus disease outbreak due to production and logistics issues. Rabobank expects 2019 pork production to be 15% lower that official Chinese statistics. This view is echoed by the United States Department of Agriculture (USDA), which estimates China’s hog production in 2019 to be down by 195 million head from 2018, with another 80 million expected to be killed by African swine fever (ASF) in 2020.
  • According to Brazil’s meat industry association, the Brazilian Animal Protein Association (ABPA, or Associação Brasileira de Proteína Animal), the so-called perfect storm of health and food security concerns in China promises to drive up demand for South American meat. Beef exports rose by 9,84% in January, totaling 135 375 t. Exports to China alone were 53 200 t, an increase of 126% over the same period last year. Exports of pork jumped 41% in January from a year earlier to 68 500 t. Again, China was by far the biggest buyer of Brazilian pork in January, buying 30 600 t, or 45% of total exports, and up by 300% against January 2019.
  • Pork exports from the US are surging, but apparently not fast enough. Despite increased purchases of pork by China and other south-east Asian countries, US production increases are still outstripping exports. US pork prices have increased by only 6% since September 2019, while European prices have risen 31%, and Chinese prices doubled over the same period. It seems US pork is still not finding its way to Chinese consumers. US pork producers exported 42 900 t by mid-February, with only 13 000 t destined for China.
  • According the Mexican cattle growers’ association, AMEG (Asociación Mexicana de Engordadores de Ganado Bovino), beef exports to China could increase by 40% in 2020. Two Mexican exporters, SuKarne and Grupo Gusi, already have permits to export to China, while 42 other meat packers are waiting for approvals. The USDA has estimated that China will import around 2,9 million tonnes of beef in 2019. Mexican beef exports to China totalled 250 000 t in 2020.
  • Brazil is expecting to see a drop in soy exports to China in 2020, as the effects of the COVID-19 outbreak and the US trade deal materialise. Estimates vary from 4 million to 8,8 million tonnes, or 7%–15%. Total Brazilian soy exports to China in 2019 was 58 million tonnes. However, total Chinese exports are expected to rise in 2020. China imported a total of 88,5 million tonnes of soy in 2019.

Corporate headlines

  • Bakkafrost, the largest supplier of salmon to Russia, has been banned from importing any product into Russia after harmful bacteria were found in some products. This follows a similar ban in November 2018, which was lifted in February 2019.
  • CJ Bio America Inc. will reduce L-Lysine production at its Iowa plant for a period to add L-Arginine. This comes in response to increased demand in North and South America for amino acids as customers lower crude protein levels in diets.
  • Zalar Holding, Morocco’s leading vertically integrated poultry producer, has received EUR 25 million (ZAR 6,3 billion) from the European Investment Bank. The funding will be used to increase overall production capacity by boosting feed production, as well as modernising and expanding breeding, hatching and growing facilities. Zalar produces 960 000 t of feed per year, while the hatchery supplies 60 million day-old chicks and three million turkey poults to 20 broiler and turkey farms.
  • Russian lysine production is steadily increasing. Belgorod-based Premix Plant N°1, a subsidiary of ZAO Prioskolie, boosted production of lysine sulphate powder in 2019 to 80 000 t, up from 57 000 t, and is further expanding L-Lysine production by launching liquid lysine sulphate in March 2020. Total sales of L-Lysine in Russia are estimated to be around 110 000 t.
  • Tyson Foods Inc. reported a drop in chicken profits. Revenue from poultry was down by more than half in the company’s fiscal first quarter, as rising production outstripped demand, despite shrinking global meat supplies due to swine fever in China’s pork and a severe drought reducing Australia’s beef production. Beef sales volume fell by 8%. However, pork exports have surged by 600% in the same period, doubling earnings from pork. Tyson’s is still forging ahead with a restructuring programme that will see 500 jobs being cut across several areas and job levels in corporate offices in Chicago and Springdale, Arkansas, where Tyson is based, despite a rise in sales and net income.
  • A new animal by-product plant will be built in Ukraine. Feednova, a partnership between Ukraine’s Effective Investments LLC and the Netherlands’ Mada Participation B.V. will be built in Busk, in Ukraine’s Lviv region, to process animal by-products into fat and protein ingredients. The USD 20 million (ZAR 305 million) plant will boast four production lines processing more than 220 t of raw materials daily, for a total output of 90 t of finished products per day.
  • Aller Aqua will no longer be using South American soy in its aqua feeds. Instead the company will focus on using regionally produced soy, as well products from its specialised protein factory in Germany, which uses local raw materials, such as peas, to produce feed proteins.
  • Global Bio-chem Technology Group Company Limited (GBT) has suspended amino acid production at two more manufacturing sites in Changchun, China. Manufacturing at a third site in Changchun has been suspended since December 2019 due to weak demand.
  • Argentina’s top exporter of processed soy, Vicentin, are to begin negotiations for debt restructuring, as the firm struggles to cope with a widening economic crisis in Argentina. Vicentin launched an expansion process last year, but as the market crashed due to political uncertainties, international creditors pulled back leaving Vicente unable to pay its creditors. Argentina is the global top exporter of soy meal and soy oil.
  • DSM Nutritional Products announced a restructuring programme that will cut 350 mainly managerial jobs called “Fit for Growth”. DSM aims to better serve customers and respond to the differentiated needs of their respective markets, by downsizing the global head office in Switzerland and its operations in North America. As part of the restructuring, Animal Nutrition will consist of two business lines: Core Products and Premix Solutions will encompass DSM Nutritional Products’ traditional offering, while the business line Specialty Solutions will focus on innovative products and solutions, primarily for gut health.
  • Two BRF S.A. plants have been temporarily suspended from exporting poultry to Saudi Arabia. Irregularities in feed production were revealed by a probe conducted between 2014 and 2018. The individuals charged, including two former vice-presidents for quality, stood accused of using banned substances and misrepresenting to regulators the amount of certain ingredients used to produce feed premix. Five other plants are still cleared for export. BRF will also invest around USD 120 million (ZAR 1,8 billion) to build its first chicken processing plant in Saudi Arabia.
  • Leading US pet food manufacturer C.J. Foods has acquired American Nutrition, a supplier of super premium pet food and treats, creating the largest independent manufacturer of super premium pet food in the country, with a production capacity of 454 000 t of pet food per year.
  • Hormel Foods Corp. is targeting an increased share of the Chinese pork market by eliminating ractopamine from its supply chain. The company will not accept any animals fed or exposed to ractopamine from 1 April 2020. Hormel, which sells ham, pork tenderloin and other meat products, does not slaughter hogs itself. Instead, it partners with third-party suppliers that process the animals for Hormel’s raw materials.
  • Bunge Ltd has offered to buy two soy processing plants in Brazil from local crusher Imcopa, for USD 12 million (ZAR 184 million), while also assuming debt of around USD 218 million (ZAR 3,3 billion). Imcopa is currently restructuring its debt as part of bankruptcy proceedings.
  • In late February, Addisseo lifted the force majeure for DL-Methionine (Rhodimet® NP99), sodium sulphate (Adisodium) and carbon sulphur (CS2) that was in place at its French production plants.
  • Cargill Inc. will launch its own plant-based meat substitutes in April, taking on Beyond Meat and Impossible Foods. Cargill will offer customers soy protein- or pea protein-based patties and ground products, while retailers will be able to sell the products under their own labels. Cargill has invested a total USD 100 million (ZAR 1,5 billion) in Puris, a major pea protein producer which supplies Beyond Meat with pea protein, since January 2018.
  • Russia’s Cherkizovo Group shipped 54 t of frozen chicken breast fillets to the United Arab Emirates (UAE), it’s first shipment to Gulf region. Cherkizovo is aiming to expand its presence in the UAE and other Gulf states in the future.

Research and technology

  • French milling company Paulic Meunerie is investing in its Oxygreen® process of treating wheat with ozone in order to remove chemical and biological pollutants such as pesticide residue, mycotoxins, and bacterial pathogens. The bran from treated wheat is uniquely suitable to feed farmed insects, as it lowers mortality and increases yield. Apparently, ozonation also increases the concentration of soluble fibre, which allows greater digestibility by the insects and accelerates their growth, weight, and protein and fat content. The company is planning to build a second-generation reactor prototype by the fourth quarter of 2020, which will boost its production of ozonated wheat bran by 140% to reach 10 800 t per year. This will be followed by the installation of a first industrial-scale Oxygreen® reactor in 2022, with a capacity of over 33 000 t per year, and a second reactor in 2023, to bring total production to 76 800 t.
  • Scientists from the Institute of Biological, Environmental and Rural Sciences (IBERS) at Aberystwyth University are working with colleagues from University College Cork in Ireland to investigate how slurry and waste water from the dairy industry could be used to grow duckweed, a fast growing plant which can be used as a protein source for feeding livestock. Using the waste products of farms could also lead to improved water quality in rivers and coastal areas off Wales and Ireland.

Charts

The extended Chinese New Year holiday has left inventories depleted, and, combined with a slow recovery in production, prices have surged as feed manufacturers try to resume production. Expect prices to remain at higher levels, although some stability should return to the market as production recovers and logistics return to normal.

Near-term demand and production issues in China and Europe have caused sharp price increases; however, production is returning to normal. The longer-term outlook are for stable prices and supply, albeit at higher levels.

Both Chinese and European prices showed strong increases in February as supply dwindled and many buyers were forced to the spot market to cover gaps in supply caused by delayed shipments. It seems the worst is over, but prices will probably remain stable at higher levels as producers will be reluctant to decrease prices again.

Valine prices seem to have stabilised after sharp increases in late January and early February. With production and shipping difficulties improving every day, prices should remain stable.

Supply chain issues in China and re-registration issues in Europe have caused tryptophan prices to soar over the past four weeks. The trend could continue, as Chinese production is still lagging behind.

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.

Synthetic amino acids

L-Tryptophan

Synthetic amino acids

L-Threonine

Synthetic amino acids

L-Methionine

Synthetic amino acids

L-Valine

Synthetic amino acids

L-Arginine

Synthetic amino acids

L-Lysine