AMINO REPORT

March 2020

Indication prices

(average cost and freight to Durban)

L-Lysine HCI

ZAR 22,08

L-Lysine sulphate

ZAR 16,22

L-Methionine

ZAR 42,83

L-Threonine

ZAR 19,92

L-Tryptophan

ZAR 148,77

L-Valine

ZAR 96,52

L-Arginine

ZAR 108,13

Headlines

CHINA, SOUTH EAST AND CENTRAL ASIA

  • Chinese officials confirmed several cases of African swine fever (ASF) in March; one in Hubei Province among wild boar, one each in Henan and Inner Mongolia, and two in Sichuan. All involved illegally transported animals.
  • Chinese animal feed production is recovering after nearly two years battling ASF, and, more recently, the coronavirus (COVID-19) pandemic. According to reports from the Chinese Ministry of Agriculture, 80% of Chinese feed mills are back in production, compared to 37% in early February. Chinese feed production is expected to be down by about 5 million tonnes, or 1%, compared to 2019. This not nearly as much as expected, considering China’s swine herd is almost 50% smaller than in 2018. Increased demand from poultry and aquaculture helped to buoy the overall production, with some estimates indicating that the increase in poultry feed offset between 65% and 70% of lost swine feed. Feed demand is expected to continue to improve as the swine herd recovers. Poultry production grew by more than 12% in 2019 and, although many farmers faced severe difficulties in maintaining production during the disruptions caused the COVID-19 outbreak, production of eggs and poultry meat is expected to remain on par with previous year.
  • However, not everyone is as optimistic about China’s pork recovery. According to a Rabobank report, pork production is expected to fall between 15% and 20% in 2020, keeping prices high. Large volumes of imports will alleviate the short supply, but there is a limit to the volume of frozen imports that Chinese ports can handle. The expectation is for the market to take longer to normalise that originally expected.
  • China has introduced various initiatives to help the swine industry recover from the ASF outbreak. The Agricultural Development Bank of China has made more than CNY 10 billion (ZAR 25 billion) available for loans to boost primary pig production as well as various links in the supply chain. Environmental registration requirements for new breeding farms have been relaxed and restrictions in areas where farming was previously prohibited have been lifted. In an unprecedented move, major producers have been encouraged to consider production facilities outside of Chinese territory, preferably in countries with good bilateral ties with China that are free from ASF and where exports back to China will be possible.
  • The Ministry of Agriculture expects the coronavirus pandemic to have a limited effect on soybean consumption and is confident that China will be able to honour the commitments made under the trade agreement with the United States (US). In a further move to indicate it’s commitment, China has drawn up food safety standards on residue limits of growth hormones in beef. China has previously had zero tolerance for any residues of growth hormones, restricting beef imports from the US, where growth hormones are widely used.
  • Chinese soybean processors are concerned that the spread of COVID-19 to major exporters could lead to supply shortages. Supply chain disruptions due to measures to control the pandemic in Brazil and Argentina have already caused delays in shipments, and some processors have been forced to scale back production.
  • Indian poultry integrator, Suguna Group, is planning to expand operations into northern and eastern India, Bangladesh, and Kenya. The planned projects include hatcheries, breeding farms, premix and feed plants, as well as processing plants. The planned investments are valued at more than USD 67 million (ZAR 1,2 billion).
  • Vietnam has recorded 43 bird flu cases in 13 provinces so far this year. Thirty-eight outbreaks of H5N6 and five outbreaks of H5N1 have led to almost 140 000 birds being culled. According to the government, all the outbreaks occurred on farms with birds which had not been vaccinated.
  • ASF has reportedly been discovered in Papua New Guinea (PNG) for the first time, after an investigation into the death of over 300 pigs in Mendi, in PNG’s Southern Highlands, on the island of Papua. The discovery of ASF in PNG has caused significant concern in Australia, for whom Papua New Guinea is its closest neighbour geographically; the mainland of Australia and Papua are separated by around 150 km, but reckoning from their closest inhabited islands, the two are only 6 km apart.

Headlines

Europe and Russia

  • According to Ukraine’s Institute of Agrarian Economics (IAE), poultry exports in 2019 increased by 26% to 414 000 t, with the majority (28%) going to the European Union (EU). The EU recently lifted a ban on poultry imports from Ukraine, in place since January due to bird flu. Mironivsky Hliboproduct (MHP), the largest producer of chicken in Ukraine, has already resumed exports.
  • Germany reported several cases of bird flu in March. Outbreaks have been reported on farms in Saxony and Lower Saxony.
  • Bulgarian feed production in 2019 remained relatively stable, increasing by 0,3% from 2018. However, Bulgaria fought its own battle against African swine fever (ASF). Almost 100 000 animals were culled in 2019, leading to a drop of 8,7% in pig feed. It seems, however, that the disease has been brought under control and that the Bulgarian swine herd is recovering. Total feed production for 2019 was 1,12 million tonnes, with poultry the main contributor (50,7%) followed by pigs (28,9%) and ruminants (15,8%).
  • Russia will sell 1 million tonnes of grain from its state stockpile on the domestic market to ensure supplies and keep prices down amid the coronavirus pandemic. Russia has about 1,8 million tonnes of grain stockpiled in Siberia. The Ministry of Agriculture also proposed limiting exports to protect the country’s food and feed security.
  • Russian feed additive importers have expressed concern over fluctuating imported feed additive prices caused by measures to contain the COVID-19 pandemic. Prices have increased by almost 30%.
  • The president of the European Commission, Ursula von der Leyen, acknowledged that the measures imposed to stop the spread of COVID-19 have nearly paralysed the intra-European movement of goods, with some border crossings taking up to 18 hours to cross due to long queues. Road freight accounts for 75% of freight movement in the EU. She encouraged member states find ways to minimise delays for freight vehicles, such as green lanes and additional crossings specifically for vehicles carrying goods between member states.
  • Poland’s first case of ASF in 2020 has been reported on a breeding farm only 80 km from the German border. The farm is situated in the county of Nowa Sól, where 146 wild boars have tested positive for ASF since November 2019.
  • Romania has been hard hit by ASF, with 528 active outbreaks up until March 2020, double the number of March 2019. The hog herd has declined by almost 10% since May 2018, while breeding sows declined by 10,4% over the same period. Total pork production dropped by 8%, while pork prices are up by more than 50%.

Headlines

The Americas

  • The Argentine government announced an increase in export taxes on soybeans, soy oil, and soymeal by 3% to 33%. The government of President Alberto Fernandez is looking to boost revenues ahead of a planned sovereign bond restructuring. Farmers and economists agree that this will lead to less soy being planted and will halt any plans to invest in farming infrastructure, while farmers embarked on a four-day strike on 9 March. To make matters worse, measures to contain the spread of COVID-19 have hampered grain transport to the port of Rosario and to soybean processors. The Rosario Grain Exchange commented that some processors have received only half of the beans they usually take. The number of trucks delivering agricultural produce to Rosario-based ports and processors fell from 28 000 in the first week of March to just over 13 000 in the last week of the month. It is a trying time for Argentine farmers, with lower soybean prices, increased costs, and higher taxes all hitting them just as the harvesting season starts. Soybean prices have dropped by USD 16 (ZAR 299) per tonne since January 2020. Argentina is expected to harvest 50 million tonnes of soy in the 2019/2020 season.
  • Argentine shipments of soymeal, soybeans, corn, and other agricultural exports were delayed as the government ramps up inspections of incoming cargo ships to ensure crew members were free of coronavirus infection. This adds to existing delays caused by municipal regulations amid the COVID-19 pandemic and its effects on road transport, even though farmers are able to harvest their crops unimpeded. Coastguard inspection of ships contributed to concerns about supply bottlenecks after dozens of towns around the Rosario ports hub, where most of Argentina’s grains shipments are loaded, defied a government order that export activities should not be interrupted. Ships are currently delayed, on average, by about one day.
  • Labour unions representing white-collar port workers, stevedores, tugboat crew members, and grains elevator operators have requested a 14-day quarantine of ships entering the country due to the coronavirus outbreak. Shipping interruptions from Argentina could force global buyers to look at alternative suppliers Brazil and the United States, to the detriment of an already struggling Argentine economy.
  • A group of almost 50 agribusiness associations has sought support from the federal government to guarantee Brazilian ports continue to operate amid the coronavirus crisis. The Brazilian government decreed measures to contain the spread of COVID-19 but have promised that agricultural export shipments through the port of Santos will not be affected in any way. However, two important agricultural towns have issued municipal decrees that contradict the federal decree and have severely hampered the movement of grain. The municipalities of Rondonópolis and Canarana originally ordered all grain processing facilities to halt operations. Both are in the important agricultural state of Mato Grosso. Canarana, in the meantime, has amended its coronavirus disease decree halting operations in most industries to allow global trading companies to ship grains out of the city.
  • The American Feed Industry Association, along with 23 state and regional feed and grain associations, called on state officials around the country to maintain access to businesses providing animal food amid proposed state plans to close non-essential businesses to curtail the spread of COVID-19. Some states released response plans that excluded animal food manufacturing facilities, transportation, and agricultural and non-agricultural retail outlets from their lists of essential businesses. In an urgent letter, the groups stated that these businesses should be reclassified to avoid hindrance to the animal feed industry’s ability to continue supplying feed.
  • Many ethanol plants in the United States (US) have scaled back production or shut down entirely as the coronavirus outbreak cuts into fuel consumption. Renewable Fuels Association chief executive Geoff Cooper said on a conference call that he expects ethanol production to fall further and called on the US Environmental Protection Agency (EPA) to ease the strain on the industry by ceasing to grant small refineries waivers from the nation’s biofuels mandates. As governments urge people to stay indoors to curb the outbreak, fuel demand has tapered off, together with margins to produce ethanol. Ethanol refining margins in some areas fell as low as USD 0,11 a gallon (ZAR 0,51/ℓ) in early March and currently sits at USD 0,10 a gallon (ZAR 0,47/ℓ). Some 200 plants across the United States produce just over one million barrels per day of ethanol, and the industry employs about 350 000 workers, either directly or indirectly. Some companies have shifted production to produce hand sanitiser.
  • Senators in the US are calling for investigations of record profit margins for beef processors like Tyson Foods and Cargill, after ranchers complained that surging meat prices due to COVID-19 hoarding did not translate into higher cattle prices. Futures prices for cattle have tumbled during the outbreak, and cattle producers are operating at a net loss while processors’ margins reportedly leapt to more than USD 600 (ZAR 11 227) per head of cattle in late March. Four US senators from South Dakota, North Dakota, and Montana called on the country’s justice department for a price-fixing investigation.
  • Canada is asking recently retired meat inspectors to come back to work as it tries to ease staffing shortages and ensure the food system remains intact during the coronavirus disease outbreak. The Canadian Food Inspection Agency (CFIA) told meat processing plants it would be reducing the agency’s staffed hours at domestic meat processing plants because of capacity constraints. It was not immediately clear when the reduced staffing, including no overtime and no Saturday shifts, would take effect. Industry experts fear the CFIA move could cut the output of meat products across Canada by 10% or more.

Headlines

Middle East and Africa

  • South Africa (SA) has lifted a four-year ban on poultry imports from the Netherlands, implemented in 2016 due to the highly pathogenic avian influenza (HPAI). At that point, the Netherlands was the second-largest exporter of chicken meat and products to SA. It’s expected that the Netherlands will resume shipping significant volumes to South Africa despite the recently announced increase in import duties. While imports from the United States (US) and Brazil are expected to be affected, imports from the European Union (EU) will not be subject to these increases due to their tariff-free market access, which was established under the Economic Partnership Agreement between the Southern Africa Development Community (SADC) and the EU.
  • Construction has started on a new animal feed mill near Otjiwarongo, Namibia. The multi-million-dollar factory will produce feed mainly using rangeland encroacher bushes harvested at farms in the Otjozondjupa region as a base.

Australia

  • After years of drought, Australian farmers are looking to rebuild their herds while cattle prices are at record levels. However, the high international price of beef could convince some farmers keep on slaughtering. The risk of major disruptions in key Australian beef markets due to the COVID-19 pandemic could bring the current beef bonanza to a halt; seasonal conditions, though, are expected to improve in the 2020/2021 season and could further strengthen Australia’s beef industry.

Markets

  • According to the Food and Agriculture Organization of the United Nations (FAO), global food prices slipped in February, ending four months of successive increases, with the spread of the coronavirus disease dampening demand for some products. The FAO food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat, and sugar, averaged 180,5 points last month, down 1% on January. Most individual price indexes were down from January 2020:
    • Vegetable oil price index: -10,3% due to a slump in palm oil prices.
    • Cereal price index: -0,9%, with the international prices of all major cereals, except rice, declining.
    • Meat price index: -2% as imports declined to China, the epicentre of the outbreak.
    • Dairy price index: +4,6%, pushed higher by a rise in cheese, fuelled by tightening export supplies from New Zealand and Australia. However, quotations for milk powder fell due to a slowdown in purchases by China.
    • Sugar price index: +45%, its highest level since May 2017, mostly caused by prospects of lower production in India and a protracted drought in Thailand – two major sugar-producing countries.
  • Meat stocks in cold storage in the United States (US) showed significant increases compared to January 2020, with lower export demand driven by the coronavirus  pandemic. Chicken portions are up by 12% and pork by 11%. Congestion in Chinese ports and a shortage of refrigerated containers all add to the problem. Normal demand, however, should pick up as soon as China returns to normal but, with the United States leading global COVID-19 infections, it remains to be seen if shipments can be dispatched to ease the glut.
  • Chicken products from the US are entering China without retaliatory tariffs after Beijing made poultry eligible for exemptions to the extra duties. China granted exemptions on retaliatory duties to 696 US goods, but poultry was not eligible until China-based importers applied for, and received, exemptions from the 30% retaliatory duty.
  • Two months after a near complete standstill in China that rattled global supply chains, the country’s ports are again pushing out thousands of containers that were stranded at the onset of the coronavirus outbreak. The massive build-up of containers at docks in China has left a big shortfall in cargo at ports in the US and Europe since early February and created a shortage of empty containers. As China returns to work, fears are rising that the Western ports won’t be able to handle a flood of imports as seaports and coastal cities face their own shutdowns and economic disruption.

Corporate headlines

  • Certification audits are being severely impacted by restrictions and measures to control the spread of COVID-19. Irregular audit frequency can affect a company’s status by not complying with the GMP+ audit requirements. The coronavirus disease pandemic is categorised as an extraordinary event by GMP+ International and, thus, the possibility to postpone audits for a maximum of six months as of 27 February 2020 is probable. Customers should contact their representatives to ensure that their accreditation remains valid.
  • The market for plant-based meat alternatives is getting quite crowded as industry giants start to compete for market share with the original start-ups, forcing them to cut prices. Big multinationals like Nestlé SA, Smithfield Foods Inc., and Cargill Inc. have all unveiled plans to introduce their own imitation meat products. In response, Impossible Foods, one of the pioneers, have cut wholesale prices by 15%. Beyond Meat are playing the long game and maintaining prices for now, though working to reduce production costs to compete with traditional meat products. Retail sales in the US totalled more than USD 1 billion (ZAR 18 billion) in 2019.
  • China’s East Hope Group has signed an investment agreement with local authorities to expand its pig production capacities in Lijiang City, in the southern province of Yunnan, by investing as much as CNY 1 billion (ZAR 2,5 billion) on an integrated operation that includes breeding, feed processing, and grower facilities with an estimated output of some 500 000 hogs annually.
  • New Hope Liuhe Co., Limited has announced 10 integrated swine projects in various parts of China, which are collectively aimed at boosting the company’s output by more than 3 million pigs annually. The company intends to invest CNY 4,386 billion (ZAR 11,15 billion) in the series of projects, most of which are expected online as early as August or September of this year. Six of the projects will be located in south-central China (three in the province of Guangdong, two in Guangxi, and one in Guizhou), two in central China (Shaanxi and Hubei), and two in eastern China (Shandong and Hebei).As these are integrated projects involving investments in all parts of the production chain, the move is also expected to expand New Hope Liuhe’s feed production by 895 500 t annually.
  • BRF S.A., the world’s largest chicken exporter, has received 15 permits to export meat products from Brazil to Oman as it aims to strengthen its position in the Middle East market. The permits allows BRF S.A. to export up to 5 000 t of halaal food products per month to Oman, where it has had a commercial presence since the 1980s.
  • Brazilian meatpacker Minerva S.A. has placed workers on paid leave for 10–15 days at four domestic plants, as they adjust production capacity amid the fallout from the new coronavirus disease pandemic. Two of the plants affected by the measures are located in the state of Mato Grosso, one in São Paulo and the other in the state of Minas Gerais.
  • A group of shareholders in JBS S.A. has started arbitration proceedings against the company, claiming they were misled after the company’s initial public offering in Brazil in 2007 and are seeking damages of BRL 1,4 billion (ZAR 4,8 billion). The plaintiffs allege JBS and its executives released false and/or misleading information to investors after going public and that the company had become the world’s largest meatpacker based on “bribery and corruption”. The arbitration suit is the latest legal blow to JBS, whose owners signed a plea deal with Brazilian prosecutors in 2017 confessing to making illegal payments to scores of politicians to advance their business interests. The plea deal related to a then three-year old graft probe that shocked Brazil’s political and business establishment.
  • De Heus is planning to acquire Brazilian cattle nutrition company Cerrado Nutrição Animal. Located in Itaberaí, state of Goiás, Cerrado Nutrição Animal produces complete feeds, concentrates, mineral supplements, and mineral protein supplements. The company has a manufacturing capacity of 50 000 t per year.
  • CJ Selecta, CJ’s Brazilian feed grade soy protein concentrate (SPC) subsidiary, has decided to stop its usage of soybeans originating from the Amazon biome by investing more in its own specific programmes. Through the project and further investments, the company believes that it can decrease the portion of non-genetically modified soybeans from the Amazon biome to zero within three years.
  • CJ BIO has decided to temporarily shut down its lysine plant in Liaocheng, Shandong province, China. Production operations at the plant will be resumed depending on the status of recovery of feed demand in China and once the COVID-19 situation appears to be stabilised. The lysine plant in Liaocheng, which was shut down in May and June 2019, was also considered last year for review for a switch to monosodium glutamate or other products, the main reasons at the time being that global lysine demand was not recovering from the African swine fever (ASF) outbreaks in China and Asia, and that lysine was still in an oversupply situation. CJ CheilJedang’s other lysine plant in China, in Shenyang, had already stopped production since March 2019 and switched to specialty products.
  • Early in March, Evonik announced that, due to the COVID-19 outbreak, its contract manufacturer had to shut down its production facilities, with both production and shipping of ThreAMINO® affected. The shortage of supply was seen to affect all regions and Evonik declared force majeure. However, some confusion arose in the market after the announcement since the contract manufacturer involved is Fufeng Group, which entered into a ThreAMINO® toll manufacturing agreement with Evonik in early 2018. Fufeng Group confirmed that the company was indeed affected in February, but since the end of February, the problems have been solved and production was never interrupted. Evonik and Fufeng Group issued the following statement: “Fufeng’s production facility that manufactures, among others, Evonik’s ThreAMINO® has been affected by the COVID-19 outbreak and the company subsequently implemented measures during the month of February that caused difficulties to catch up the production and supply of ThreAMINO®. In addition, shipments of ThreAMINO® to the agreed delivery locations were affected heavily. The general logistics situation is gradually recovering since then, but the impact of the delayed shipments will take time to fully recover. For the avoidance of doubt, Fufeng confirms that its production facilities are now back to normal operation after the difficulties caused by the outbreak of COVID-19, and the supply is now in recovery.”
  • China’s Brother Enterprises Holding Co., Ltd. has officially been allowed to resume its production of vitamin B1 in Jiangsu. Production is expected to gradually return to normal. Brother Enterprises has a vitamin B1 production capacity of 3,200 t per annum, and also manufactures vitamin K3, and vitamin B3 (nicotinamide and niacin) for the feed, food, pharmaceutical, and cosmetic sectors.

Charts

Deliveries of raw materials to Chinese lysine plants have resumed after the COVID-19 restrictions were lifted, boosting production and overall stock levels. However, lackluster local demand and global logistical issues could start putting pressure on the market as the stock levels improve.

Strong global demand for poultry feed and production issues in Europe and Malaysia due to anti-COVID-19 measures are pushing methionine prices higher. The ZAR/USD exchange and the countrywide lockdown are making matter worse for the local market.

Chinese threonine is expected to remain tight as production is slow to recover and most producers are pushing to catch up on back orders. International demand is set to rise after Evonik declared force majeure in March. Expect prices to remain strong.

Valine prices resumed the sharp rising trend seen earlier in the year. Supplies are tight and are expected to remain so for the foreseeable future, supporting the current price dynamics. International logistical challenges will contribute to maintain current price levels.

Higher production and stable demand have tempered tryptophan prices after strong increases in February and March. Expect tryptophan to remain stable at the current levels.

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-Arginine

Synthetic amino acids

L-Lysine

Synthetic amino acids

L-Threonine

Synthetic amino acids

L-Isoleucine

Synthetic amino acids

L-Tryptophan

Synthetic amino acids

L-Methionine

Synthetic amino acids

L-Valine