AMINO REPORT

May 2020

Indication prices

(average cost and freight to Durban)

L-Lysine HCI

ZAR 19,30

L-Lysine sulphate

ZAR 14,22

L-Methionine

ZAR 46,51

L-Threonine

ZAR 22,88

L-Tryptophan

ZAR 157,07

L-Valine

ZAR 100,16

L-Arginine

ZAR 112,60

Headlines

CHINA, SOUTH EAST AND CENTRAL ASIA

  • China appears to be making progress towards reaching the goals set by the Phase 1 trade deal with the United States (US), whereby China increases agricultural imports from the US by 50%, based on 2017 levels. China has steadily been chipping away since January, when the deal was signed. Up until the end of April, Chinese traders had booked more than 1,3 million tonnes of soybeans, bringing the total still to be shipped for 2020 to 4,95 million tonnes. Typically, Chinese buyers start buying US soybeans shortly before harvest season in August. According to some analysts, China would need to import nearly 40 million tonnes of soybeans to reach the levels set by the trade deal. However, it is not all about soybeans. China has so far booked 2,5 million running bales of US cotton, 318 747 t of sorghum, 904 063 t of wheat (449 063 t old crop, 455 000 t new season), and 1,381 million tonnes of corn (881 081 t old crop, 500 000 t new season). China is expected to buy at least 20 million tonnes of US corn for state reserves this year.
    The Chinese have also stocked up on 424 301 t of pork from the US. Beef has seen some increases, albeit from a very low base, but chicken is lagging behind. With the disruptions caused by the COVID-19 pandemic and high levels of domestic production, demand for US chicken has been mute. In fact, prices for chicken and eggs are at their lowest levels this year due to an oversupply in the market.
  • China is planning to draft a medium-to-long-term food security plan to limit future disruptions to the food supply chain. Global supply chains are strained because of the current pandemic. Plans are likely to include increased grain production, expanded grain storage, and improved storage management, while imports of important agricultural commodities and goods will be diversified.
  • India’s animal feed industry is facing difficulties because some states failed to classify animal feed production as an essential service. Labour shortages, transport, and raw material challenges together with the forced closure of butcher shops and abattoirs have pressured the whole supply chain. Some analysts are expecting the Indian animal nutrition sector, especially the poultry sector, to undergo a period of consolidation with many smaller producers disappearing from the market.
  • Indian beef exports have been slashed with most processors shut down. Indian beef is mostly sourced from culled dairy buffalo. India typically exports around 1,5 million tonnes of beef per year, with the majority (1,2 million tonnes) being buffalo meat, but buffalo meat exports in April fell to just 40 000 t, compared to the average 100 000 t. Major export markets Malaysia and Indonesia have experienced a sharp increase in buffalo meat prices of between 15% and 20%, despite lower demand due to local lockdowns.
  • The Indian state of Assam has reported the deaths of thousands of pigs due to African swine fever (ASF), the first time the disease has been officially acknowledged in the country. No animals have been culled so far, but a containment zone of 1 km around the infected area has been established, with a 10 km surveillance zone.
  • Indonesian feed production declined by as much as 35% between March and April, mostly driven by lower poultry feed demand. Poultry feed makes up about 90% of Indonesian feed production. However, there have been no reports of raw material constraints from feed mills, despite global supply chain disruptions.
  • Vietnamese pork producers are set to import nearly 20 000 breeding pigs from Thailand to rebuild the herd, after more than 6 million animals were lost to the ASF outbreak that decimated South East Asian swine herds.
  • Thailand has reached a deal with Brazil to allow imports of Brazilian beef. Five processing plants in the states of Para, Rondonia, Goias, Mato Grosso, and Mato Grosso do Sul have been cleared for exports. Australia has been the traditional supplier of beef to Thailand with USD 45 million (ZAR 783 million) worth of exports last year.

Headlines

Europe and Russia

  • After a brief reprieve in mid-May, water levels in the Rhine River have again fallen to such low levels that normal shipping has been impacted. The northern parts around Cologne seem to be the worst affected. Vessel operators have begun to impose surcharges on cargo since vessels cannot be fully loaded.
  • A series of COVID-19 cases in German meat processing facilities and two deaths has brought the German practice of using migrant labour, mostly from Romania, into sharp focus. Despite the ban on the movement of people, chartered flights have continued to bring Romanian migrant labour to Germany to keep slaughterhouses and processing plants going. Many of these migrants end up in housing where social distancing is impossible. The Romanian labour minister, Violeta Alexandru, drove 18 hours from Bucharest to Berlin to assess the situation and to discuss the treatment of Romanian nationals with the German labour minister, Hubertus Heil. Germany has vowed to ensure that regulations are tightened and implemented to avoid similar situations in future. In keeping with this, a meat processing plant was shut down in late May in Dissen after several workers tested positive for COVID-19.
  • The Ukrainian parliament, the Verkhovna Rada, recently passed a new law on feed safety and hygiene, which could disrupt feed additive imports. The new law has introduced the compulsory registration of all feed additives in locally and imported mixed feed. However, the State Register of Feed Additives has not been established yet, which means registrations cannot be filed. With many registrations due to expire soon, some manufacturers will find it impossible to continue with production. If the situation is not resolved by the end of the year, feed additive imports to Ukraine will cease.
  • Kazakhstan is planning substantial expansions in animal agriculture, with several recently announced projects. The latest project to be announced is the investment of KZT 110 billion (ZAR 4,6 billion) into 12 new broiler farms with a combined production capacity of 174 000 t of chicken per year. This follows continuing investments into the cattle sector that includes subsidising the construction of new feedlots and dairy industry projects. Kazakhstan also plans to establish a pork export sector to primarily service the Chinese market. Kazakhstan share a land border with the Chinese province of Xinjiang.

Headlines

The Americas

  • Venezuela has returned to strict price controls after a year of relaxing such measures, during which the shortages of many basic goods improved. According to the new list, some items such as butter cost more than the set minimum wage of VEF 400 000 (ZAR 35,18). The country has been struggling with an inflation rate of over 3 000% and the recent collapse in oil prices has only exacerbated the situation.
  • Around 150 barges transporting soybeans from Paraguay to the Argentine grain hub of Rosario have been stuck in the Paraná River due to low water levels. Argentine and Paraguayan authorities have agreed to release water from the Yacyretá Dam to raise the river level enough to allow the barges to reach Rosario. The barges are carrying approximately 500 000 t of soybeans.
  • Corn farmers in the US are facing another tough year as demand for corn has plummeted thanks to the COVID-19 pandemic. It is not just demand from the animal feed sector, but the biofuel sector too. Prices have collapsed ever since farmers started planting the second largest crop since the 1920s. Many farmers pinned their hopes on the Chinese trade deal to lift them out of almost seven years of hardship, during which the average farm income decreased by almost 22%. Then COVID-19 swept through the world and, with it, hopes for a better year.
  • The United States Department of Agriculture (USDA) recently released its latest forecast for the 2020/2021 season. Farmers in the US are planning to plant 97 million acres (39,25 million ha) of corn, while the USDA is expecting ending stocks of 3,318 billion bushels (84,28 million tonnes), which will more than outweigh expected exports and recovery in demand from the biofuels sector. Exports are expected to reach 2,15 billion bushels (54,61 million tonnes), while the biofuels sector is expected to rebound to 5,2 billion bushels (132 million tonnes), up from 1,775 billion bushels (45 million tonnes) in 2019/2020. Corn ending stocks for 2019/2020 are forecast at 2,098 billion bushels (53,29 million tonnes).
  • Meat prices in the US have been driven up by supply shortages at processing plants across the country, caused by disruptions related to the COVID-19 pandemic. However, as the barbeque season approaches, it seems supplies are at least starting to improve. It is expected that it will take months to return to pre-pandemic levels; as many processors start to increase production, so too are restaurants, putting strain on the supply chain. Many grocers have been implementing restrictions on the amount of meat customers can buy to prevent panic buying and depletion of their stock. At the end of May, compared to 2019, retail beef prices had increased by 21,7% and pork by 17,7%. Apart from meat, other products such as pasta and rice have also been reported to be in short supply.
  • Meanwhile, pork exports to China have been soaring as part of the Phase 1 trade deal. When the deal was signed, the timing for the US was spot on. However, a few months later, with the COVID-19 pandemic disrupting American meat processors and causing meat shortages, it is not such a good deal anymore. Total pork exports to China for 2020 stood at a record-high 464 530 t at the end of April, while total exports for 2019 were just over 300 000 t.
  • President Donald Trump ordered the US government to support local farmers by buying more than USD 3 billion worth of produce for soup kitchens and food banks. Farmers are struggling to get their produce to market, while unemployment has soared due to the COVID-19 pandemic.
  • Mexico has stepped in to partially plug the hole in US beef supply, with exports already 10% higher this year. Mexican processors have been able to avoid the effects of the COVID-19 outbreak, mostly because they are smaller operations than those in the US and it is easier to implement new regulations. Mexico has 20 accredited export processors, who largely export more expensive cuts to grocery outlets.
  • Despite increasing exports of Mexican beef to the US, the Mexican feed industry has not escaped unscathed from the social distancing measures introduced by the government on 23 March, which were set to expire at the end of May. Local consumption of beef and shrimp have been declining due to restaurant closures, while production has been continuing as normal, which is mostly due to the relatively long production cycle of these products. This has put prices and producers under pressure, although the devaluation of the Mexican peso has made exports more competitive, and that could help producers survive the current market disruption. As social distancing measures are eased, local demand should also start to recover, but how long it will take to reach pre-pandemic levels is an open question.

Headlines

Australasia

  • The tense standoff between Australia and China over China’s handling of the COVID-19 outbreak has spilled over into the countries’ bilateral trade arrangement. China blinked first, after weeks of enduring Australian criticism, by introducing an 80% import tariff on Australian barley, to which Australia responded by calling for an independent international investigation into the origins of the novel coronavirus that has disrupted the global economy and killed thousands of people. Australian beef exports have also been affected, with several companies banned from exporting beef due to labelling and health certificate issues. Against the background of the current bilateral tensions and China’s commitment to the US trade deal, more limits on Australian exports can be expected in future. Australia is China’s third largest supplier of beef and its top supplier of barley. Australia exports nearly half of its annual barley harvest to China, worth AUD 917 million (ZAR 11 billion) in 2019. China is Australia’s biggest trade partner with annual imports worth AUD 135 billion (ZAR 1,6 trillion). China has been sourcing additional suppliers of barley for almost 18 months, most notably Canada, France, and Ukraine, while Russia and the US have recently been added to the list of approved importers. Australia, meanwhile, has turned towards the Saudi feed market to find an alternative export market.
  • A Kuwaiti livestock ship, set to collect a cargo of 56 000 of sheep, was held off Australia’s west coast near Perth after the crew tested positive for COVID-19. It is unclear if the shipment will be completed, as a ban on the export of live animals to the Middle East kicked in on 1 June. The sheep are currently held in a feedlot close to the port. The ban of live animals to the Middle East during summer was introduced after thousands of sheep died on the Awassi Express due to heat exhaustion in 2017. The ban will be in place until mid-September.

Middle East and Africa

  • Namibia lifted restrictions on the trade and movement of cattle in the north-eastern Kabbe North constituency, which was implemented after an outbreak of foot-and-mouth disease in August 2019.
  • Ghana’s Agricultural Development Bank aims to invest GHS 500 million (ZAR 1,5 billion) into the country’s poultry industry through loans to businesses involved in the entire poultry value chain. This is part of the Ghanaian government’s broiler revitalisation programme, which aims to increase local broiler production and decrease dependence on imports. It is hoped that through this government intervention, the production of poultry meat will be doubled. Ghana’s poultry meat consumption outstrips local production by about 340 000 t per year, with the balance imported.
  • Tunisia’s state-run phosphates producer, Compagnie des phosphates de Gafsa, has been brought to a standstill by protesters demanding jobs. Tunisia used to be the world’s largest exporter of phosphate before the Arab Spring of 2011 swept through the country. Since then, continuous protests and strikes have eroded the country’s global market share, resulting in billions of dollars in lost revenue. Phosphate production totalled 8,2 million tonnes in 2010, but that number has dropped to 3,8 million tonnes in 2019.

Markets

  • The USDA has released its latest forecast for the 2020/2021 season and is expecting the largest corn crop since 1987/1988. Farmers in the US are planning to plant 97 million acres (39,25 million ha) of corn, while the USDA is expecting ending stocks of 3,318 billion bushels (84,28 million tonnes), which will more than outweigh expected exports and recovery in demand from the biofuels sector. Exports are expected to reach 2,15 billion bushels (54,61 million tonnes), while the biofuels sector is expected to rebound to 5,2 billion bushels (132 million tonnes), up from 1,775 billion bushels (45 million tonnes) in 2019/2020. Corn ending stocks for 2019/2020 are forecast at 2,098 billion bushels (53,29 million tonnes).

Corporate headlines

  • Lucas E³, a US-based corn ethanol plant builder, has signed an agreement with Brazilian company Maracaja Bioenergia to build an ethanol plant in Mato Grosso state. The investment will total BRL 500 million (ZAR 1,6 billion) and comes at a time when the Brazilian ethanol market is facing difficult times. The COVID-19 lockdowns have slashed demand by nearly 50%. Mato Grosso is Brazil’s top corn-producing state.
  • Throughout May, the largest meat processors in North America were forced to either throttle plants or to completely shut them down as workers tested positive for COVID-19. In the United States, Tyson Foods Inc., JBS USA, Cargill Inc., and Smithfield Foods were all forced to close at least twenty processing plants as workers fell sick. This caused a shortage of meat products on the one hand and, on the other, forced farmers to euthanise market-ready animals. Grocery stores, such as Costco and Kroger, were forced to limit customer purchases to avoid running out of stock. In response to the shuttering of processing plants and the severe effects both upstream and downstream, President Trump was forced to declare processing plants as essential and compel them to remain open while implementing the necessary regulations to ensure workers’ safety. This led to some unions seeking legal redress to protect their members. However, the shutdowns, even though only temporary for deep cleaning and disinfection, continues, with the latest being at Tyson’s pork plant in Iowa. Canadian processing plants have also been hard hit, but the Canadian government has chosen to allow individual companies to decide when to shut down, despite having the legal basis to force shutdowns.
  • Brazilian meat processors have also been severely affected. However, it seems they were unwilling to shut down plants initially and state prosecutors had to approach the courts to force the plants to close as workers fell ill. Both BRF S.A. and JBS S.A. have been in state prosecutors’ and labour inspectors’ crosshairs. The companies have been forced to comply with health and safety regulations at all their plants or face further shutdowns. Marfrig Global Foods S.A. and Minerva S.A. had a number of workers testing positive for COVID-19 at several plants but took the necessary precautions to avoid plant shutdowns. Both companies have since confirmed that workers who tested positive as well people that they had been in contact with were isolated.
  • Bunge Limited will buy two soy crushing plants from bankrupt Imcopa. Bunge is already the largest soy processor in Brazil, with 12 crushing and refining plants. The two plants in question crushed a combined 1 million tonnes of soybeans in 2019.
  • Marfrig Global Foods S.A. and ADM Animal Nutrition have joined forces to create PlantPlus Foods, a joint venture to supply plant-based foods to the North and South American markets. Marfrig own 70% of the new venture and will be responsible for production and distribution, while ADM, with 30% ownership, will be involved in product development while also supplying flavourants and specialty proteins.
  • Beyond Meat capitalised on the pandemic-induced meat shortage and closed restaurants in the US by rerouting product meant for restaurants and fast food outlets to retail outlets and grocers. This helped Beyond Meat to exceed its estimated second quarter profit. The rise in meat prices has narrowed the gap between meat and plant-based alternatives, although the latter remains substantially more expensive.
  • Biomin America has agreed to pay USD 257 862 (ZAR 4,4 million) in a settlement to the US treasury department after the company, together with some of its foreign affiliates, sold agricultural products to Cuban-based Alfarma S.A. Since the US has sanctions in place against Cuba, any intended transactions with Cuban companies must be authorised by the treasury’s Office of Foreign Assets Control. Biomin America voluntarily disclosed the information after an internal investigation into the matter, thereby avoiding the maximum penalty of USD 2,1 million (ZAR 36 million).
  • China’s Wens Foodstuff Group Co., Ltd has started construction of two unique multi-level, vertical farming pork production sites, one in Anhui province and the other in Jiangxi province. The Anhui facility will eventually produce 550 000 pigs per year, while the much smaller site in Jiangxi will produce 10 000 pigs per year.

Research and technology

  • The Roslin Institute and investment firm Deep Science Ventures (DSV) have created the Food and Agriculture Science Transformer (FAST) programme, which aims to select global commercial and technology opportunities and recruit and train founders to create agricultural and biotech companies that can meet the needs of farmers, the public, and the environment. Newly formed companies will be able to operate from the Roslin Innovation Centre at the University of Edinburgh’s Easter Bush Campus, also at DSV’s headquarters in London, and online, while having access to the Roslin Institute’s world-leading expertise and facilities across genomics, veterinary biosciences, biotechnology, and agriculture.
  • Scientists from the Pirbright Institute have developed a promising vaccine against African swine fever (ASF). In a recent study, the vaccine protected 100% of treated animals against infection, although some animals still showed clinical signs of the disease. The vaccine uses a harmless virus as a vector to introduce eight selected genes of the African swine fever virus. This is a step forward in the development of a commercial vaccine. The research was funded by the United Kingdom’s Department for Environment, Food and Rural Affairs and the Biotechnology and Biological Sciences Research Council, part of UK Research and Innovation.

Charts

Chinese lysine stocks remained tight in May with various manufacturers shut down for maintenance and corn stocks limited. However, flat demand, caused by low soymeal prices, and overall overcapacity in the market is limiting the upward scope of lysine prices.

Chinese methionine stocks have improved as demand has dropped in the wake of lower poultry product prices. Prices could drop further as production expansion is planned by at least two Chinese producers, while poultry feed demand is expected to remain sluggish.

Threonine prices are expected to increase as demand and production costs increase. Most Chinese manufacturers have indicated to be sold out for third quarter shipments, which could further affect prices in the foreseeable future, especially as international demand remains firm.

Valine prices settled slightly lower in May, with ample stocks and stable global demand.

With softer demand and ample stocks, tryptophan prices have shown slight retracements in the last few weeks after sharp increases earlier in the year. However, the downside is limited as Chinese demand gradually increases with a recovering swine herd.

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-Threonine

Synthetic amino acids

L-Tryptophan

Synthetic amino acids

L-Valine

Synthetic amino acids

L-Isoleucine

Synthetic amino acids

L-Lysine

Synthetic amino acids

L-Methionine

Synthetic amino acids

L-Arginine