July 2, 2015
China amino acid markets suffer loses while vitamin products stay range bound
An eFeedLink Exclusive
China's hog market remained strong in June as availability dwindled further. Meanwhile, egg prices remained weak, prompting layer farmers to trim inventories further. Although broiler prices rebounded during middle of the month, market participants remained wary of the market prospects.
Aquaculture sector grew robustly, but the expansion was curtailed as several regions in China, including the major aquaculture provinces in the south and east coasts of the country, were troubled by floods and heavy rains.
With the fundamentals of the livestock markets weak and the aqua farming disrupted to some extent, feed millers prudently limited feed output in view of sluggish demand ahead. Hence, sales of feed additives were slow over the month.
Amino acids market
Methionine suffered heavy losses during June. Supplies in China increased with imports from Southeast Asia expanding even as feed millers withheld buying while the poultry markets' performance was disappointing. In the global market, supplies increased as one producer managed to resume operation in one of its facilities facing technical problems. Prices dropped considerably in Europe with the supply crunch eased.
Consequently, Chinese distributors and traders continued to cut prices to release inventories in view of a weaker market. After diving about 20% in May dl-methionine prices plunged another 13% in June. Since they started to fall in March, dl-methionine prices have tumbled 48%, with price quotes falling below RMB40/kg in some regions. Liquid methionine prices have dropped 40% from its April peak.
Threonine and tryptophan markets weakened during June as soymeal prices broke new lows while feed demand remained slack. Mounting inventories pressured producers to cut prices in a bid to entice buyers. However, with inclusion rates low amid cheap soymeal costs, sales showed little improvement, dragging prices of threonine lower by over 20%, and those of tryptophan down by almost 30%.
Lysine market was under pressure as well, as hog feed demand was limited with the animal population diminishing. Although high releases prior to the Dragon Boat Festival helped to keep feed consumption stable, demand softened after the festive season. A soft soymeal market and ample availability added further pressure, hence dragging prices of 98%-lysine down by 4%.
Although vitamin products markets did not suffer as heavy losses as the methionine market, sluggish demand put a lid of the prices. Most products were therefore flat over the month, as producers and traders had difficulties lifting prices.
Only prices of products that were tight in supplies managed to buck the trend and climb higher, but to a limited extent of less than 5%. These products included vitamin B12, vitamin C, folic acid and niacin.
Meanwhile, prices of vitamin D3 plummeted over 10%, as buyers, who felt that the product remained expensive, held back purchases. Inositol producers cut prices by 7% in a bid to entice feed millers, who were wary of the disruption of aqua farming. Prices of biotin and choline chloride prices dipped 4% each.
With demand flat, prices of sulphate additives and calcium phosphate remained unchanged during June.
The profits of hog farming have increased significantly over the past couple of months. However, pork demand is usually slack during summer, which means price hikes may taper off during July even though hog availability is limited. This will dampen the sales of hog feed, which is already limited by a shrinking hog population. Although hog farms were more enthusiastic to expand sow numbers starting late May, hog population is unlikely to expand within a short time, an indication that hog feed demand may not improve substantially even during Q3.
For the broiler sector, layer farmers have discarded a large number of aging layers, resulting in a fall in layer inventories. Broiler breeder farms have also cut production, which will translate to slow broiler inventory growths or even a slight contraction. Overall, demand for feed from the poultry market will not be strong in the coming month.
Consequently, aquaculture will be the main driver of feed production in China, provided floods do not worsen in the country.
Overall feed production is therefore unlikely to grow robustly in June under such circumstances. Additionally, sliding soymeal prices, the result of global oversupply, will discourage feed producers from manufacturing in excess in anticipation of lower production costs.
This will inevitably put a lid on the prices of feed additives, particularly those with ample supplies. For amino acids, prices are expected to fall further, despite at a slower pace after the prominent slide lately.
Vitamin products prices should continue to move within narrow ranges as feed millers purchase only as and when required. For products that will enjoy stronger demand due to higher usages in the aquaculture sector, for instance vitamin C and niacin, prices may move higher modestly.
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