December 26, 2003
Mad-Cow Disease in US Seen To Influence Global and China's Lysine Markets
An eFeedLink Exclusive Report
The U.S. Department of Agriculture's confirmation of the first reported incident of mad cow disease will have a significant impact on the global animal production and feed industry. Market analysts foresee a significant change in the proportion of feed ingredients used, including both macro and micro feed additives. Lysine usage, and thus prices, in the global market is seen will be affected.
How far will the discovery of the first case of mad-cow disease in the US affect lysine prices in the global market? Append here is an analysis by some industry insiders.
Mad-cow disease, also known as bovine spongiform encephalopathy or BSE, eats holes in the brains of cattle. In April 1985, a group of doctors first discovered a new disease in England and they carried out a tissue pathological analysis. In November 1986, the disease was named as BSE and was first published on British newspapers.
In ten years, BSE spread quickly. Every year, thousands of cattle in England are infected with the disease. BSE also spread to other countries like France, Ireland, Canada, Denmark, Portugal, Switzerland, Oman and Germany. It was reported that the outbreak of BSE in some of these countries was due to imports of beef from England.
To curb the spread of BSE, many countries implemented measures like the banning of beef imports from infected countries, and the prohibition of use of meat and bone meal as feed additives. Currently, Europe forbids the use of meat and bone meal while it is still allowed in the U.S. The U.S. consumes 2.5 million metric tons of meat and bone meal per annum, mostly used in the production of poultry and pig feed.
There will be a significant impact on global raw feed materials if as expected, the U.S. outlaws the use of meat and bone meal as feed additives.
As soymeal is the best substitute for meat and bone meal, there will be a consequent increase in its demand. Pound for pound, the protein content of soymeal is not as high as meat and bone meal. Hence a higher quantity of soymeal will be required in feed production. This anticipated rise in soymeal usage would in turn propel the prices of soymeal.
On December 24, CBOT US soybean and soymeal prices increased sharply due to the U.S. BSE case. The soybean contract for March rose by 18 US cents per bushel, an increase of 2.3 % while soymeal contract for January leaped by US$10/short ton.
Meanwhile, soybean and soymeal prices in Dalian futures market also rose by big margins, reversing its previous downward trend. On December 24, opening prices of soybean and soymeal in Dalian futures market rose by RMB50-80/ton.
The rise in soymeal prices in China will definitely have a positive impact on lysine prices in the domestic and global markets. This is because an increasing number of industry insiders realize the importance of lysine as a complementary feed additive to soymeal.
In addition, the first case of U.S. mad-cow disease will definitely lower beef consumption in the country and decrease US beef exports. This will in turn boost the demand of pork and poultry meat. As lysine is primarily used as an additive for pork and poultry feed, its demand will see a corresponding increase.
Currently, Japan, South Korea, Russia, Singapore, Thailand, Philippines, Malaysia, Brazil and Mexico have already banned US beef imports.
Previously in 2000, the mad cow disease outbreak in Europe resulted in a sharp rise in lysine prices on the global market. Likewise, lysine prices in China also rose dramatically from RMB15/kg to around RMB23/kg in 2000.
At present, the lysine market in China is still relatively quiet with little price fluctuation reported. However, if soymeal prices in China continue to rise and lysine producers change their sales practices, lysine prices in China will definitely feel the upward pressure in the weeks ahead.
