February 4, 2004

Impact of the Bird Flu Crisis On Lysine Prices in China & The Global Market

An eFeedLink Exclusive Report

The outbreak of bird flu in Asia and in China has led to mass culling and much panic, casting a gloomy outlook on the poultry industry in Asia. While the impact of the bird flu crisis on the methionine market is indisputable, the question that remains is whether and how it will affect the lysine market. To a certain extent, lysine prices will be affected by the bird flu situation. However, this impact is not expected to be direct.

On one hand, the human deaths resulting from the bird flu outbreak has led to a widespread boycott and corresponding fall in consumption of poultry meat and eggs. Pork, mutton and aqua products will be used to fulfill part of the consumption needs. The increase in pork consumption will in turn generate favorable factors for lysine prices in China and the global market in the near future.

On the other hand, soymeal consumption is likely to plummet along with the fall in the poultry inventory. This is due to the fact that soymeal constitutes a substantial part of poultry feed. As such, a fall in soymeal consumption will put considerable downward pressure on soymeal prices. A sharp drop in soymeal prices will, in turn, have adverse consequences on lysine prices.                   

Furthermore, the bird flu crisis, if not contain, will have far-reaching and negative consequences for the animal production and feed industries of China and Asia, leading to an overall fall in prices of feed ingredients, including soymeal, corn, fishmeal and methionine. When this happens, it is more than likely that prices of lysine will also be negatively affected.

Overall, the impact of bird flu on China and the global lysine market will only be circuitous, and thus is not expected to be considerable if the outbreak is effectively contained in the short run. Nevertheless, market participants are advised to closely monitor the bird flu situation, as it can still have adverse consequences on lysine prices should the outbreak takes a turn for the worse.