December 26, 2003



US Soy Demand Surge On Probable Ban of Meat and Bonemeal Use in Cattle Feed


In the aftermath of the first reported mad cow disease in the U.S., Chicago Board of Trade (CBOT) soybeans and soymeal surged on Wednesday in anticipation of increased demand due to probable ban of meat and bonemeal use in livestock feed.


"The market is assuming there will be a total ban in the use of meat and bonemeal in U.S. chicken and hog feed," said Vic Lespinasse, CBOT floor analyst for AG Edwards & Sons.


The late-day CBOT soy rally followed early panic selling to two-month lows, after U.S. Agriculture Secretary Ann Veneman said late Tuesday that a possible first case of the mad cow disease, or bovine spongiform encephalopathy, had been detected in an animal in Washington state. People can get a deadly form of Creutzfeldt-Jakob disease, known as vCJD, from eating beef products infected by BSE.


The CBOT soy complex recovered to end up on hopes for wider U.S. restrictions on the use of meat and bone meal in livestock feed, including its complete ban in U.S. poultry and hog feed.


Of the 212.1 million tons of U.S. feed concentrates used in 2001, U.S. poultry and pork ate about 2.5 million tons of animal protein feeds, noted Bill Nelson, grains and oilseed analyst at A.G. Edwards & Sons in St. Louis.


Of that 2.5 million tons, tankage and meat meal totaled 2.0 million tons, and milk products and fishmeal made up the rest of the balance, he said.


But all meat and bonemeal feed is banned in Europe, where cattle herds were culled in the 1990s in hopes of eradicating the source of a disease that has killed at least 137 people.


The Bush administration might enact a similar ban in hopes of assuring consumers that more U.S. cases of mad cow will not be discovered, and in hopes of alleviating damage to the $27billion U.S. cattle industry, another grain analyst said.


"If tankage and meat meal were banned from being fed in the U.S., soybean meal could garner most of the added demand," said AG Edwards' Nelson. "Without consideration of protein levels, this could increase soybean meal demand by about 2 million tons, or about 75 to 100 million bushels of soybeans."


The amount would be significant compared with the USDA's latest forecast for a 2003/04 soybean carryout of 125 million bushels, almost a 30-year low. The USDA last estimated this year's U.S. soybean crop at 2.452 billion bushels, down 11% from last year's already drought-shortened crop.


And a consumer shift away from beef to pork and chicken could also lead to increased soymeal demand, Nelson added. U.S. pigs and chicken are the major consumers of U.S. soymeal. Suchan impact would have longer-term price effects.


CBOT soybeans for March delivery ended on Wednesday up18 cents at $7.65 per bushel. CBOT March soymeal futures closed up $9.50 at $234.20 per ton. CBOT agricultural markets were closed on Thursday for Christmas Day and closed at 12 noon CST (1800 GMT) on Friday.

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