US soya bean farmers losing battle to feed livestock

Washington

AT a time when people around the world are eating more meat, poultry and dairy products than ever before, American farmers may be losing ground to Brazil in the race to feed all those animals.

US exports of feed crops already were expected to drop this year as producers in South America and Europe expand sales. But after some bad weather in the Midwest this year, the harvest yielded soya beans with less protein, a key ingredient that helps build muscle in animals. At 34.1 per cent per bushel, the protein content tied with 2008 as the lowest since it was first measured in 1986, government data show.

While US exporters often have to contend with Brazilian soya bean that is higher in protein - at around 37 per cent - the widening quality gap could mean further erosion of demand from places such as China, the world's biggest buyer. Brazil's shippers are trying to exploit the difference to sell more from last season's record crop and to take advantage of expansions of export capacity, including new ports in northern parts of the country.

"Brazilian soya beans are getting a quality premium," Sergio Mendes, general director at Brazil's grain exporter group Anec, said in a telephone interview from Sao Paulo. "We're having a good moment in terms of quality, which has been recognised and valued by the Chinese."

Higher-protein Brazilian soya beans usually command a premium of about 15 US cents a bushel more than US supplies, said Dan Basse, president of AgResource Co in Chicago. On the Chicago Board of Trade, soya bean futures closed at US$9.705 a bushel last Tuesday.

Soya beans have become an essential global food crop because they are crushed to extract vegetable oil, and then the remaining soya meal is fed to livestock. Brazil's share of the export market is expected to rise to a record 43 per cent this season as the US share falls to 39.7 per cent - even as global demand rises for a ninth straight year, according to the US Department of Agriculture (USDA).

Supplies from Brazil - which have doubled in 15 years - are becoming more attractive to some importers. The country supplanted the US as the world's largest exporter in 2013, and purchases in 2017 rose at a record pace. Shipments will reach 67 million tonnes this season, according Anec, the country's grain exporter group. That will be far above the initial estimate of 60 million tonnes and 33 per cent more than in 2016, when exports totalled 50.5 million tonnes.

Chinese soya bean imports are up 15 per cent in the first 11 months of 2017, the government reported last Tuesday. Half of those purchases were from Brazil at 49 million tonnes, up 29 per cent from a year earlier, with 26.7 million tonnes from the US, up 2.3 per cent.

Total US exports in the year till Aug 31, 2018, will probably be about 60.6 million tonnes, USDA said on Dec 12. While that was still an all-time high, it was down 1.1 per cent from the estimate a month earlier, and was probably still 2.2 per cent higher than it will be by the end of the season, Mr Basse said.

Part of the reason that demand is less than forecast is the declining quality, which began to emerge two months ago amid signs of reduced protein and oil content from the recent harvest, according to Vinicius Ito, an analyst at Ecom Trading in New York.

In the most recent crop, the largest decline was in the eastern Midwest, where conditions were the driest in August, according to data compiled by Seth Naeve, an agronomist at the University of Minnesota.

Protein levels in US soya beans have mostly been falling since reaching a peak of 36.2 per cent in 2000, USDA data show. The content tends to rise with hotter weather and more sunlight, so farmers in Brazil near the equator tend to have an advantage, Mr Naeve added.

But it is not all about protein. US soya meal has more digestible amino acids and less variability in composition than supplies from Brazil, Argentina, China and India, according to a study published last year by the American Society of Animal Science. Amino acids are building blocks for meat production, and because there are more in US soya beans, they tend to require fewer synthetic compounds to achieve peak feeding performance, Mr Naeve explained.

Still, the quality of Brazilian beans has been improving over the past two seasons amid favourable weather conditions and enhancements in crop management, said Hugo Soares Kern, a soya bean researcher at Embrapa, a government-run agricultural research organisation.

"Lower protein content in soy has been supportive for meal prices in Chicago as crushers need to use more soybeans to get the same protein content on feed," Ecom's Mr Ito said. "Brazil's exports were boosted by a quality differential, but also by huge supplies." WP