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December 20, 2000
Will the European Union’s ban on use of meat and bone meal affect soybean planting in South America this season? The answer to this question is not clear, but it seems that Brazil and Argentina may be able to increase plantings yet in 2000/01 to take advantage of increased demand for vegetable protein in the wake of the European Union’s new restrictions.
Though the European Commission’s ban is for 6 months, it appears likely that restrictions on meat and bone meal feeding in the European Union will continue longer. The amount of meat and bone meal consumed in the European Union is about 2.5 million tons annually. This equates to 2.9 million tons of soybean meal or to 3.7 million tons of soybeans based on protein equivalency. To put this in context, Brazil is forecast to harvest 34.5 million tons of soybeans, harvested from 13.4 million hectares, while Argentina is forecast to harvest 23.5 million tons from 9.7 million hectares. Although soybean meal is expected to be the main beneficiary of the meat and bone meal ban; corn gluten, field peas, rapeseed meal, sunflowerseed meal, and higher protein feed grains have all been mentioned as substitutes.
Germany recently enacted legislation which bans the use of fish meal in addition to the use of meat and bone meal in mixed feeds for commercial livestock, and it bans the use of animal fats in mixed feeds. For Germany, this broadens the ban and increases the amount of vegetable protein needed, it also will increase the demand for vegetable oil which will be needed, for technical reasons, to serve as a binding agent in the mixed feed industry. France has implemented a similar law which bans the use of meat and bone meal as well as fish meal for all land animals. It also restricts the use of animal fats in the feeding of commercial livestock.
World stocks of soybeans and soybean meal are somewhat low at the current time possibly suggesting the need for more production to compensate for the increased demand caused by the meat and bone meal ban. Ending soybean stocks for 2000/01 are forecast at 23.4 million tons, down from 23.8 million last year and 24.7 million for the 5-year average. Soybean meal ending stocks for 2000/01 are forecast at 3.73 million tons, down from 3.92 million last year and down from the 5-year average of 4.0 million. These 2000/01 estimates have been adjusted downward to take the meat and bone meal ban into consideration. Some soybeans and soybean meal may be available from the United States where ending soybean and soybean meal stocks are above their respective 5-year averages. The need for more soybean output from South America is not great, but with somewhat low stock levels new demand will add marginal pressure to increase prices and will be an incentive for South American producers to plant this season.
The time is short for South American farmers to react if they are to take advantage of the new European Union policy by planting more soybeans this season. The ban was passed by the EU Commission on Monday December 4 and will be implemented starting January 1, but the possibility of such a ban had been seriously discussed for several weeks, since three French supermarkets revealed in October they had sold beef from herds which were potentially contaminated with mad cow disease. Planting of soybeans begins in earnest in October. By November 3, an estimated 18 percent of Brazil soybeans had been planted, and by December 1, an estimated 84 percent had been planted. Argentina soybean planting generally runs two to three weeks behind Brazil’s plantings. Soybean plantings in Argentina were an estimated 12 percent complete as of November 10 and was 54 percent complete as of December 1. Soybean planting in Brazil will be virtually finished by the end of December, but planting of second-crop soybeans in Argentina on winter wheat stubble will continue through January. Consequently, South American farmers were well along in their soybean plantings by the time it became clear that a somewhat larger market for soybeans was developing.
One trade analyst in Brazil has predicted that Brazil will see soy complex exports to the European Union expand by one million tons due to the meat and bone meal ban. Soybean meal prices reportedly reacted to the prospects of the EU ban on meat and bone meal when prices in Europe surged on Monday November 27 by US$7.00 per ton. Many farmers in Brazil and Argentina pay for many of their planting inputs by contracting with their cooperatives or other soybean purchasing firm to deliver product at harvest. This gives market savvy coop and company executives the power to influence planting decisions, and makes South American farmers relatively responsive to current market conditions at planting time.
For more information, contact Paul Provance with the Production
Estimates and Crop Assessment Division at (202) 720-0881 or by
e-mail at Provance@fas.usda.gov.
