Special Report- December 2000
BSE in Europe: The Impact on U.S. and World Soybean and Soybean Meal Demand
On December 5, 2000, the EU Farm Council met to discuss the Bovine Spongiform Encephalopathy (BSE) situation in the EU and develop regulations relating to feeding rendered products to livestock. These regulations were prompted by the widening scope of the BSE outbreak in the EU where, in addition to France, new cases have been reported in both Germany and Spain. It is believed that BSE is transmitted through the feeding of rendered products from infected animals. As a result, the EU farm council has proposed a 6 month ban on feeding rendered products to livestock beginning in January 2001. This proposal bans the use of all animal protein meals from feeds including feather meal and blood meal. Fish meal is also banned for use in cattle feed but is allowed in feed destined for fish, poultry, and hogs. Animal fats are not banned but are subject to a maximum 0.15% level of impurities and protein. No ban on the use of animal proteins in pet food is anticipated nor is the utilization of Yellow Grease being impacted at this time. These regulations are expected to be reviewed by the Standing Veterinary Committee and may be altered or extended as recommended.
France and Germany have unilaterally enacted legislation further tightening the use of animal products in feeds. In France, fish meal is restricted from use in all animal feeds including those fed to fish, poultry, and pork. Additionally, all animal fats (Yellow grease excepted) are banned from feeds. The same is true in Germany except that animal fats may be used in calf milk replacers. Germany also bans the use of all meals from warm blooded land animals in animal feeds but does continue to allow for the use of fish meal. Both German and French regulations take effect immediately. In addition, both the EU proposals and the French and German regulation ban the export of animal meals outside the EU.
Restrictions on the use of meat and bone meal (MBM) in the EU are estimated to result in an annual short fall of 2.5 million tons of MBM which equates to 2.9 million tons of soybean meal equivalent (SME). This will likely result in a significant increase in demand for soybeans and soybean meal by the EU as replacement for MBM in feed rations. While the proposed EU regulations are for 6 months, experience with the UK and its handling of BSE in the mid-1990's suggests that feeding of rendered animal products, particularly to cattle, are likely to be banned indefinitely. Additionally, it is unlikely that soybeans and soybean meal will account for all MBM replacement, particularly over the long term as growers react to the ban on MBM by adjusting planting regimes to supply additional feed components.
Analysis indicates that an additional 1.2 million tons SME will be required to meet EU feed demand in 2000/01. This figure accounts for additional feeding of domestic and imported rapeseed and sunflowerseed meal, domestic feed grains, imported corn gluten feed, and domestic and imported field peas and beans. Further, we expect a draw-down in soybean stocks, particularly in the short term and possibly some increase in domestic soybean production over the longer term. Finally, demand for cattle feed is likely to decline as herds are reduced in response to the BSE situation and reduced consumer demand for beef. This may be offset by additional demand for pork and poultry feed as consumers search for alternatives to beef.
We expect the 1.2 million tons SME demand for the EU in 2000/01 will be broken out as 500,000 tons soybean meal and 900,000 tons soybeans. The U.S. is expected to account for nearly 150,000 tons of soybean meal and 400,000 tons of soybeans this year. The remaining soybeans and soybean meal is expected to be supplied by South American sources. Most of the U.S. exports to the EU are likely to occur during the first quarter of 2001. Traditionally, the U.S. ships most of its soybeans and soybean meal between October and March when South American supplies are short.
Additionally, we expect EU demand for soy products to be somewhat stronger in the first quarter of 2001 as many additional sources of protein from domestic sources will not be available until the 2001 harvest. U.S. exports in the first quarter of 2001 are also expected to favor soybeans over meal since the U.S. is traditionally the preferred supplier of soybeans. Additionally, the restriction on animal fats in feed rations imposed by France and Germany will likely boost demand for vegetable oils thereby boosting demand for soybeans for crush.