Record Soybean-Meal Price Seen Cutting EU Livestock-Feed Demand

Soybean-meal consumption in the European Union, the world’s biggest importer, may be set to fall after drought in the U.S. sent prices to a record high, Oil World said.

European livestock producers, especially pig farmers, are already cutting their herds because rising feed prices have eroded profits, the Hamburg-based researcher said today in an e- mailed report. A weaker euro also has made feed imports more expensive for farmers in the 27-country bloc, according to the report. Soybean meal reached a record $509.80 per 2,000 pounds on July 23 on the Chicago Board of Trade.

“Consumption of soya meal in the EU-27 will probably be more affected than in other countries by the supply shortage and the steep price increase,” Oil World said. “The feed sector must be prepared for soya meal prices staying at unusually high levels in the next five to six months.”

The U.S. Department of Agriculture has said the country’s soybean crop, the world’s biggest, is in the worst condition since 1988 and declared almost a third of U.S. counties as natural-disaster areas because of drought. Soybean futures have surged more than 25 percent since mid-June. Without improved weather in the U.S., “there are only few factors left that can break the current bull market,” Oil World said.

The EU’s usage of soybean meal may be 1.4 million metric tons less than the previous season’s consumption of 32.6 million tons, Oil World said.

Less Demand

“The recent explosion of feed costs will inevitably lead to demand destruction in the feed use of corn and soya meal in the coming six months,” Oil World said. “Once livestock herds, in particular pigs, are reduced, there will be a significantly smaller demand base for some time.”

The price of soybean meal shipped from Argentina to Rotterdam jumped 71 percent in the past year when calculated in euros, while prices have appreciated 46 percent in dollar terms, the researcher said. Argentine export registrations for soybean meal shipped to the EU total 550,000 tons so far this month, compared with an average 1.1 million in July during the past four years, the report showed.

Livestock producers in Europe may substitute soybean meal with feed wheat after rainy conditions in some areas increased supplies of the grain, Oil World said. Feed manufacturers in Europe have also stepped up imports of products including sunflower meal and palm-kernel meal to replace soy, it said.

“Elevated grain and oilmeal prices will continue to undermine the profitability of the European compound feed industry in 2012,” Oil World said. “On top of that, the prospective sluggish economic growth worldwide and in the EU-27 will prevent a recovery of European consumers’ buying and is likely to facilitate a shift from red meat to more affordable poultry meat in 2012.”

To contact the reporter on this story: Whitney McFerron in London at wmcferron1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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