Brazil’s new tax legislation threatens soybean export competitiveness
On 4th June, the Brazilian government signed new legislation aimed at removing tax benefits for exporters and processors of several industries, including grains (soy), biodiesel, meat, and coffee. While the new measure has been sent to Congress and was immediately put into effect, it will require congressional approval within the next four months to remain valid. Market players opine that this is expected to make the top soybean exporter less competitive in the coming years, mainly affecting farmers and presenting a risk to investment plans across the supply chain.
It is likely that crush and biofuel activity will be shifted to the Argentina and the US, as soybean processors and biodiesel producers will be faced by higher tax costs and lower margins. Various bodies, including the Brazilian grain exporters’ association (Anec), have thus called on Congress to reject the rule or allow an open discussion with affected companies on the impacts of these measures, with rumors emerging today (12th June) that this order has been cancelled. Mintec will continue to provide updates on this situation as it unfolds.
Despite the recent floodings in Brazil’s second largest producing state, Rio Grande do Sul, which led to damages estimated between 3-4 million metric tonnes of this season’s unharvested soybean crop, market players remain optimistic for this season’s domestic supply which is predicted to be the second largest ever. Ahead of the USDA’s June World Agricultural Supply and Demand Estimates (WASDE) update, to be released 12th June (12:00 pm ET), the average trade estimate has pegged the Brazilian soybean crop between 149-154 million metric tonnes, compared to the USDA’s May estimate of 154 million metric tonnes. Additionally, the depreciation of the Brazilian real against the US dollar has also made the Brazilian bean more attractive for the international market, limiting further upside price movement in the US CBOT futures prices in the past week, with reports of large May exports – particularly to China. According to Chinese custom data, China imported 10.22 million metric tonnes of soybeans in May, up from figures reported in April.
Turkey’s wheat import ban
On 7th June, Turkey, a major wheat importer, announced a wheat import ban from 21st June to 15th October 2024. The Turkish authorities stated that the measures aim to “prevent our producers from being affected by price decreases due to supply density during the harvest period, to meet the raw material supply required for our exports from domestic production, and to ensure market stability in favor of producers.”
Market players suggest that the ban could impact Russia, however, there is also a caveat around the Russian 2024 wheat crop size due to recent adverse weather conditions. Potential smaller harvests from Russia and also from Ukraine could reduce the overall exportable surplus, potentially offsetting the effects of the Turkish ban. Additionally, Turkey’s import ban may lead to increased competition from Russian and Ukrainian wheat in traditional EU export markets. A market source commented, “Russia and Ukraine might need to push more exports into North Africa and Asia over the next four months instead.”
Industry insiders assert that this policy shift creates a slightly complex scenario. While it protects Turkish farmers, it could disrupt the usual flow of wheat in the global market. A source noted, “This announcement has caused a collapse in freight rates from Russian ports. We see that the charter rates of sea-river vessels from Azov to Marmara have fallen by about $3-6/tonne since the announcement.” Furthermore, despite the import ban, Turkey will allow exports of flour made from domestically produced wheat under a licensing system. Market players noted that this policy could incentivize domestic wheat processing and increase competition for EU wheat in the flour export market.
With the wheat harvest beginning in Turkey, the Turkish Statistical Institute’s initial forecast for the country’s 2024 crop projects wheat output at 21 million mt, a 4.5% decline compared to last year. Between 2019 and 2023, Turkey was the world’s fourth-largest wheat importer, primarily importing from Russia and Ukraine, with Russia holding the largest share.
China’s hog market introduces AI to cut costs
Recent years have seen African Swine Fever (ASF) and Covid-19 driving Chinese pork prices up due to market shortages and squeezing some producers out of the market. In a bid to meet soaring pork demand and address longstanding pricing challenges, Chinese hog producers are increasingly turning to Artificial Intelligence (AI) technologies, marking a significant shift in the country’s swine industry landscape. “With China standing as the world’s largest pork producer and consumer, the integration of AI has emerged as a game-changer, revolutionising every aspect of hog production, from disease control to market forecasting,” a Chinese pork industry source said.
Darin Friedrichs, Director of Market Research for Sitonia Consulting, an independent information service company providing analysis and insights into China’s agricultural commodity markets, told Feedinfo late last year in an interview, “2024 should see hog prices recover as producers are forced to cut capacity.” However, affected by the relationship between supply and demand, Chinese pork prices have fluctuated irregularly.
Cutting costs has now become a priority for producers. New Hope, a large-scale Chinese hog producer, commented: “This year, the company has made cost reduction its top priority. It will make adjustments to some high-cost production lines, while considering increasing capacity in areas with excellent cost performance. Overall, this approach is conducive to steadily reducing the company’s breeding costs.” The Chinese hog market has taken a downward turn in profits, with big players such as New Hope and Muyuan citing lower-than-optimal hog prices in their fiscal-year results. “(FY 2023) loss is mainly due to a significant drop in live hog prices and increasing manufacturing costs, decreasing profit margins,” said Muyuan. In response, the company is exploring avenues for cost reduction involving technology and AI, including the setup of energy-providing subsidiaries with hopes to reduce energy costs by half.
During the 2024 National People’s Congress and the Chinese People’s Political Consultative Conference, government officials highlighted the importance of improving livestock farming: “technology, the application of intelligent farming, and biotechnology has provided strong support for the transformation and upgrading of the animal husbandry industry.”
“Artificial intelligence technology has facilitated the transformation of the pig farming industry from a focus on quantity to a focus on quality, and from extensive farming to large-scale, intensive, and industrialised operations. Pig farm big data service platforms have made significant contributions to the adoption and promotion of new models, concepts, and technologies … Systems for intelligent feeding and monitoring of temperature and humidity in pig farms have achieved automated control of pig farming production, greatly improving production efficiency,” states Chinaswine, a Chinese trade source.
After speaking to Chinese sources in the hog market, a few key takeaways can be highlighted regarding the future of AI in the Chinese hog market. “One of the most profound impacts of AI lies in disease control and monitoring,” said one source. Advanced AI-powered systems are enabling early detection of diseases by analysing key data, including body temperature, feeding patterns, and behavioural changes among hogs. This approach allows farmers to swiftly implement preventive measures, curbing disease outbreaks and minimising losses.
Precision Livestock Farming (PLF) has also witnessed a paradigm shift with the advent of AI. Through a network of devices and sensors, real-time data on environmental conditions, feed consumption, and animal health are collected and analysed. This information empowers farmers to make data-driven decisions, optimising feed efficiency, monitoring growth rates, and predicting market demand with unprecedented accuracy. This is crucial as “the Chinese domestic market is proving to be challenging for pig producers. The heightened apprehensions surrounding animal disease outbreaks have encouraged the slaughter of pigs before attaining optimal market weights, squeezing smaller players out of the industry”, said Friedrichs.
In terms of sustainability, AI-driven solutions are revolutionising hog production practices. By optimising resource utilisation, minimising environmental pollution, and reducing carbon footprint, AI is paving the way for more eco-friendly farming methods. From smart farming solutions incorporating robotics and drones to precision management of feed formulations and waste disposal, AI is driving a shift towards more sustainable and efficient hog production practices “even in the most rural of areas,” according to China World Farming Association.
NHU to expand methionine production in Shandong
Shandong NHU Amino Acid Co., Ltd., NHU’s fully owned subsidiary, plans to expand methionine production at its existing factory in Weifang, Shandong, eastern China, according to the regional government, adding another 70,000 tonnes/year. The factory currently has two operating DL-methionine lines with a combined nameplate capacity of 150,000 tonnes/year, according to Feedinfo’s Supply & Demand Database. The company expects the expansion to raise the total capacity of these two units to 220,000 tonnes/year.
NHU’s third DL-methionine unit at Weifang, with a capacity of 150,000 tonnes/year, was scheduled to start production in February, but it is understood that this line has not yet begun commercial operations. Shandong NHU Amino Acid Co., Ltd. was founded in 2013 and is an amino acid producer based in Shandong.
Lifosa phosphates plant resumes production after year-long shutdown
EuroChem’s mothballed phosphate fertilizer plant in Kėdainiai, Lithuania, resumed operations on 10 June after a year-long halt due to sanctions and other complications, Lithuanian National Radio and Television (LRT) reported. Under the supervision of a temporary administrator, production of phosphoric acid has restarted, with full operations expected imminently. The plant’s first shipment is scheduled for 17 June, LRT reported.
Lifosa AB, the plant’s operator, suspended activities in May 2023 for repairs and is now gradually resuming production amid various economic, operational, and legal challenges. The main markets for Lifosa products include Europe and the Americas. Details on feed phosphate have not yet been confirmed, but the company previously said, “Feed phosphates are produced on demand; therefore, it does not always correspond to the production of other products.”
Global feed phosphate usage began declining following the start of the Russia-Ukraine war in February 2022, when feed phosphate prices surged.
Camlin Fine Sciences to acquire Belgium’s Vitafor
Camlin Fine Sciences, an Indian provider of shelf-life solutions, aroma ingredients, performance chemicals, and health and wellness ingredients, has announced plans to acquire a 100% stake in Belgium’s Vitafor Invest, via its Mexican wholly owned subsidiary, Dresen Quimica. The share purchase agreement involves a 100% takeover of Vitafor Invest’s subsidiaries Addi-Tech, Vitafor NV, Vitafor China, and Europe BioEngineering as well as a 45% stake in Vial Sàrl. “The Group will use the facility of Vitafor and Vitafor’s network to augment and grow in the European feed and pet food market and also in the African market,” Camlin Fine Sciences said in a statement.
Originally founded in 1974, Vitafor became a premix producer in 1993. Located near Antwerp, the business went through a management buy-in in early 2018 and became Vitafor Invest. Vitafor Invest recorded a turnover of €16.55 million with a loss of €1.18 million (after tax) in 2023. Vitafor currently manufactures a range of premixes, liquid feed supplements, farm hygiene solutions, and powder specialties for different challenges in feed. The company also sells a variety of vitamins, amino acids, trace elements, antioxidants, pigments and other feed additives.
