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Cash Market Moves             11/22 10:06

   Why All the Fuss Over the Lysine Shortage?

   A shortage of synthetic lysine additive, which is used in feed compounds, 
has sent soybean meal prices soaring recently.

Mary Kennedy
DTN Basis Analyst

   A shortage of synthetic lysine additive, which is used in feed compounds, 
has sent soybean meal prices soaring recently.

   Lysine/L-lysine is an essential amino acid and is used to address nutrient 
requirements and improve performance for animals in agricultural production. It 
is used in pig diets, feed for poultry and for dairy cattle.

   The cause of the recent shortage of dry lysine has many reasons, with one 
being production issues. ADM announced in mid-December 2020 it would end 
production of dry lysine in the first half of 2021, "focusing solely on 
customer needs for liquid and encapsulated lysine products."

   Iani Adrian Chihaia, president of the ANFNC, Romanian Feed Association & 
USSEC regional consultant for Southeast Europe, told DTN via email, "We feel 
like that the current shortage is not a supply problem only. As in any crisis 
situation, there are also speculators who are taking the advantage to increase 
their margins. Several lysine manufactures in China have stopped offering the 
product, claiming to be sold out. As a reaction to this, some traders started 
selling the available stocks at increased prices."

   Chihaia said among the key factors causing the surge in prices for 
Lysine/feed additives, in general are:

   1. Stringent COVID-19 lockdown regulations across several nations.

   2. Disruptions in import and export activities of L-Lysine.

   3. Global shipping problems.

   4. High concentration of the lysine manufacturing capacities, with China 
being the No.1 player in this industry, taking a market share of over 65%.

   5. High demand in China due to rebuilding the swine herds in China.

   Chihaia, who is extensively involved with the leading feed and livestock 
companies in Romania, said, "On the short term, there are signs that after the 
New Chinese year things might ease a bit. On medium term, I believe that from 
now on the purchasing managers will continue to have more and more difficulties 
in finding the ingredient at the lowest possible price. On top of this, 
receiving it in due time will be probably the biggest challenge for at least as 
long as the COVID-19 outbreaks will continue to occur, and lockdowns will be 
required.

   "In the long term, I believe that the era of the classic 'supply & demand' 
has ended. At this moment, we are no longer talking about a classic competitive 
market, determined by supply and demand. The world's goods flows are blocked by 
the transport and delivery capacity, deadlines and supplies for component 
products (parts, supply), a fact that fundamentally affects the global economy, 
pushes inflation and especially towards the global economic crisis."

   Chihaia said soy in animal nutrition is his top favorite topic simply 
because soybean meal is the number one supplier of digestible lysine in broiler 
feeds (broilers being the number one species consuming soy).

   Dr. Scott Carter, an animal nutritionist who has spent his career focused on 
formulating animal feed, said in an Aug. 1, 2019, U.S. Soybean Export Council 
(USSEC) article on ussoy.org: "If we fed a bird only soybean meal, and the 
amino acids aren't balanced for what the bird needs, some of that protein will 
go to waste."

   According to USSEC, protein complementation, often practiced by animal 
nutritionists, combines protein sources to ensure all the amino acid needs are 
met. The amino acids -- lysine, threonine, methionine and tryptophan -- are 
required in all formulations. "If a diet has inadequate amounts of any of these 
essential amino acids, protein synthesis cannot proceed beyond the rate at 
which that amino acid is available. Therefore, digestible and metabolizable 
amino acid calculations must be a consideration with different protein sources."

   Dr. Jason Woodworth, research professor at Kansas State University (KSU) 
while speaking at KSU Swine Day on Nov. 18, advised pig producers who hadn't 
already made feed formulation adjustments because of the dry lysine shortage 
would be wise to do so before they no longer have a choice.

   "If you're not experiencing a lysine shortage, great. I don't know what 
you're doing, but you're one of the lucky ones," said Woodworth. "The shortage 
is something that you need to really be aware of."

   In an Oct. 15 article titled, "It Bears Repeating: Soybean Meal Prices Are 
Cheap" DTN Lead Analyst Todd Hultman noted U.S. ending soybean supplies are 
estimated at 320 million bushels (mb) for 2021-22, a comfortable but not 
excessive amount. "There is plenty of uncertainty in the season ahead and we 
have not yet seen China's demand, but early indications look promising. As 
usual, I can't guarantee soybean meal prices will go up from here, but for a 
wide variety of producers who need to buy meal for their feed mix, I have to 
point out that you are currently being offered the cheapest prices in over a 
year."

   Soybean meal prices have soared in the short time since Hultman's comments. 
Fast forward one month to Nov. 19 when front-month soybean meal price closed at 
$371.80 as the lysine shortage has sent the market into a frenzy.

   Here is a link to Hultman's Oct. 15 article: 
https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.dtnpf.com%
2Fagriculture%2Fweb%2Fag%2Fnews%2Farticle%2F2021%2F10%2F15%2Fbears-repeating-soy
bean-meal-prices&data=04%7C01%7CMary.Kennedy%40dtn.com%7Cc0f9b0762e5e4da5eccc08d
9acd6adc4%7Cd945da26f07f451496e79b8f78a743d0%7C0%7C0%7C637730860325452044%7CUnkn
own%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn
0%3D%7C3000&sdata=ulp43IJJ5AHU71bGp%2B22fGGdEDYggMMkAc1%2BQo1pIRY%3D&reserved=0

   Here is a link to "All Soybean Meal is Not Created Equal", USSEC: 
https://ussec.org/wp-content/uploads/2015/10/US-Soybean-Meal-Information.pdf

   Mary Kennedy can be reached at mary.kennedy@dtn.com

   Follow her on Twitter @MaryCKenn




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