Feedinfo Review Spring 2021

REVIEW

Spring 2021 Issue

EXCLUSIVE INTERVIEW

METEX ACQUIRES AANE

EU REGULATION

What’s next for Chinese vitamin maker Tianxin?

Future of amino acid production in Amiens

Industry voices concerns about major overhaul

Pages 10-11

Pages 14-15

Pages 22-27

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WELCOME

FROM THE EDITOR

O

Welcome to the first Feedinfo Review magazine

ne might have expected that, with global economic performance down as significant portions of the world’s population were confined to their homes and with the hunt for treatments and vaccines for Covid-19 absorbing the resources and attention of the life science sector, this would be a slow time for deal-making in our industry.

However, an observer of the animal nutrition space would see that this was not the case. In just a single deal in the last quarter, we have seen billions of dollars of equity change hands, as Lonza Specialty Ingredients, a manufacturer of vitamin B3 (among other ingredients), was sold to private equity investors.

But more important than the size of the deals is the indication that the cast of characters in the vitamins and amino acids space is changing.

In the last few months, Ajinomoto Animal Nutrition Europe, one of the EU’s last remaining amino acid fermentation businesses, was sold to industry up-and-comer METabolic EXplorer. Meanwhile, in eastern Europe, Belarus National Biotechnological Corporation brought online production capacity for lysine, threonine and tryptophan in the second half of last year.

Existing players are also changing the game by entering markets they hadn’t previously competed in, expanding their portfolios. In

Shannon Behary, editor, Feedinfo

China, Anhui Huaheng Biotech entered the feed-grade valine market in early 2021. Moreover, the consequences of a new entrant in biotin in 2020 reverberated throughout the year.

The reverse is also taking place, as iconic players exit parts of the market; ADM Animal Nutrition, a giant whose US fermentation operations transformed the lysine industry when it first came online at the tail end of the 20th century, announced late last year that it would end production of lysine HCl 98% (‘dry lysine’), finding that global industrial capacity had expanded faster than demand.

Adaptations Structural changes within these markets are driving adaptations in the strategy of those companies that remain. Amino acids producer CJ Bio has been expanding production capacity in Indonesia and Brazil for tryptophan, a product whose demand is growing, and in the US for threonine, a product which recently received an FDA authorisation.

The increased focus on these and other lower-volume/higher-margin amino acids, such as isoleucine and histidine, is happening amid an ample global supply situation in larger-volume products such as lysine.

Ajinomoto Animal Nutrition, too, has been reinforcing its specialty amino acids business over the last few years through the conversion of production facilities which had previously been making commoditised threonine and lysine.

Finally, there are also the usual news items – regulatory barriers and adjudications of trade disputes, shipping disruptions and fluctuations in the prices and availabilities of inputs such as grains or chemical intermediaries – which also pass through and leave their impressions, fleeting or durable, on the vitamins and amino acids markets.

Taken together, these different phenomena – an evolving cast of characters, structural changes within the market and the impact of current events – make up the theme of our inaugural edition of Feedinfo Review: ‘The changing landscape of vitamins and amino acids’.

The articles that follow, written by Feedinfo’s team of journalists and analysts, are meant to give readers an idea of some of the ways in which the landscape for vitamins and amino acids is changing, help understand the plans of some of the new actors and explain how various forces, from regional decision-makers in China to cold fronts in Texas, have shaped and will shape the markets.

Of course, if this kind of analysis is relevant to you, real-time coverage of the animal nutrition and feed additives industry is available to subscribers of Feedinfo’s flagship online news service.

CONTACTS Editorial enquiries Shannon Behary – Editor +33 (0)5 61 00 13 45 /+33 (0)6 70 11 27 38 shannon.behary@feedinfo.com

Feedinfo subscription enquiries Richard O’Donoghue – Client account manager +33 (0)7 88 14 28 09 richard.odonoghue@agribriefing.com

Advertising enquiries Lisa Guiraud – Global lead, Perspectives +33 (0) 6 37 46 86 47 lisa.guiraud@feedinfo.com

© AgriBriefing 2021 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical including photocopying, recording, or any information storage or retrieval system without the express prior written consent of the publisher. The contents of Feedinfo Review are subject to reproduction in information storage and retrieval systems. ISSN 1777-5566

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IN THIS ISSUE

CONTENTS SPRING

6-8

10-11

NEWS BITES

EXCLUSIVE INTERVIEW

Industry developments this quarter

Jiangxi Tianxin’s expansion in the world of vitamins

12-13

14-15

Tackling the industry’s emissions

METEX shares plans for the future of AANE

16

17

INDUSTRY PERSPECTIVES

INTERVIEW

ANALYST'S CORNER

VITAMIN B3

China’s plan to cut emissions

Evolution in the B3 market

18-19

20

LIQUID LYSINE

WINTER STORMS

Changing market for European liquid lysine

US storms disrupt feed additive production

22-27

28

INSIGHT

RECRUITMENT UPDATES

EU Transparency Regulation: Expected impacts

Recent senior job moves within the industry

30-31 INTERVIEW

Stratégie Grains analysts offer global feed grain market forecasts

www.feedinfo.com

SPRING 2021 | 5

SECTION NEWS BITES SUB-SECTION US winter storms disrupted the livestock, feed and feed additives industry.

Markets and supply chain SHIPPING ISSUES As we entered into Q1, shipping issues continued to disrupt the supply chains for feed additives. Covid-19-induced lockdowns in China, reduced space on shipping lines, congested ports and other interruptions caused higher prices and longer lead times than usual for products imported into the US, Russia and other markets.

US WINTER STORMS In the US, these issues were compounded by the winter storms across much of the country in late-February. In addition to their significant human toll, the storms disrupted the livestock, feed and feed additives industry by causing power cuts, icing over rail lines and roads and damaging facilities, all of which interrupted domestic production. z More on the effects of the winter storm on page 20

SUEZ CANAL Meanwhile, the disruption of passage through the Suez Canal when a container ship ran aground in late-March added delays to Asia-Europe shipments.

implications for the company’s supply of powder or liquid methionine, given the larger inventories held for these products.

CAPS ON ENERGY USE A cap on energy use was announced in February and the Chinese government set reduction targets at the National People’s Congress meeting in early March. z More on the possible effects on amino acid production on page 16

EVONIK MAY EXIT THREONINE AND TRYPTOPHAN In a mid-April update on Evonik’s Nutrition and Care structural and efficiency improvements, division head Johann-Caspar Gammelin floated the possibility of a selective exit from bio amino acids production, namely threonine and tryptophan, to focus on higher value amino acids. Evonik has already optimised its global methionine network and regrouped production in three major hubs after stopping production in Wesseling in late 2020. Meanwhile, Evonik’s Slovakia facility, previously an animal nutrition site, has been repurposed and is now a biotechnology scale-up and launch platform.

RUSSIAN IMPORT RESTRICTIONS

METHIONINE ANTI-DUMPING

Russia’s Federal Service for Veterinary and Phytosanitary Surveillance has been cracking down on the presence of undeclared GMOs in feed additive imports. This was cited as the justification for a ban on feed and feed additives imports originating in the US as of March 2 and those originating in Spain as of March 22.

In late-February, the US Department of Commerce (DoC) announced its affirmative preliminary determinations in the anti-dumping duty investigations of methionine from France, Japan and Spain, based on a complaint filed by Novus International in July 2020. Final determinations by the DoC are now expected by May 10. The USITC will provide final determinations by June 24. Issuance of final orders is expected by July.

ANTI-DUMPING DUTIES In mid-January, China imposed anti-dumping duties on m-cresol, an input for some vitamin E production processes. There are six vitamin E producers in the world and four of them are based in China, though not all necessarily use m-cresol. Nonetheless, rising prices for a variety of raw materials, not only m-cresol, have been seen to raise production costs for various feed additives in China throughout the quarter.

PRODUCTION PLANTS

AVAILABILITY OF RAW MATERIALS

In early January, Cargill Animal Nutrition opened a 220,000 squarefoot, $50 million non-medicated premix facility in Lewisburg, Ohio, which has a total annual production capacity of up to 154,000 tonnes.

Meanwhile, in late-March, it was revealed that ADM Animal Nutrition plans to close two Sermix sites in north-western France that were part of its acquisition of Neovia.

In late-March, Adisseo declared force majeure on Adisodium, its chloride-free sodium sulphate product, citing difficulties in securing an adequate supply of sulphur feedstock. Sulphur is also used in the production process for methionine, but the situation had very limited

$50m

6 | SPRING 2021

Cargill Animal Nutrition opened a 220,000sq.ft, $50 million non-medicated premix facility.

www.feedinfo.com

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NEWS BITES

Mergers and acquisitions SPECIALTY INGREDIENTS BUSINESS SOLD Lonza sold its Specialty Ingredients business, which includes its vitamin B3 operations, to Bain Capital and Cinven. The CHF4.2 billion deal was announced in February and is expected to close in the second half of this year.

AJINOMOTO IN TALKS WITH METEX Ajinomoto Animal Nutrition Group announced in early March it was in exclusive negotiations with France’s METabolic EXplorer regarding the sale of its entire equity stake in Europe’s top producer of feed grade amino acids by fermentation: Ajinomoto Animal Nutrition Europe. z More on this story on page 14

IK INVESTMENT PARTNERS AND INNOVAD GROUP European private equity firm IK Investment Partners is acquiring a majority stake in Innovad Group, as well as Italy’s Add-Co Nutrition and Belgium’s Add-Essens, according to an announcement in midFebruary. Following the transaction, Jamal Al Saifi, the founder and current majority shareholder of Innovad, will retire, and Ben Letor, fellow co-founder, will become the new chief executive officer of Innovad. IK Investment Partners had previously been involved in the animal health sector through investments in CID Lines and Ceva Santé Animale.

IFF AND DUPONT NUTRITION AND BIOSCIENCES The merger between IFF and DuPont Nutrition and Biosciences, announced in December 2019, took place in February of this year.

The combined business continues to operate as IFF.

EW NUTRITION AND NOVUS INTERNATIONAL In early February, EW Nutrition acquired the Feed Quality and Pigments business from Novus International, Inc., which includes brands such as Santoquin® feed preservative, SURF●ACE® feed mill processing aid, and Agrado® feed ingredient. As part of the deal, EW Nutrition gains ownership of Novus’ production facility in Constantí, Spain.

NORDIC FEED SOLUTIONS AB AND YARA Sweden’s Nordic Feed Solutions AB acquired the Bolifor feed acidifier range from Yara International in early April. The new owners have committed to maintaining the portfolio and existing formulas.

RAVAGO GROUP AND GRUPO INDUKERN Luxembourg-based chemicals firm Ravago Group is acquiring Indukern from Spain’s Grupo Indukern, in a deal announced early March.

Indukern caters to the food, flavours and fragrances, pharmacy and animal nutrition industries.

BARENTZ INTERNATIONAL AND NOACK GROUP Barentz International announced in late-February the acquisition of Austria’s Noack Group, a specialised distributor of ingredients for the animal nutrition industry with a presence in the central/eastern European regions.

FORFARMERS AND DE HOOP MENGVOEDERS ForFarmers closed the acquisition of compound feed producer De Hoop Mengvoeders in early February, giving it a leading position in the Dutch broiler feed segment. It also expanded its presence in the equine sector, buying Mühldorfer Pferdefutter that same month.

EIGHT FIFTY FOOD GROUP AND SOFINA FOODS Eight Fifty Food Group, a UK and European pork and seafood supplier with over £2 billion in sales and 23 manufacturing sites, will be sold to Sofina Foods of Canada for an undisclosed amount, as per an announcement in late-March.

TYSON FOODS AND MALAYAN FLOUR MILLS BHD Tyson Foods announced in mid-February that it would be buying a 49% stake in the poultry segment of Malaysia’s Malayan Flour Mills Bhd. The acquisition is expected to help Tyson Foods increase its presence in the global halal-certified poultry segment.

ROYAL DE HEUS SLAUGHTERHOUSES Royal De Heus announced in late-January the signature of a conditional agreement to acquire poultry slaughterhouses from Van Miert Breukelen and Mieki Hunsel, two production sites with a total slaughter capacity of 850,000 birds per week. The feed giant has said that Covid-19 has put a huge dent in demand from the catering and foodservice sectors, which in turn has put pressure on Dutch abattoirs.

ARVESTA AND PALITAL

MULTIPLE DEALS AND INVESTMENTS IN PET FOOD

In early January, Arvesta (formerly known as Group Aveve) announced its intent to acquire all remaining shares (70%) of Palital, a specialist manufacturer of various types of butyrates (calcium, sodium and magnesium butyrate), protected urea, as well as flavouring agents and sweeteners. Arvesta expects annual turnover of €20 million when combined with Arvesta’s own feed additives arm Aveve Biochem.

Finally, in pet food, private equity investors Eurazeo Brands signed an agreement in early April to acquire a majority share of French premium pet food company Ultra Premium Direct for €68 million. This follows deals such as private label supplier United Petfood acquiring Cambrian Pet Foods and its three Welsh production plants in early March, Hungary’s Partner in Pet Food acquiring Italian private label manufacturer Landini Giutini in late-January and HIG Capital acquiring Brazil’s FVO. Indeed, throughout the quarter, the pet sector has continued to attract sizeable investments, including Nestlé putting $35.1 million into its Chinese pet product portfolio and Royal Canin expanding its manufacturing facility in Lebanon, Tennessee, with a $200m investment, as well as announcing a new $390m facility in Ohio.

ALLTECH AND DLG GROUP JOIN FORCES IN FINLAND After the finalisation of a transaction revealed in mid-February, Alltech and DLG Group will each hold a 50% share in Finland’s Kärki-Agri, which supplies the cattle industry. The collaboration between Alltech and DLG follows their successful 2017 joint venture: AV Nutrismart Holdings, a premix business based in Orenburg, Russia.

www.feedinfo.com

SPRING 2021 | 7

SECTION NEWS BITES SUB-SECTION

Animal health NEW AFRICAN SWINE FEVER STRAIN The use in China of unauthorised vaccines against African swine fever (ASF) is believed to have resulted in the emergence of a new strain of the virus causing chronic disease, as reported in January. By March, the Ministry of Agriculture and Rural Affairs had announced it would be stepping up its fight against the use of illicit vaccines. z More on the effects of animal and human diseases on the industry in next quarter’s edition of Feedinfo Review

CHINA’S HOG INVENTORIES Chinese official forecasts in late-February predicted that the country’s hog inventories would recover from the devastation of ASF and return to pre-epidemic levels by around June this year.

However, ASF outbreaks continue in China.

WORST BIRD FLU SEASON IN YEARS Moving on to poultry, both Asia and Europe are coming out of one of the worst bird flu seasons in years, Reuters reported in January. Nearly 20 million chickens have been destroyed in South Korea alone since November, driving egg prices up by over 24% and chicken prices up nearly 10%. In India, one of the world’s largest chicken producers, consumer confidence in poultry was said to be affected.

20m

Nearly 20 million chickens have been destroyed in South Korea alone since November due to bird flu.

EUROPE STRUGGLES AGAINST A(H5N8) The emergence of a new and lethal strain of avian influenza, A(H5N8) has marked the European bird flu season. The EU had recorded more than a thousand HPAI detections over 25 EU/EEA countries plus the UK as of mid-February. France has been hit particularly hard, with more than 450 outbreaks over the winter of 2020-2021. The country began easing its control measures by mid-March.

NEW STRAIN SHOWS UP IN HUMANS FOR FIRST TIME Meanwhile, in Russia, seven human cases of the A(H5N8) strain of bird flu were reported in February. The individuals in question were poultry farmworkers in contact with H5N8 on a poultry farm in Astrakhan Oblast. According to the World Health Organization

“Whenever avian influenza viruses are circulating in poultry, there is a risk for sporadic infection and small clusters of human cases” WORLD HEALTH ORGANIZATION 8 | SPRING 2021

Both Asia and Europe are coming out of one of the worst bird flu seasons in years.

(WFO), the cases ‘remained asymptomatic for the whole follow up duration [several weeks]’ and all close contacts of the individuals were monitored, with no signs of clinical illness.

WFO said: “Whenever avian influenza viruses are circulating in poultry, there is a risk for sporadic infection and small clusters of human cases due to exposure to infected poultry or contaminated environments. Therefore, sporadic human cases are not unexpected.”

WORLD’S FIRST COVID-19 PROPHYLACTIC FOR ANIMALS Also in Russia, the world’s first Covid-19 prophylactic for animals has been registered. Developed by the Federal Center for Animal Health, the new vaccine will reportedly enter mass production this month and has been tested in pets, mink and other animals. The federal service for veterinary and phytosanitary supervision Rosselkhoznadzor notes that the use of a coronavirus vaccine in animals can help prevent the development of mutated forms, which most often occur during interspecies transmission of the pathogen. It could also potentially prevent losses to the agriculture industry, such as enforced culls of farmed mink.

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SECTION SUB-SECTION EXCLUSIVE INTERVIEW After recently venturing into biotin and vitamin D3, what is next for Tianxin?

Jiangxi Tianxin’s expansion in the world of vitamins

O

ver the last year, several vitamin markets have been extremely competitive – biotin in particular. This is partially thanks to the arrival of a new entrant reshaping the supply scene.

However, that new entrant was no stranger to the vitamin markets; indeed, Tianxin Pharma has been in the industry for around 20 years now, starting with vitamin B6 production in the early 2000s. It eventually grew to one of the leading players in the B vitamins space, adding vitamin B1 production in 2007 and entering the folic acid market in 2015.

In 2019, it expanded into biotin and vitamin D3.

These various products are all made at Tianxin’s production base in Jiangxi, then shipped to its customers in more than 100 different countries and territories. In a recent conversation with Feedinfo, Kyle Wang, head of Tianxin’s export business, stated production capacity for vitamin B1 at the site amounted to around 4,000 tonnes/year, while that for vitamin B6 was 6,500t/year.

He said: “In terms of actual production, our company will adjust according to market demand. Overall, in recent years, our VB1 and VB6 capacity utilisation rate is relatively adequate.”

Tianxin’s footprint also consists of its R&D facilities, including its Key Vitamin Laboratory in Jiangxi province and an R&D centre in Shanghai.

“We believe that technological breakthroughs are the main factors affecting the global vitamin supply in the future.

Therefore, we regard R&D as the foundation of Tianxin… we established a sound research and development system not only in order to control the cost of our production and offer reliable products to our customers, but also with an eye to new projects to drive the company’s long-term development,” Wang added.

“Therefore, in order to improve our service and meet our

10 | SPRING 2021

customers’ demands for packaged purchases, we choose to enter the biotin and VD3 markets as part of our Customer Service Improvement scheme. We have made great efforts in R&D for decades and these products went to market just in time to give our customers a better procurement solution.”

Operating in competitive markets Some might see this as a bold move, entering fiercely contested parts of the vitamins market. However, Tianxin itself disagreed with this characterisation of these sectors.

“Honestly, in my opinion, that [level of competition] is not only in biotin and D3 markets; I think all of the vitamins market are quite competitive,” said Wang.

Having entered the market for folic acid, vitamin D3 and biotin relatively recently, one major focus of the company in these sectors is on market-related certification, as well as market expansion.

“So far, Tianxin has passed GMP certification for the pharmaceutical industry in China, COS for EU, FDA for United States and MF for Japan, as well as obtaining food and feedrelated industry certifications including ISO22000, halal, kosher, BRC and FAMI-QS.” Finally, Tianxin intends to maintain its competitive edge through careful attention to the constraints of its upstream and downstream partners.

“After years of development, Tianxin has established a relatively stable sales chain and supply system. We respect each participant’s efforts within the chain. By continuously innovating our service model, we maintain and deepen the relationship with partners and at the same time we always listen to and accept valuable advice from customers and partners, prioritising timely improvement and perfection.”

Given the extraordinary nature of supply chain disruptions in recent times, such adaptation is clearly essential.

“The epidemic situation of Covid-19 is undoubtedly the most far-reaching event affecting this industry. Tianxin is working closely with the local government to win the battle against the pandemic. We organise the resumption of work and production based on the scientific evidence and in an orderly and safe manner. That way we can ensure the needs of customers will be effectively met,” added Wang.

Still, while Covid-19 has profoundly impacted both the global economic outlook and the local operations of companies, Tianxin is confident in the future.

“With the large-scale use of the vaccine, we remain optimistic about the global economic growth.”

“The epidemic situation of Covid-19 is undoubtedly the most far-reaching event affecting this industry” KYLE WANG www.feedinfo.com

What is ahead for Tianxin?

Asked about future plans for portfolio expansion, Wang declined to comment, saying instead that Tianxin’s next investments would concentrate on existing products.

“Our follow-up development will focus more on automation upgrades and sustainable development. On the one hand, by upgrading automation, we aim to improve the production efficiency and working environment, lower production costs and enhance the stability of the supply chain. On the other hand, we continue to increase the investment in environmental protection and employees’ safety and welfare so as to achieve our goals in green production and sustainable development.”

In a context where environmental issues or industrial accidents can lead to firm crackdowns which can halt production and interrupt a whole supply chain, this seems prudent. Tianxin witnessed this in March, when an accident at a neighbouring chemical plant caused the authorities to shut the entire industrial park in order to investigate the cause of the fire; after a one-week shutdown, production was restarted in the middle of the month, with reportedly little impact on prices.

To quote Wang: “We [have] established a sound quality management system, environmental management system and occupational health and safety management system so as to guarantee a more stable supply chain for our customers.”

Beyond this focus on the production and technical upgrading of existing products, the company is also excited about one particular strategic development – namely, its plans to list publicly.

Tianxin’s next investments will focus on the production and technical upgrading of existing products.

“Tianxin Pharma is currently preparing for an IPO and plans to list on China’s A-shares. Updates on the specific progress of the listing shall be based on the disclosure of information rules of the China Securities Regulatory Commission,” Wang added.

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SECTION SUB-SECTION | Sponsored INDUSTRY PERSPECTIVES AB Vista’s new Emissions Reporting Service offers insight into how the industry can address carbon emissions.

Tackling the industry’s emissions

T

he environmental impact of animal agriculture is being increasingly scrutinised by consumers, who are focusing on carbon emissions as the key area for improvement.

What an animal eats has a large impact on its environmental footprint, so a better understanding of which feed ingredients and processes will create more sustainable animal protein is crucial.

Feed producers have responded by offering products which reduce livestock carbon emissions and AB Vista is supporting the sector by introducing its new emissions reporting service. It aims to give partners in animal agriculture more information about their carbon emissions, to help them make the best decisions and decrease their impact.

Feedinfo spoke to AB Vista’s Gilson Gomes, head of global technical; Paul Steen, head of services; and Simon Phelps, commercial director at AB Vista’s sister company Intellync – to understand more about the service and what learnings have already emerged.

[Feedinfo] What are the biggest environmental challenges faced by animal agriculture value chains right now?

[Gilson Gomes] Animal production has tackled and reduced its environmental impact over time, especially through advances in genetics, but also through nutrition – delivering substantial Paul Steen

12 | SPRING 2021

Gilson Gomes

improvements in productivity. However, consumers are also demanding higher standards of welfare during production which, depending on the nature of the change, can potentially increase the environmental impact as it could negatively affect performance levels. For me, the biggest internal challenges are achieving net zero carbon emissions and producing animals with better welfare without compromising the environment.

Considering challenges from outside the industry, we have vegetarianism and veganism increasing as more people believe animal production is harming the environment and we have seen a rise in synthetic meat and vegetable meat imitations. Many claim they are more environmentally-friendly, but I feel we need to better measure their impact and speak up if this is not the case.

[Paul Steen] Reducing carbon emissions is one of the biggest challenges being faced by the agriculture sector. From a consumer perspective we see a growing media focus on this and there are new products emerging, such as meat alternatives. However, we must not lose sight of other environmental challenges. For example, phosphorus and nitrogen pollution have a huge impact by acidifying oceans and affecting freshwater environments through eutrophication and deoxygenation. The animal protein industry has a role to play in reducing its use of phosphorus by utilising new technologies such as phytases. We must also better measure and quantify phosphorus and nitrogen excretion within the manure and ensure it is recycled effectively.

[Feedinfo] Tell us about your new emissions reporting service.

Why is it so important for our industry?

[Paul Steen] There is a huge rise in consumer awareness and demand for low carbon products across all industries and it is imperative that sectors react accordingly. Agriculture has not been painted in a good light due to greenhouse gas (GHG) emissions, use of fertilisers and land use change, but we are vital in providing nutrients to feed a growing global population. We now have an opportunity to work at resetting this imbalance and make significant strides in lowering carbon emission by measurement, mitigation and managing GHG emissions which will change the way our industry is depicted.

Historically, AB Vista has been investigating how the application of phytase affected the environmental footprint of animal agriculture, Simon Phelps

www.feedinfo.com

Sponsored | INDUSTRY PERSPECTIVES initially from a phosphorus pollution perspective. However, after undertaking an impact assessment at a research level, we quickly realised that the feed element of a monogastric production process was the main contributor to carbon emissions. We started using our research to map this more closely and determine what role feed additives could play in reducing this impact, which was presented in 2019 with a published paper in the Journal of Poultry Science. From there we started to develop a tool which would enable feed producers to better understand the carbon emissions of feed production, reduce their GHG emissions, decrease the carbon footprint of our industry and provide sustainability choices.

[Simon Phelps] Our models accurately measure carbon at farm level for large groups of producers, for all types of livestock farming systems, and deliver benchmarked data reports to enable farm insights and corporate environmental and social governance reporting.

Agriculture is under pressure to reduce its carbon footprint globally, so our emissions reporting service provides the baseline information to make data-driven carbon reduction strategies and then becomes the tool to demonstrate that these changes are bringing the expected results.

[Feedinfo] When looking at emissions from livestock value chains what interesting things have you observed that the industry may not be aware of?

[Gilson Gomes] This is a pretty new subject for most producers and education is needed so people can understand which factors have the biggest impact on emissions. The largest impact comes from the feed itself (what we call the inputs) and many are not aware of how different feedstuffs impact emissions. There are other inputs such as the type of electricity, equipment efficiency, fuel, etc., that producers can do something about. The other side of the environmental impact is the output or productivity, so the more efficiently you are producing, the lower the impact per unit of output. In between, we also have things related to how we deal with manure and leftovers from animal production. Most people are not aware of the complexity in calculating and quantifying environmental impacts.

[Paul Steen] Carbon emissions in livestock are tied very closely with energy requirements, feed conversion, performance and mortality. We find in discussions with many of our customers, we hear ‘I never thought that would have an impact on my emissions’. When we show customers a chart of numerous farms all seemingly doing the same thing and producing the same kgs of pigmeat but all with different emissions, they can start to see the variations in carbon emissions.

We can trace these as far back as the breeding units and understand where seemingly small performance differences have had an impact on the carbon emissions of those pigs over their lifetimes. That to me is insightful data for the livestock industry to have.

[Feedinfo] Can you talk us through the work you have done comparing the environmental impact of animal protein products to plant protein products?

[Paul Steen] When making a comparison between the two, it is important to note we are eating these products for their protein content and so we should measure the carbon based on that context. This is what we did when we worked with a US client who wanted to compare pork to a plant-based alternative protein burger. On the face of it the

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“Education is needed so people can understand which factors have the biggest impact on emissions” GILSON GOMES plant-based burger was claiming much lower carbon emissions per kg of product in comparison to pork. However, the burger contained less protein than the pork meat typically would and so it is not a fair comparison as you would need to eat less pork to obtain the same amount of protein.

Our work, based on USA industry averages for pork production, showed that if you compared the two products on a kgCO2 /kg protein basis then the differences were not so significant. Pork was still higher than the alternative protein burger, but let’s not be discouraged as this can also be seen as an opportunity to explore lowering emissions from pork production and by using our emission model these changes can be tracked effectively.

[Feedinfo] Can you share more about how animal nutrition decisions impact the emissions footprint of animal agriculture?

[Gilson Gomes] Although nutrition has the biggest environmental impact, there are several strategies to reduce this, one being the choice of ingredients. Doing so presents challenges, such as dealing with more fibrous ingredients or not having the best amino acid profile in some protein meals. To truly reduce the impact you would need to use more feed additives, such as more synthetic amino acids and enzymes. Any additive that enhances performance would also help to reduce environmental impact, but to reduce emissions you would potentially increase feed cost when compared to a conventional diet.

There are strategies to mitigate the rise in cost and this is where knowing how choices in farm management are contributing to your environmental footprint can help a lot.

[Feedinfo] What could be the impact on agricultural industries if we do not act now to reduce carbon emissions?

[Simon Phelps] A growing population requiring more food, coupled with government targets to reduce the carbon impact of agriculture, means our value chains will require investment to deliver on both requirements. Advances in digital transparency and social media means consumers and investors have greater access to sustainability information – and retailers are already seeing these trends and are taking steps to reflect this in their brands and supply chains. For the agriculture industry this presents a hugely valuable opportunity to create sustainable production systems, but improvement takes time.

We believe businesses need to act now, evaluating their production processes, identifying opportunities, implementing improvement strategies and marketing their sustainability credentials.

Published in association with AB Vista

SPRING 2021 | 13

SECTION INTERVIEW SUB-SECTION Purchaser of the Amiens plant will introduce new specialty products, but what about amino acids?

METEX shares plans for the future of AANE

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n late-February 2021, Ajinomoto Co. Inc. subsidiary Ajinomoto Animal Nutrition Group, Inc. (AANG) and France’s METabolic EXplorer (METEX) disclosed they were in exclusive negotiations regarding the sale of AANG’s entire equity stake in Ajinomoto Animal Nutrition Europe S.A.S. (AANE).

Following this announcement, Feedinfo spoke to the president of METEX’s industrial subsidiary METEX NØØVISTA, Antoine Darbois, about the future of the AANE Amiens production site.

METEX is a French biological chemistry company that specialises in developing manufacturing bioprocesses for biobased compounds.

Previously known for developing technology for the fermentative production of methionine before selling it to Evonik in late-2016 for €45 million, METEX is planning to start commercial production of feed-grade butyric acid in Carling Saint-Avold (Moselle department) in H2 2021, via its industrial subsidiary METEX NØØVISTA. METEX claims that METEX NØØVISTA and AANE together will become the largest integrated European maker of naturallyderived functional ingredients produced by fermentation.

METEX NØØVISTA has a production capacity of 6,000 tonnes/year of PDO (1-3 propanediol) and butyric acid at Carling Saint-Avold.

AANE’s facility at Amiens has a production capacity of around 100,000t/year of lysine HCl and liquid lysine, according to Feedinfo’s Delphi analytics service. Tryptophan (7,500t/year), valine, and other specialty amino acids are also produced at the site.

METEX has already communicated that its industrial plan for Amiens is to introduce its new specialty products there. The first investment decision for the site is expected to be made

14 | SPRING 2021

before the end of 2021 to industrialise natural glycolic acid.

This investment is estimated at approximately €25m and will be carried out once the engineering studies are completed.

Future of amino acids production in Amiens We asked Darbois what the company has in store for the feed-grade amino acid units, notably lysine.

He said: “In the short-term, there is no doubt that the lysine production lines will continue to face volatility and stiff Asian competition. However, the lysine produced in Amiens has specific values and fits European market METEX has said that its industrial expectations. Amiens’ plan for Amiens is lysine cost position to introduce its new specialty is among the most products there. interesting in the EMEA Amiens market.”

AANE discontinued the production of threonine in early 2018 and today Ajinomoto Animal Nutrition’s threonine sold in Europe is sourced from China.

Darbois added: “We have no plans to resume threonine production in Amiens in the short-term.

And we have no plans either to reduce lysine capacity in Amiens in the short-term, given the market conditions and the capacity that was freed up by the threonine discontinuation.”

Longer term, given that METEX’s business model is geared to high-end technologies, Darbois knows METEX will have to offset its exposure to the volatility in amino acid prices.

“We know that lysine volatility is here to stay. We are no fools. So we will need to address this issue as we have excess production capacity in Amiens,” he said.

6,000t

METEX NØØVISTA has a production capacity of 6,000 tonnes/year of PDO (1-3 propanediol).

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INTERVIEW “We will offset that exposure to volatility by increasing production of high-margin amino acids and other products such as natural glycolic acid for use in cosmetics.

“We have no long-term plans either to resume threonine production in Amiens, only in the very unlikely scenario that the market warrants having a Europe-based producer,” Darbois added.

“Our plan for lysine over the long-term is maintaining a solid production volume.”

AANE, in the past five years, has increased its production of valine and introduced the manufacturing of isoleucine, leucine and arginine. The Amiens plant was accelerating the development of these new amino acids under a flexible production system. With METEX at the helm, these specialty amino acids will continue to be a high priority. Darbois argued that AANE’s cost competitiveness for these products and the exclusive licences it has in place for them, as well as for their customised solutions in the EMEA region, give a lot of scope.

“We will increase the production of specialty amino acids in Amiens. And in terms of capacities for these products, we do not foresee any issues at this time. If ever we meet bottlenecks, we will invest where required,” he said.

According to Darbois, animal nutrition has always been and will continue to be a key priority for METEX. “We have been developing processes that rely on fermentation of natural and renewable feedstock. 100% natural is a strong value proposition in the animal nutrition sector today and we want to be a key player in functional ingredients,” he said.

“We were looking for large fermentation capacity. So, when we learned that AANE was for sale, we saw it as a perfect fit.”

Employee commitment Darbois stated that METEX has committed to keeping all of the approximately 320 AANE employees for at least two years and that Amiens will continue to be managed by the local team.

“We’ve known AANE for many years, which will make the integration easier,” he added.

“We have two truly complementary organisations with no overlaps or redundant positions. METEX mainly has R&D resources while AANE is a large industrial and commercial organisation with fewer R&D resources.”

Asked what the main reasons were for Ajinomoto choosing to sell AANE to METEX and not another company, Darbois was unable to divulge the exact criteria but did share his thoughts on the competitive process Ajinomoto put in place to divest AANE – one that took into account the economic value and sustainability of the project and would maintain the level of employment at the Amiens site.

“The credible buyer needed e.coli bacteria and R&D expertise. There aren’t that many companies out there with that expertise. Other candidates could have probably been competitor fermentation companies or startups with fermentation know-how. But other companies with already under-used capacities would not necessarily require the large capacity in Amiens. Companies from outside the sector or financial investors could have been likely candidates too but they do not have the fermentation expertise,” Darbois said.

Questions are being asked in the industry about the price

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“The price also reflects the high level of risk associated with the commoditised amino acids produced in Amiens” ANTOINE DARBOIS paid by METEX for AANE (€15m), which is seen as very low.

However, the METEX NØØVISTA president simply pointed out that the price is just the result of the competitive process Ajinomoto put in place and takes into account the intrinsic value of AANE. “It’s interesting to know that the price also reflects the high level of risk associated with the commoditised amino acids [lysine] produced in Amiens,” he added.

Ajinomoto’s Y13 billion (approximately €100m) write-offs also mean that METEX will acquire AANE free of debt.

However, for Darbois, what the market has failed to factor in regarding this divestment price is that METEX has invested approximately €100m in R&D over the years and from a METEX shareholder perspective, those years of investment are seen as part of the price to acquire the extra fermentation capacity that was required.

“We have a proven track record of financing each of our development steps,” Darbois added.

“The €45m of proceeds from the sale of the l-methionine process to Evonik in 2016 was one step. This was followed by the 2018 deal with Bpifrance for the creation of the PDO and butyric acid joint venture METEX NØØVISTA.” METEX invested a total of €24.15m, while Bpifrance’s SPI investment fund invested €19.75m, giving them stakes, respectively, of 55% and 45% in METEX NØØVISTA. METEX and SPI said they would invest, respectively, €17.15m and €19.75m in three instalments over a two-year period to cover the €37m required for the project’s first phase. The financing required to adapt the site for the first industrial biochemical unit (building, utilities, studies) was provided by project stakeholders such as the Total group, the French state, the Greater East region and the Communauté d’Agglomération de Saint-Avold Synergie.

In June 2020, METEX, after requesting a State Guaranteed Loan (PGE) in the context of the Covid-19 crisis, obtained €6.2m. This amount reinforced METEX’s cashflow, which had already benefited from a €7.3m fundraising in February 2020. This loan may be amortised over a period of up to five years and allows METEX to continue its activities and, where appropriate, deal with the financial consequences of the delay in the development of its projects caused by the health crisis.

Darbois added: “And now AANE, with its fixed assets, inventories, working assets and cashflow from operations driven by demand for AANE’s amino acids, opens up new financial options for METEX and makes us even more confident in finding additional funding.”

SPRING 2021 | 15

SECTION SUB-SECTION ANALYST’S CORNER

China’s plan to cut emissions

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ncreasingly stringent environmental policies are pushing feed additive production costs and prices higher.

As part of China’s 14th five-year plan announced during the National Congress Meeting (also known as ‘two sessions’) held in early March, Beijing said the country will reduce energy consumption and carbon dioxide emissions per unit of GDP by 13.5% and 18% respectively in 2021-2025. In addition, the total emissions of main pollutants will also be reduced, but no detail was provided.

China produces the majority of the world’s vitamins and amino acids and the new emission targets are set to hit production costs and volume.

The Chinese government started to roll out its ‘green development’ or anti-pollution campaign as early as 2015, with many draconian environmental reforms implemented across most of its industrial operations. Beijing said this trend will continue in its plan to achieve clean air and blue skies.

China has routinely restricted industrial operations in winter to combat air pollution, particularly in densely populated provinces, because the country experiences severe smog as coal-fired power plants ramp up to provide heating in the colder season.

Sparsely populated regions such as Inner Mongolia have in the past escaped the intense environmental scrutiny imposed on other more economically-developed provinces, but the Chinese government’s latest emission targets have renewed attention on the region.

As part of China’s plan to cut emissions, the Inner Mongolia provincial government announced on February 9 that it would implement policies to cap energy use by all industries and imposed levies on industries with excess capacity, including steel,

30%

Under the policy, the Inner Mongolia government will hike power tariffs this year for restricted industries by 30%.

aluminium, ferroalloys, cement production, etc. The policy was designed to promote energy-saving and emission cuts in energyintensive industries.

Feed additives production was not mentioned, but producers said this will still have an impact on their plants as the government restricts energy consumption across all industries.

Under the policy, the Inner Mongolia government will hike power tariffs this year for restricted industries by 30%, while sectors with excess capacities fall into the ‘elimination category’ and will have a 50% increase.

Inner Mongolia has not issued specific targets for amino acid producers and many are evaluating the impact this will have on production.

One Chinese amino acid producer said in mid-March: “To meet these targets, electricity consumption will be limited and output will definitely be impacted. Our plants are still evaluating the impact. This policy has just been implemented, from top to bottom the various units will pay special attention to it.”

All producers said these emission targets would have an impact on amino acids production in Inner Mongolia, but “it will depend on the local government on what kind of emission standards will be set, it’s uncertain,” said a second Chinese producer.

Threonine is set to be the most severely impacted of the amino acids, as three of the world’s largest threonine producers – Meihua, Fufeng and Eppen – are operating in the region. For more information on operating rates and production volumes, please see Feedinfo’s Delphi analytics service.

In lysine, Chinese producer Eppen operates in Chifeng, Inner Mongolia, while East Hope operates in Baotou. Finally, in valine, Meihua, Eppen and Huaheng Biotechnology operate plants in the region.

Rising environmental standards and production costs

China experiences severe smog as coal-fired power plants ramp up to provide heating in winter.

16 | SPRING 2021

Feed additive production costs have been rising over the past few years; one vitamin producer said that environmental, health and safety costs have more than doubled. Beijing’s draconian implementation of its environmental policy over the past five years has also cleaned up corruption in local government. This has raised environmental standards in the Chinese feed additive sector.

A vitamin producer said: “Environmental protection is very [strictly enforced] and there is coercion from the government; no-one will dare take your money, the government officials are scared of [industrial] incidents.”

Government officials regularly invite companies that breach environmental rules for ‘chats’, a warning to these companies to comply with the regulations. Many industry participants said ‘invitations to chats’ by government officials are a sign of trouble.

The vitamin producer added: “Invitation to chats a few more times are invitations to jail.”

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VITAMIN B3

Evolutions in the B3 market

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1 2021 was a historic quarter for global feed grade vitamin B3 (niacin) as some of the key suppliers have either found new owners or have restructured.

It started in January 2021 with Vertellus, a leading producer of feed grade vitamin B3 as well as beta picoline and niacinamide. The company was acquired by Pritzker Private Capital (PPC) for an undisclosed amount with support of John Van Hulle, the current president and CEO of Vertellus, as well as other members of the Vertellus management team. Van Hulle and existing management will continue to lead the business, whose 10 manufacturing facilities are located in the US, UK, India and China.

A month later, Lonza, which had been seeking to divest its Lonza Specialty Ingredients (LSI) business, which also includes its feed grade vitamin B3 unit, announced it had agreed to sell LSI to private equity firms Bain Capital and Cinven for CHF 4.2 billion (about $4.4 billion).

Headquartered in Basel, Switzerland, LSI has approximately 2,800 employees, 11 R&D centres and 17 manufacturing sites across the world. The deal is expected to close in H2 2021, subject to customary closing conditions.

It is interesting to note that Vertellus and LSI are being acquired

Some of the key vitamin B3 suppliers have either found new owners or have restructured.

by large private equity firms which have all expressed interest in further investing in the specialty chemicals category and reinforcing the market positions of the companies they have or are acquiring. Animal nutrition companies will be closely monitoring the ramifications of these deals on the vitamin B3 market.

Another leading manufacturer of vitamin B3, India’s Jubilant, completed the demerger of its Life Science Ingredients business on February 1, 2021. The demerger was originally proposed in 2019. The demerged and independent business, now known as Jubilant Ingrevia Limited, includes Jubilant’s animal nutrition and health solutions unit, comprising among other products its vitamins range – vitamin B3 (niacinamide and niacin) and choline chloride.

Shaping livestock solutions We aim to reach and improve the performance, health, and welfare of every livestock animal. www.huvepharma.com

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SPRING 2021 | 17

SECTION SUB-SECTION LIQUID LYSINE Suppliers and customers are switching to a lysine form requiring fewer processing steps.

What are the implications for the European market?

Changing market for European liquid lysine

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raditionally, end-users have switched between different types of lysine (HCl, sulphate and liquid) based on price or available supply. However, in January 2021, Feedinfo reported that a growing number of end-users are seeking to switch from lysine sulphate to liquid lysine or lysine HCl in H1 2021, while more recent developments from the suppliers’ side indicate that a move to l-lysine liquid 50% specifically is underway.

As a lysine supplier told Feedinfo in late-February: “As long as liquid is cheaper, and if you compare the pure lysine content in all three types, any feed mill that has a possibility to use liquid will do so. It’s currently simply a better deal.”

From a general standpoint, whether we are talking about liquid lysine, HCl or sulphate, prices this year for all types of the amino acid have been driven by high corn prices, logistical disruption and reduced supply from China. Chinese shipments have often been delayed due to container shortages and lockdown measures in parts of the country.

Meanwhile, only three suppliers are currently offering liquid lysine in Europe: ADM Animal Nutrition, Ajinomoto Animal Nutrition Europe and Korean producer CJ Bio. Market sources report fierce competition between them.

Korean producer Daesang is also expected to enter the market and offer liquid lysine sometime this year, pending authorisation from the EU. However, some market sources told Feedinfo they do not expect prices to soften as a result of better supply in the coming quarters.

One seller said: “We still don’t know when Daesang will be coming back. Q2 is already sold out so it won’t offer volumes for Q2, the earliest for Q3. So, their role will not influence pricing in the short-term.”

conditions’ and a global industry capacity which has ‘expanded faster than demand’, the company will phase out dry lysine production globally before the end of H1.

ADM Animal Nutrition’s lysine focus will shift entirely to liquid and encapsulated lysine products. The company is already helping customers make the transition.

According to Pierre-Joseph Paoli, president, feed ingredients and additives at ADM Animal Nutrition, in a January 2021 interview, liquid lysine production is more straightforward and cheaper than dry lysine as lysine HCl production requires additional processing steps, because of having to convert the liquid form to dry, resulting in a higher production cost per unit.

Paoli said: “The first output after fermentation and refining is l-lysine liquid 50%. We are simply eliminating the subsequent drying and packaging process steps. The liquid form is easier and safer to use in a feed mill.”

He added that ADM Animal Nutrition will continue to invest in the production of liquid lysine.

“ADM gains efficiencies by linking lysine and milling operations in Decatur and we are always looking for ways to enhance production,” he said.

“For example, our science and technology group has improved our fermentation yield and rate in partnership with University of California researchers and a third-party biotechnology company.

In addition, we optimised the back end of our production by investing in a new refining process with NOVASEP, a well-known expert in the field of purification.”

The western European market is currently seen to benefit from quite large quantities of liquid lysine. According to ADM Animal Nutrition’s estimates, liquid lysine represented about 45% of European imports in 2020.

ADM ceases dry lysine production

A pioneer weighs in on liquid lysine

One significant shift in the market structure globally was ADM Animal Nutrition’s mid-December 2020 decision to end production of dry lysine (l-lysine HCl 98%). Citing ‘eroded market

This is in line with Ajinomoto Animal Nutrition Europe’s estimates, which see liquid lysine accounting for 30-50% of lysine usage in Europe, with the proportion varying by country.

In a late-January interview, Pierre Tille, sales director at Ajinomoto Animal Nutrition Europe, shared his views on the emergence of liquid lysine in Europe.

Liquid lysine, which was introduced by Ajinomoto Animal Nutrition Europe in the 1990s, has strongly developed in the last 30 years. According to Tille, supply can be easily increased to follow growing demand.

Tille sees a variety of factors shaping the price of lysine generally in Europe, including the rising cost of Chinese corn,

“L-lysine liquid 50% has a great future ahead in Europe” PIERRE TILLE 18 | SPRING 2021

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Shipments of all types of the amino acid have often been delayed due to container shortages.

45%

According to ADM Animal Nutrition’s estimates, liquid lysine represented about 45% of European imports in 2020.

the strengthening of the Chinese currency, rising maritime freight prices affecting the cost of imports, reduced production in the US impacting global supply and, of course, the higher protein prices playing on the demand side. However, he does not see the EU reauthorisation process affecting availability of liquid lysine.

“Looking back at 2020 until today, after the implementation of the EU lysine regulation [2019/1964], supply of l-lysine liquid 50% to the European market was little impacted compared to other lysine forms since most existing suppliers had their bacterial strains authorised. Indeed, additional supply is expected in 2021 with new strains authorised and capacities to supply the European market,” Tille said.

He added: “L-lysine liquid 50% has a great future ahead in Europe, where feed manufacturers invest heavily in feed factory automation and productivity. Many feed mills in Europe have the possibility to switch from one form to another one.”

Reacting to ADM Animal Nutrition’s decision to permanently stop production of dry lysine HCl in H1 2021, the Ajinomoto Animal Nutrition Europe sales director argued that, while his company thinks it is a concern for the European feed industry to have fewer suppliers, ADM will remain in the market as a supplier of liquid lysine.

Moreover, Tille said: “It should drive more Chinese [lysine HCl] into North America to replace the reduction of local supply.”

Local production: The changing of the guard Soon after that conversation, another firm came onto Europe’s lysine scene, as METabolic EXplorer (METEX), the French

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biological chemistry company, acquired Ajinomoto Animal Nutrition Europe this quarter.

With this sale, the Japanese company, a pioneer in this domain, will no longer supply amino acids it manufactures itself within the European market (with the exception of rumen-protected lysine).

Meanwhile, METEX will come into possession of the AANE plant in Amiens, which is understood to be the last site producing fermentation-based amino acids in the European Union–Evonik having disclosed that its Slovakian plant, previously an animal nutrition site, had become a biotechnology scale-up and launch platform serving all businesses in nutrition and care.

As explained in greater depth in the interview on page 14, the new owners of the amino acids unit in France have ‘no plans to reduce lysine capacity in the short-term’, insisting that the locally-manufactured product continues to have a niche: “the lysine produced in Amiens has specific values and fits European market expectations…Amiens’ lysine cost position is among the most interesting in the EMEA market.”

New amino acids players are also starting to emerge among Europe’s neighbours to the east, although not necessarily for production of liquid lysine. Belarus National Biotechnological Corporation brought online a new amino acids and feed plant near Minsk in the second half of 2020.

The plant’s nameplate capacity in lysine amounts to 64,700 tonnes/year and the country’s president forecast in June 2020 that the plant would be operating at targeted capacity this year.

Even further east, Russian company Arnika LLC is bringing online Kormibiosintes, a project with a nameplate capacity of 8,000t/year of vitamins and amino acids (lysine, tryptophan, and valine; vitamins unspecified). It is understood that this production site is primarily aimed at the Asia-Pacific region.

SPRING 2021 | 19

SECTION US STORMS SUB-SECTION

Winter storms in US disrupt feed additive production

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evere winter storms Uri and Viola swept across much of the US in mid-February, hitting particularly hard in the south where both livestock and chemical industries are concentrated.

With record-low temperatures freezing parts of the country that were unused to such extremes and ice and snow provoking declarations of states of emergency across nearly half the country, the storms impacted production at refineries, chemical plants and feed additive manufacturing facilities, as well as among the industry’s customers in feed and animal production.

Methionine production interruption The situation was particularly acute in Texas, where the electrical grid struggled to cope with high demand and several different sources of power generation were interrupted by the weather, causing rotating blackouts starting on February 15.

“Unprecedented winter weather has resulted in widespread power outages and transportation disruptions that are affecting Novus International’s operations in Chocolate Bayou, TX, where Novus’ ALIMET® feed supplement is manufactured,” a company spokesperson told Feedinfo that same week. After an initial assessment of the event, damage was found at the facility in late-February, extending the down time.

Production lines were restarted the week of March 8, although the company said that time would be needed to return to full production capacity and rebuild its global methionine inventory and for upstream suppliers to do the same.

Methionine contractual commitments were being met in the US, according to buyers, but inventories were said to be minimal.

Spot offers from US suppliers halted amid production issues and supply chain constraints caused by the severe weather and by late-February, spot prices had reached the highest level since Feedinfo began tracking US prices in 2018.

Meanwhile, Chinese methionine manufacturers returned to the US market in early March to plug the supply gap. These spot deals marked the first time Chinese methionine producers have returned to the US market after exiting in 2018 following the imposition

$228m 20 | SPRING 2021

The storm is estimated to have caused the Texas livestock industry losses of $228 million.

Ice and snow provoked declarations of states of emergency across nearly half the US in mid-February.

of a 25% tariff in the context of President Trump’s trade war with China.

Methionine from other overseas sellers had largely not been on offer in the US as suppliers were cautious about importing product until the outcome of the USITC case on methionine coming from France, Spain and Japan was more certain (an affirmative preliminary determination released in late-February announced duties on methionine exports from the three countries).

Potential for phosphate impacts In the end, it was not only production of methionine that was impacted by the power crisis; a phosphate producer had to idle operations at its three feed phosphate plants located in Illinois, Missouri and Nebraska due to gas curtailments that were being enforced to provide more gas for heating and electrical generation.

Raw materials production was also threatened; as of February 18, the storm had shut down roughly one-third of all US crude production and several refineries had paused operations until weather conditions improved. This is of concern for the feed additives industry because a key raw material for phosphoric acid is sulphur, which is a by-product of oil refining and gas processing.

Phosphoric acid is the main feedstock for feed phosphates.

A supplier said: “Phosphoric acid prices are already extremely high. If sulphur prices go up, we will continue to see high costs to produce feed phosphate.”

Transportation interruptions Other impacts from the storms included transportation interruptions caused by icy roads and railroad tracks, as well as terminal shutdowns. This was understood to be most acute in the north west of the country.

Further downstream, the storm’s effects, particularly the power cuts, were felt by many different operators; feed mills ceased production, dairies were forced to dump milk when they either could not power the processing equipment or transport the raw milk to the processors and animals lost lives as generators or water delivery systems failed.

A report by Texas A&M University in early March estimated that losses in the Texas livestock industry from the storm amounted to $228 million.

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SECTION SUB-SECTION INSIGHT Companies weigh in on pros and cons of major overhaul of EU’s additives approval process.

EU Transparency Regulation: Expected impacts on industry

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egulation (EU) 1381/2019, also known as the ‘Transparency Regulation’, entered into application on March 27, 2021.

The regulation is being implemented by the European Food Safety Authority (EFSA) and the European Commission (EC), with involvement of stakeholder groups representing not only the value chain, but also consumer, welfare and environmental groups. The regulation does not only cover feed additives, but also food additives, novel food, pesticides, biocides, etc.

According to EFSA and the EC, the implementation of the Transparency Regulation will aim to safeguard the balance between greater transparency and the required protection of business operators in the food chain to ensure their viability.

Thanks to Regulation (EU) 1381/2019, the non-confidential parts of a dossier that is used to register a feed additive will be made available to the public via the EFSA website.

This special insight collects a wide range of industry voices weighing in on why the regulation was passed, some of the questions surrounding its application to ongoing feed additive reauthorisation dossiers and some of the potential positive and negative effects of its different requirements on supporting transparency and innovation.

Origins Ruud Bremmers, director of Regal BV, a consultancy firm for feedrelated regulatory affairs in the EU, explains why it was set up originally.

He says: “The way we think about food safety has changed.

Basically, it was set up for two reasons. First, there is the General Food Law which was established in 2002. And after so many years it was time to do a ‘fitness check’.

“Secondly there was the glyphosate case,” he adds.

“The conclusions from the EFSA assessment were not trusted by the public or public organisations. Because of that there was doubt about the way EFSA assessed safety. Some claimed EFSA was not open enough and the belief in the quality of work from EFSA was challenged.”

This triggered a legislative process with the EC proposing a revision of the General Food Law (the revision is referred to as ‘Transparency Regulation’) in April 2018. As a follow-up from debates, votes and negotiations among the European Parliament, the EU Council and the Commission, the final Regulation (EU) 1381/2019 was finally adopted in June 2019.

Regulation (EU) 1381/2019 is based on four pillars: 1) Sustainability and governance of EFSA; 2) Quality and reliability of studies; 3) Improvement of risk communication; and 4) Transparency of EU risk assessment.

For pillar 1) each member state will nominate a

22 | SPRING 2021

“One of the anticipated benefits of the new regulation is that it will lead to more robust decisions on the efficacy of new feed additives” DANISCO ANIMAL NUTRITION representative to the management board of EFSA. The representative should have relevant experience and expertise in the field of food chain legislation and policy and, of course, should be independent. By using national scientific organisations, EFSA will strengthen cooperation with the countries. For pillar 3) the EC will have a general plan for risk communication which is geared to be more coherent and engage the public. The EC, EFSA and member states will work together on the communication.

However, it is pillars 2) and 4) which are particularly important for the feed additive industry, says Bremmers.

Indeed, any applicant for a feed additive, after registering itself as a ‘business operator’, needs to notify EFSA about any studies undertaken before even starting them, otherwise they may not be accepted.

Pillar 4), especially, is related to the transparency of the risk assessment, with studies being made public through EFSA’s website early in the risk assessment.

“The information in the studies will become public and there will even be public consultations,” Bremmers says.

“Also, the laboratory or institute where the study is going to take place needs to notify what it is doing. The regulation also gives the possibility to the EC to ask EFSA to perform verification studies to double check results of studies provided by an applicant. It is expected this will be done only in exceptional circumstances.”

According to Bremmers, this is not set yet, but will be done before March 2025.

“The aim is to increase public confidence and through this transparency EFSA can be held accountable for what they do,” he adds.

“The public or any other party can check data provided and can scrutinise the methods of assessment.”

Of course, an applicant can request to keep specific data, as listed in the Regulation (EU) 2019/1381 plus additional

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Thanks to Regulation (EU) 1381/2019, non-confidential parts of a dossier that are used to register a feed additive will be made available to the public on EFSA’s website.

provisions that have been included in an updated Regulation 429/2008, confidential in the case that it would cause the applicant significant damage if this information were to be disclosed. However, applicants would need to justify themselves and EFSA ultimately decides.

“For feed additives, studies demonstrating the efficacy of an additive may be kept confidential as well as specification of impurities and relevant methods of analysis developed internally by the applicant,” Bremmers says.

“For products produced by fermentation, such as enzymes and amino acids, it is expected that strain-related issues and method of manufacturing can also be kept confidential.”

On January 11, 2021, EFSA published ‘Practical Arrangements’, which specify the details for the implementation of required processes. EFSA will also be producing a range of supporting materials, such as animated tutorials and holding a series of training sessions which have been taking place since January 2021.

What about Regulation (EC) No 1831/2003?

One immediate question that comes to mind is: What are the implications for feed additive products currently undergoing the reauthorisation process under Regulation (EC) No 1831/2003?

For Bremmers, in principle, any authorisations submitted before the regulations applies will fall under the old regime.

This interpretation is shared by Danisco Animal Nutrition (IFF), which believes that, as far as it has understood, the new regulation will not affect any current feed additive products if renewals have already been submitted. Going forward, it is also unlikely to have any impact if business operators are provided with sufficient guidance from EFSA. Meanwhile, Kemin EMENA is wary about this issue: “There is a risk that ongoing dossiers are affected due to all required

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changes. There might also be delays due to public consultation or even the risk that some products will have to be retracted if new trials are being demanded. This risk is especially high for generic feed additive products.”

Alltech also points out the need for EFSA to clear the current significant backlog of feed additive re-authorisations that remain outstanding from the revision of feed additive legislation under Regulation (EU) 1831/2003.

The company says: “More than 400 out of 1,400 additives have yet to be fully evaluated.”

Or, as Phileo by Lesaffre says: “We still have a lot of questions on what will be the impact of the application of the Transparency Regulation on these kinds of dossiers.

And till today we have not received a lot of ‘transparency’ on this topic.”

Advice and better management Companies and organisations interviewed by Feedinfo see some positives with Regulation (EU) 1381/2019 as more transparency and better management is generally a good thing.

Kemin EMENA, for instance, says the implementation of the Transparency Regulation aims to help safeguard the fair balance between greater transparency and the required protection of everyone involved in the food chain.

Or as FEFANA (EU Association of Specialty Feed Ingredients and their Mixtures), acting as a united voice of the specialty feed ingredients business in Europe, says: “A more transparent EU risk assessment system should regain public confidence and, thanks to improved risk communication, should reduce the risk of false and misleading information spreading.”

Phileo by Lesaffre adds: “The new requirement of this regulation to notify all the studies carried out for a future

SPRING 2021 | 23

Pre-submission advice from EFSA is one of the major benefits expected from the new regulation.

INSIGHT

“There will be a significant economic burden on the industry in implementing the new rules” ALLTECH application can be seen as a pro. It will mean deeper consideration of trials we intend to do; it will change the way we approach our studies/trials. Specific resources and skills will be necessary, further specialising regulatory activity.”

Danisco Animal Nutrition (IFF) agrees: “One of the anticipated benefits of the new regulation is that it will lead to more robust decisions on the efficacy of new feed additives because every product trial will now be taken into account.”

The pre-notification of the regulation is also an interesting element for Danisco Animal Nutrition (IFF).

“On the one hand, this level of transparency may reduce some of the competitive advantage of an individual feed additive entering the market. But on the other, it could help to ensure that the industry avoids channelling all its efforts into solving the same issue and, ultimately, lead to a more robust portfolio of additive products for animal producers.”

In Adisseo’s view, it is likely that more preliminary studies will be conducted.

“Applicants being ‘sure’ of what they notify upfront will also give supportive and acceptable results,” says the company.

The idea is that companies will be perceived as being even more professional than they are today and will gain further trust from customers.

The new platform for the creation and submission of the

24 | SPRING 2021

dossiers is also expected to result in a better management of the EFSA authorisation process, with some time-saving that can be hoped for in the long run.

Commenting on this, Phileo by Lesaffre says: “At the end this can be a pro even if, in a first step, it requires a lot of extra work from us, probably a lot of time to adapt our internal process to this new way of proceeding, and time to educate teams to the new tools.”

Evonik also sees EFSA new process as a big step into the digital future.

“We believe that the modern approach, involving digital submission of the dossiers and the study notifications, is very positive,” Evonik says.

“It will hopefully facilitate the application process once applicants have got used to it.”

Another promising aspect of Regulation (EU) 1381/2019 is the notion of pre-submission advice.

The industry has been asking EFSA for pre-submission advice for a while. Now, theoretically, it can talk with EFSA about the requirements for an application.

For FEFANA, this advice is one of the major benefits expected and the organisation welcomes the possibility for applicants to have pre-submission meetings with EFSA. Danisco Animal Nutrition (IFF) believes the service will help closely tailor future submissions to meet the exacting requirements of EFSA. “We hope that this particular aspect of the new regulation will have a positive impact on the timelines - both in terms of reducing potential ‘clock stops’ and helping to shorten the overall registration process,” the company adds.

“We believe that the pre-submission advice could be a good thing, especially for those who do not have a lot of experience or want to clarify the submission process and get a rough idea of the required data. This particularly applies for substances which are to be submitted under the zootechnical category,” says Evonik.

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INSIGHT

Major concerns over regulation implications

W

hile the EU feed additives industry may have a positive opinion about some aspects of Regulation (EU) 1381/2019 and may indeed agree with its larger goals of increased transparency and a modernised authorisation process, there is a substantial amount of worry over the immediate challenges and longer term, perhaps more detrimental, implications of the regulation.

Ensuring they were ready for the regulation’s implementation in a fairly short time period has been a major concern for many companies, since the regulation came into effect without any delay. As of March 27, the notification of studies via the European Food Safety Authority (EFSA) website prior to an application has become mandatory.

Evonik says: “EFSA and the EC have made it clear that they will not delay the date of the Transparency Regulation coming into effect. So, they will press the switch on that day. Nobody is asking if applicants can comply the same day. EFSA is publishing training videos and holding webinars but the time is in fact too short to train our staff in-house and adapt our processes. So, at that point an inexperienced applicant meets an inexperienced authority and a system with ‘teething problems’ is to be expected.”

FEFANA shares this view: “By retaining a fast-track implementation approach with the March 27 deadline, during times of Covid-19 causing very obvious delays in different parts of the process and a lack of dialogue with those who are mostly concerned, there will be considerable consequences for applicants, among whom are many SMEs who have very little time to prepare for adhering to a set of new measures, which still have not yet been fully explained by EFSA, with many questions yet to be answered.”

Alltech also agrees: “We are less than two months from the implementation of the regulation, yet few details have been provided on how everything will work.”

Or as Kemin EMENA adds: “We do feel that EFSA should have taken more time to transit this project and give time to explore, test, learn and adapt to all applicants. We have the impression that they didn’t assess it correctly and as a result, a lot of information is coming too late.

“Additionally, the efforts that are required from all involved parties are considerable. Many systems and IT tools are not yet available, meaning that we cannot get acquainted with their use yet. We therefore hope that we can take a pragmatic approach.”

Building on this last comment made by Kemin EMENA, FEFANA adds that some of the IT tools are not yet available to allow applicants to get acquainted with their use, so it will be a learning process for all involved.

5%

Information whose disclosure would cause a harm of up to 5% of applicants’ turnover won’t be claimed confidential.

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“We therefore call for pragmatic and reasonable approaches for mitigation of side effects related to the enforcement of increased transparency during the first phases of implementation in order not to disrupt the process of innovation by our companies and their orientation towards the EU market.”

After March 27 But even after March 27, the industry is concerned that Regulation (EU) 1381/2019 may translate to an even longer timeframe for authorisations and with that extra costs for the applicants.

As Alltech says: “There will be a significant economic burden on the industry in implementing the new rules. It will be especially difficult to allow for the extended time needed to pre-notify studies and wait on the public consultation phase. There will be a significant administrative burden on the EFSA to perform the extended risk assessment process, dealing with confidentiality issues, cross-checking the study database, review of third-party comments and potentially the commission of verification studies.

“For the applicant, the value of the engagement through provision of scientific advice with applicants in the pre-submission phase is largely unknown and opening the dossier information for third-party review, including competitors, could end up in a strategic mudslinging fight. These delays are forecast to add a minimum of six months to the scientific evaluation process.”

Phileo by Lesaffre also points to the possible delays taken with internal planning of submissions of dossiers and the six-month sanctions in case of missing notifications, which would apply in the event of a gap between the studies presented in the dossier and the notified studies.

“All of this will imply heavy processes and more administrative costs,” the company says.

“The area that will impact most organisations is the extended evaluation period prescribed for the dossier’s EFSA review.

Increasing the time to market will cripple financial projections for companies and sink innovation in the EU. Currently the EFSA evaluation already takes longer than the six months foreseen in the legislation and this regulation only provides more possibilities to delay the eventual adoption of a scientific opinion. This will come at the expense of additional time and resources required to take products to market,” adds Alltech.

“A more realistic goal would be to complete the reauthorisation process first. There is little doubt that projects and investments in research will slow down for the initial month/year to allow labs and companies to understand how to navigate the new rules and procedures.”

Kemin EMENA also wonders what this might mean at EFSA level: “We expect that EFSA [who already struggle with delivering opinions and treating dossiers in a timely manner] will even have greater difficulties in managing these timelines as they will need to

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SECTION SUB-SECTION INSIGHT review the protocols [on top of the reports] and the confidentiality aspects of the dossiers. There might be a risk of more rejections or questions towards those protocols while the pre-submission meetings will not allow to revise them for their fitness for purpose.

“We expect increased uncertainty for companies on the cost, lead-time, and outcomes of each future dossier,” the company adds, highlighting extra costs which may not be necessarily easy to spot.

“Other costs are related to the obligation to provide access rights to the literature cited in the dossiers. These additional costs per dossier of €60,000-€100,000 will discourage many SMEs from submitting dossiers for innovative products.”

Evonik says: “We believe that most companies will wait until another business has made an application and learn from its experience. The unlucky ones who cannot wait are those who must keep time frames for renewals of authorised substances. Industry representatives have asked many times for a transition period for renewals, but it has been strictly denied.”

IP at risk and unsolicited interference Time is an issue, but so is the general lack of clarity regarding confidentiality.

FEFANA says: “When launching its proposal in April 2018, the EC decided to proceed fast-track, meaning to go against the EC’s own rules for better regulation by omitting the conduct of an economic impact assessment before adoption of the proposal and we are particularly concerned that certain aspects of the EFSA Practical Arrangements seem to go even beyond what is defined in the Transparency Regulation.

“These critical elements have been highlighted in a joint

stakeholder letter to the EC’s Secretary General, signed by 22 stakeholders, representing thousands of companies in the feed and food chain. These include, among others, the absence of legal basis for the introduced criteria justifying confidentiality and the significant extra costs that an applicant should shoulder to purchase from a publisher the rights for EFSA to publish copyrighted data and information that are part of an application dossier,” the association adds.

Kemin EMENA also says: “According to the Practical Arrangements [PAs], information more than five years old would automatically be disclosed without respect for the trade secrets a company might have for many years, thus ruining the competitive advantage. Moreover, information whose disclosure would cause a harm of up to 5% of applicants’ turnover won’t be claimed confidential. Although in their last version of January 18 the PAs leave the door open for a company to justify the confidential nature of information older than five years or representing less than 5% of its turnover, the mechanism by which EFSA would take its final decision is not disclosed, leaving a high level of uncertainty on this matter.

“This criterion does not seem to consider the global market in which most companies are active: the impact should be considered for all markets where the confidentiality would be breached,” adds the company.

Evonik goes on to say: “If there is a disagreement between an applicant and EFSA regarding confidentiality, then the applicant has to either accept the EFSA ruling or withdraw their dossier.

Meanwhile, the proactively published summary stays on the website. This means there is an unpredictable risk for the application. The Practical Arrangement states that it does not

Companies are worried about the implications of the transparency regulation on the confidentiality of data about their innovations and the security of their IP.

26 | SPRING 2021

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INSIGHT affect IP laws and the safekeeping of investments and innovations.

However, the plans to publish, for example, study data and reports proactively prior to the safety evaluation, does not give us a sense of security for our innovations, in particular when data of studies and reports would be used by third parties to create new IP during the period where the originator’s IP has not yet been published.

Legal disputes would be a consequence.”

Monitoring applications will be facilitated for competitors the company also warns: “There is a high risk that a competitor from outside the EU could copy the data and use our dossier to submit it with its own data in another country.”

And, with this sensitive data available publicly on the EFSA website, Huvepharma is wary of unsolicited interference in submissions.

“In the new system, there is a possibility for NGOs to interfere with the planning and work of EFSA which may seriously harm the neutrality of the work of EFSA’s scientific experts and EFSA itself.”

Furthermore, for Evonik, it is not entirely comprehensible why the public opinion aspect would be added to a scientific risk assessment process.

“This could prolong the case immensely and its outcome would not be calculable anymore. Time to market, calculability of the outcome and of the necessary costs for such a project are essential,” the company adds.

And Alltech asks: “Will the consumers value our industry’s collective effort to engage more transparently in risk communication, with the desired outcome being a higher level of trust in food safety? Or will we look back in a few years and consider this legislative initiative as a regulatory mismatch? Time will tell. Alltech is keeping an open mind.”

Alltech extends its questioning to the scientific advice EFSA would be providing.

The company argues: “It is yet to be determined whether the EFSA will provide quality scientific advice to applicants and how specific that advice will be. A few other questions to consider are: Will the guidance documents continue to be the ultimate reference? [which means there is little value to hiring a scientific advice group]. What qualifications will the advisors have? What criteria will EFSA work to for the lab or facility evaluations? Will they create their own quality standard or go with a third-party assurance scheme?”

Going back to a point made previously by Regal BV’s Ruud Bremmers, pre-submission advice on paper is a positive change.

However, “one should not expect too much from it,” he also says.

Kemin EMENA fears that pre-submission meetings will most likely not focus on any technical elements, thus limiting the real benefits of such consultation.

Evonik also points out that a lot will depend on how informative the published meeting report will be and how helpful the meeting with an administrative person might be for the applicant.

“Unfortunately, we already know that this will not happen in the same way as the US FDA operates. There you can meet directly with the scientists and all meeting notes are kept confidential, which is essential if one is working on an innovation,” the company says.

Pushing innovation outside the EU All these issues are preoccupying. And companies are increasingly worried that Regulation (EU) 1381/2019 may backfire and have a

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“There is a high risk that a competitor from outside the EU could copy the data and use our dossier to submit it with its own data in another country” EVONIK long-term impact on animal nutrition sector innovation, with more applications for product registration happening more outside the EU. Huvepharma says: “Innovative companies may reconsider their approach to gaining approvals, delaying their submissions in the EU until approvals have been obtained in other key markets, to protect their data from abusive use by others of their investment in their intellectual property. This will have a direct impact on innovation and competitively for agriculture, food production and even health care in the EU.” Kemin EMENA adds: “We expect that a lot of companies will search outside of the EU for trial organisations to partially escape the burden of trial and tests pre-notification for both the applicant and the EU trial organisation. This provision of the EFSA Practical Arrangements will greatly increase the administrative burden for the applicants and will likely be the source of delays and rejections by EFSA in case of inconsistencies.”

Adisseo and Phileo by Lesaffre both agree, arguing that companies will think twice before launching a product in the EU. And the sector is at risk of pushing knowledge and experience outside the EU. FEFANA says: “This would ultimately impede the EC’s own intentions to promote innovation and to make the EU the global leader of change as is stated in the European Green Deal/Farm to Fork Strategy.

“The implementation of the Transparency Regulation is bound to have a significantly negative impact on innovation, administrative burden and economic viability of applications, having an effect which is opposite to of the one intended.”

Reflecting on the matter as well, Evonik says: “The burden to authorise feed additives seems to be rising by the minute, while the gap between the demand and authorised additives is getting larger. One could even say this will let the EU fall further behind other areas of the world. The European Green Deal and the Farm to Fork strategy have set high goals for a sustainable and safe food production chain and climate change is among many issues on which feed additives have a positive and much needed impact.

We fear that despite this positive outlook for the industry, the uncertainties and hardships of the Transparency Regulation might mean innovations will not be sent through the authorisation process in Europe unless companies can keep their IP safe, the time to market is short and a return on investment can be calculated and anticipated.”

The company adds: “The feed additive industry, being rather small compared to most of the other industries impacted by this regulation, feels like it has been trapped in a fire it did not initiate.”

SPRING 2021 | 27

SECTION SUB-SECTION RECRUITMENT UPDATES

INDUSTRY MOVES Recent senior job moves within the global animal nutrition industry ADISSEO expanded its technical and commercial teams for aquaculture in Asia Pacific and China. Ms Guiping Zhao joined the team as of February 1 as regional technical manager aquaculture for China, while Mr Huynh van Lanh joined as aquaculture sales manager – Vietnam.

In March, cooperative AG PROCESSING INC announced that J. Keith Spackler, chief executive officer, has informed the board of directors of his intention to retire after conclusion of the current fiscal year on August 31, 2021. Spackler will continue in his role as CEO until a successor is named and the transition in leadership is complete.

In February, ALLTECH COPPENS named Ronald Faber as its CEO and global aquaculture lead. Faber began his career in the aquaculture and veterinary industries and joined Coppens International in 1998.

In January, ANIMINE appointed Yohann Laurent as a new area sales manager for the Asia Pacific.

ANITOX announced that Dr Enrique Montiel joined the company as director of nutrition and live production on March 1.

ANPARIO has announced the appointment of Ian (John) Hamilton as a non-executive director of the company with effect from April 1, 2021. Hamilton has senior executive and non-executive experience in the animal genetics and specialty feed additive industries.

Steve Bourne joined ARM AND HAMMER Animal and Food Production as Eurasian sales director after more than 30 years with agri-food businesses, primarily Alltech.

AVIAGEN ASIA has appointed Peter Fisher as its new president, effective from April 1. In this role, he will provide leadership for the Asia region, while continuing to enhance service to poultry producers.

BOEHRINGER INGELHEIM announced the appointment of Randolph Legg as its US president. He succeeds Everett Hoekstra, who retired in December. Legg will remain head of the company’s US commercial business while serving as president.

CARGILL has appointed Jamie Miller as CFO. Miller will succeed David Dines, who has held the CFO role since December 1, 2018. Miller will join Cargill on June 1 and will serve on the company’s executive team. Dr Omar Ishrak has also been appointed to its board of directors.

CCPA GROUP appointed Olivier Poli as general manager and he assumed his new duties on April 1.

CERMAQ has appointed Lars Galtung as global director of communication and sustainability.

He starts on June 1.

DEVENISH has expanded its business operations in Australia and New Zealand, with the appointment of Russell Trainor to the new role of area manager for Australasia.

ENTERRA welcomed Dave Lemmon as CEO. Lemmon brings more than 25 years of experience in the CPG industry.

ELANCO ANIMAL HEALTH announced the departure of executive vice-president Michael-Bryant Hicks. He joined Elanco in 2018 as general counsel and corporate secretary to prepare the firm for IPO, build the legal department structure for the standalone company and complete the successful acquisition of Bayer Animal Health.

At HAMLET PROTEIN Kurt Desmet joined the team as area sales manager Benelux.

MERCK CEO Ken Frazier will retire at the end of June. Frazier, 66, will remain with the firm as executive chairman for a transition period.

ANNOUNCEMENTS AND SERVICES z As part of our industry recruitment service, Feedinfo covers recent senior job moves within the global animal nutrition industry, helping industry colleagues keep up-to-date with new roles, board appointments and business changes. Please send any announcements to recruitment@feedinfo.com

28 | SPRING 2021

z In addition, organisations seeking to recruit specialist or senior staff can take advantage of Feedinfo’s recruitment service, which offers an audience of engaged and highly qualified animal nutrition specialists, managers and executives. For more details, contact our recruitment specialist, Dineo Komane at dineo.komane@agribriefing.com

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SECTION INTERVIEW SUB-SECTION The outlook for corn is rather tight for marketing year 2020/21, according to Stratégie Grains analysts.

Tallage SAS – Stratégie Grains has been providing data and intelligence for the grain, oilseeds, durum wheat, animal feed, biofuels and malting barley sectors since 1993.

Analysts offer global feed grain market forecasts

I

n January, French-based Tallage SAS – Stratégie Grains was acquired by Feedinfo parent company AgriBriefing. Not long after, Feedinfo sat down with a group of Stratégie Grains analysts to get their views and forecasts of the global feed grain markets and discuss what the animal nutrition/amino acids sector needs to bear in mind.

[Feedinfo] What is your outlook for the European soybean meal, feed corn and feed wheat markets?

[Stratégie Grains] EU production of soybean meal in the 2020/21 marketing year (October-September) is expected to be lower than in the previous marketing year, as a result of lower soybean supplies. Conversely, soybean meal consumption is expected to increase due to a sharp decline in wheat and sunflower meal supplies. In 2021/22, the expected production of soybean meal should remain stable. The high supply of grains and the reduced competitiveness of soybean meal compared to rapeseed meal could reduce the use of soybean meal in the next marketing year.

The outlook for corn is rather tight for marketing year 2020/21.

The local harvest has been lower and a very bad crop in Ukraine has dramatically decreased imports. Therefore, the EU should end the marketing year with decreased stocks. The world outlook is

30 | SPRING 2021

30mt

A rise of over 30 million tonnes in the total consumption of raw materials in the Chinese feed sector is expected.

even tighter in 2020/21. Chinese stocks have been depleted by several years of destocking, a low harvest in 2020 and a quick recovery of the hog population after the African swine fever (ASF) crisis. The growth in feed demand in China resulted in huge corn imports needs, mainly coming from the US. In 2021/22, the situation should ease moderately, at the global level as well as in the EU, thanks to higher harvest prospects and the return of Ukrainian maize.

A fragile situation is expected for EU wheat until July because of the low crop harvested in 2020 and dynamic exports to third countries. The rebound of the wheat crop in 2021 will allow feed wheat to catch back up with demand thanks to increased availability for on-farm needs and a better competitiveness against corn and barley in compound feed. The situation in 2021/22 will strongly depend on the impact of the floating tax in Russia. The bounce-back of human and industrial demands associated with the re-opening of the economy and the increase in the animal demand should not leave a great margin for a pick-up in exports. Hence if the floating tax in Russia results in a sharp reduction for projected Russian exports, then projected

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INTERVIEW EU exports to third countries would rise to counterbalance; this would quickly cause the European market to tighten.

[Feedinfo] Can you share any consumption or price trend forecasts?

[Stratégie Grains] In the 2020/21 marketing year, the production of compound feed in the EU is expected to decline slightly due to the economic slowdown and the sanitary measures resulting from the Covid-19 pandemic. The downturn in the catering industry and the decline in purchasing power have negatively impacted meat consumption. The production of compound feed will also be penalised by the increase in the price of raw materials, which will squeeze the margins of livestock farmers. Compound feed production could increase moderately in the 2021/22 season with the arrival of several Covid-19 vaccines fuelling hopes of an economic recovery.

After a sharp increase during the last months, corn prices are expected to remain very high or even increase slightly until the harvest in the northern hemisphere. Chinese demand as well as harvest issues in Argentina and Brazil could sustain moderate prices unless a severe resurgence of ASF is confirmed in China.

Corn prices could ease slightly in 2021/22 as stocks are expected to increase moderately in the main exporting countries.

Corn prices should remain at high levels.

[Feedinfo] How has ASF and China’s expanding pig herd impacted global grain usage and trade?

[Stratégie Grains] ASF resulted in a colossal pig herd loss in China, which opened huge market opportunities for meat-exporting countries. This supported feed demand for the main meat exporters (USA, Brazil, Canada, EU) which have benefited from very favourable pork export prices. Pigmeat deficit in China is expected to persist throughout 2021, as it will take many more months for farmers to rebuild the pig herd to pre-crisis levels. Meat shortages strongly stimulated Chinese production in highly industrialised livestock units that have replaced most of the traditional small-scale farms.

Soaring pork production margins contributed to grow the herd by an estimated 31% in 2020 and it could expand further by 9% during 2021, according to our forecast.

China’s animal protein needs are also supported by strong demand from the poultry and beef sectors that have been expanding to compensate for the pork deficit and to respond to changes in eating habits linked to urbanisation. This growth, fuelled by the development of factory farming, implies a sharp rise in the compound feed needs of China, exacerbating the competition for feed materials at the global level.

In the 2020/21 season (July-June), we expect an increase of more than 30 million tonnes (+10%) in the total consumption of raw materials in the Chinese feed sector. This huge demand cannot be met by local production and has been generating record import requirements for a variety of raw materials, with corn and soybeans at the top of the list. Total raw material consumption is expected to grow further in 2021/22, albeit to a much smaller extent.

[Feedinfo] China’s domestic production of soybeans is insufficient and millions of tonnes are imported every year to meet demand.

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ABOUT STRATÉGIE GRAINS z Tallage is an agro-economic research and analysis bureau and consultancy specialising in European and world grain and oilseed markets. Its flagship activity is the publication of Stratégie Grains, a series of supply and demand country forecasts for a wide range of agricultural commodities.

Learn more by visiting www.strategie-grains.com

Despite this, the supply-demand gap is growing. In response, Chinese feed manufacturers are seen to be reducing soybean content. As a result, feeds are likely to be supplemented with more amino acids. What is your view on the situation?

[Stratégie Grains] Chinese soybean production (non-GM) is almost entirely dedicated to local human domestic demand, whereas imported soybeans (GM) are fully dedicated to the feed market. The sharp development of the Chinese protein market implies a growth in imports requirements. Meanwhile, supply of soybeans in main exporting countries is seen to decline sharply owing to low beginning stocks. US soybeans shortage, uncertain crop size in South America combined with strong Chinese demand led to a price rally in the soy complex during 2020/21.

In this context, feed makers will continue to seek and build viable alternatives through the local and import markets to diversify protein sources and lower dependency on soy. The Chinese market will thus undoubtedly remain supportive for the amino acids industry.

[Feedinfo] What is your understanding of the correlation between grain markets and the prices of amino acids such as lysine and threonine?

[Stratégie Grains] The correlation between grain markets and prices for amino acids such as lysine and threonine can be illustrated by a theoretical feed ration mainly composed of maize and soybean meal. Soybean meal, used as a source of protein, is relatively rich in lysine, while maize, as a primary energy source, contains much less. If the price of soybean meal is high and the price of maize is low, feed manufacturers would prefer to maximise maize use. In this case, the feed must be supplemented with lysine to gather the animal’s requirement for this amino acid according to this specific formula: 100kg soybean meal = 97kg maize + 3kg lysine. The theoretical maximum price of lysine can be determined by comparison with the cost of soymeal and maize. The maximum price varies according to the type of feed, the species and the growth stage of the animal. The greater the spread between the price of soybean meal and maize, the higher the maximum price.

In Europe, where wheat is used as a primary energy source instead of maize, the spread between soybean meal and wheat prices takes the place of the soybean meal/maize spread in determining the maximum lysine price.

The maximum threonine price is affected not only by the spread, but also by the lysine price. The maximum price of threonine increases when the price of lysine is low, and vice versa.

SPRING 2021 | 31

IN YOUR SUMMER EDITION OF

REVIEW...

The concept of One Health is that human and animal health are intrinsically linked, which was particularly relevant in the past year.

This issue will focus on: • How the human coronavirus pandemic affected the industry.

• How the swine sector is coping and rebounding from the worst of African swine fever and even progressing on a vaccine.

• How perennial issues such as influenzas and resistant bacteria are causing the industry to adapt.

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