EU's Need for Alternate Cattle Feed Could Solve Global Soybean Glut

SCOTT KILMAN /  WALL STREET JOURNAL 8dec00

CHICAGO -- Europe's measures to fight mad-cow disease might generate more business for U.S. soybean farmers.

The European Union's decision to temporarily ban the use of animal remains in livestock feed means farmers there must find another source of protein for their herds. One likely alternative: soybeans, which are rich in protein but don't grow well in Europe. Europe already imports about 220 million bushels of U.S. soybeans annually, a $1.1 billion market for U.S. growers.

Should the restrictions on animal remains in feed become permanent -- something that German Chancellor Gerhard Schroeder Thursday predicted -- Europe could buy as much as 55 million more bushels of U.S. soybeans a year, said Daniel Basse, executive vice president of AgResource Co., a Chicago commodity forecasting concern.

U.S. meat exports are less likely to be affected. The European market has been essentially closed to U.S. meatpackers for almost a decade, making European consumers unlikely to turn to American beef. U.S. ranchers routinely treat their cattle with growth-promoting hormones, a practice deplored in Europe.

U.S. meatpackers, meanwhile, don't export to Europe the meat byproducts now being banned in European livestock feed.

Calculating the size of Europe's new appetite for U.S. soybeans is difficult. Europe's feed manufacturers could turn to everything from South American soybeans to European wheat and oilseeds. Fishmeal is also a possibility, although it is expensive.

Another factor is that more than half of the soybeans produced in the U.S. are genetically modified. While the European Union approved the import of this genetically modified crop years ago, groups opposed to genetic modification of food are certain to object to any flood of bioengineered soybeans arriving on their shores.

European makers of livestock feed use about three million metric tons of animal remains annually as a protein source. The EU is banning the practice on Jan. 1 for six months for fear the meat byproducts are spreading to cattle the infectious agent that causes bovine spongiform encephalopathy, or mad-cow disease.

Archer-Daniels-Midland Co., the commodity-processing giant based in Decatur, Ill., said Thursday it has received a flurry of interest for soybean meal from European customers in recent days. But so far it hasn't been enough for ADM or its rival grain processors to reopen any of the eight U.S. soybean-crushing facilities idled in recent months amid a global soybean glut.

Reflecting the uncertainty over European demand, a mad-cow-related soybean price rally at the Chicago Board of Trade has run out of steam in recent days. U.S. soybean prices continue to hover near their lowest levels in two decades.

In trading at the Chicago Board of Trade Thursday, the soybean futures contract for January delivery slipped four cents a bushel to settle at $5.03 a bushel.