Protein content of Brazilian soybean fell for the first time in 2018, according to the basic data from Brazilian government, Reuters reported. This has already deprived some Brazilian companies of business with China, their biggest buyer.
Brazil, the world's biggest supplier of soybeans, has seen its protein levels fall. This has caused problems for exporters, who may face cancellations or lower prices.
Marcelo de Oliveira, a researcher at Embrapa, Brazil's agricultural research arm, said preliminary findings showed that the protein content of soybeans harvested in Brazil in January 2018 had fallen to 36.83%, down from 37.14% in the previous season. He added that concrete figures will be revised by September, when Embrapa releases its final report on soybean quality.
Although the quality report has not yet been available, Embrapa said in a statement that annual changes in soy protein content in Brazil were not statistically relevant; suggesting that soy protein content in its grains remained stable.
Caramuru Alimentos SA had to turn down a deal from China this week, because it could not guarantee that its products would meet the minimum protein levels required by Chinese importers, said Cesar Borges, executive director of the company's board, in an interview.
At present, China imports soybeans for raising livestock.
China has become increasingly dependent on Brazil for soybeans since last year. But with the outbreak of African swine fever and the deaths of large numbers of pigs, China's import demand for soybean fell. That means China has more options when it comes to buying soybeans.
Apart from Brazil, China also imports soybeans from Argentina, the third-largest exporter, though the imports are still small.
Camilo Motter, a broker from Paraná, believes that the decline in protein content of Brazilian soybeans and competition from Argentina could have an impact on the premium of Brazilian soybean.
Argentina's soy protein content rose to 35.4 percent in 2019 from 34.6 percent in last season, according to the National Institute of Agricultural Technology.
Brazilian farmers are more concerned about the quantity of soybeans than their protein or fat content, as neither of these two factors changes the price at which they sell to processors or exporters, said Antonio Piolo, an official at Embrapa. The institute also said that the yield of soybeans is inversely proportional to their protein levels. But the impact of higher crop yields on protein levels is thought to have been offset by a warming climate in Brazil.
Protein levels in the U. S. soybean industry have also fallen in recent years as farmers seek higher yields. That helped Brazil overtake the United States as China's top supplier of soybeans over the past decade, even before the trade war. Currently, around 80 percent of Brazilian soybeans are exported to China.
According to the U.S. bean quality report, compiled by the American soybean industry organization, if Embrapa's figures are correct, the protein content of Brazilian soybeans is still higher than the average (34.2 percent) of American soybeans in 2018.
But soy protein levels in the United States are slightly better than in 2017, while in Brazil, they seem to be heading in the opposite direction.
"The decrease in protein content increases the steps for separating the hulls and extracting other ingredients from the soybean.
Additionally, it also lowers the weight of the grain, which results in a reduction in the amount of food crops." said Alessandro Reis, chief operating officer of CJ Selecta, a Brazilian soybean processor, by telephone.
He explained that separating the fiber-rich soybean hulls could help raise the protein content of the soybean meal to 46-48 percent, as required by the contract. Although by-products of the shells can also be exported, their market value is much lower than that of soybean meal.
"We are unlikely to stop exporting soybeans to China. But if they insist that protein levels should be maintained at 35 to 36 percent
That will be a problem for us." Mr. Reis said.
Lucas de Brito, a senior executive at ANEC, said that Chinese complaints about Brazilian protein products had prompted discussions within ANEC to revise the terms of the contract for standard soybean exports.
The contract sets a number of thresholds, including oil content standards and maximum allowable grain moisture.
Although the standard contract did not specify a fixed value for protein content, traders could still set quality standards in private negotiations with buyers, Mr. Brito said.
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