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EU melamine controls on Chinese soy could affect supply, price

By Jess Halliday , 09-Dec-2008
Last updated on 09-Dec-2008 at 15:09 GMT2008-12-09T15:09:21Z

New measures to restrict the import of soy foods into the EU from China may have an effect on soy stocks already in the EU, and push up ingredient prices over the coming months, say industry experts.

The European Commission said last week that it would take measures to ban the import of soy-containing infant food and food for young children from China, following the detection of high levels of melamine in Chinese soy bean meal.

In addition, all food and animal-feed containing soy or soy products will have to be tested before entry into the EU; only those containing less than 2.5mg of melamine per kilo will be permitted. Checks will also be conducted on baking powder (ammonium bicarbonate), after that, too, was seen to have high melamine levels.

The measures have been adopted today and are expected to be published in the Official Journal of the European Union tomorrow.

Gerard Klein Essink, director of consultancy Bridge2Food, told FoodNavigator.com, that the immediate impact will be on stocks of Chinese soy that have been built up in the EU over the last few months.

At this stage it is not clear whether this material will need to go through the same checks as newly imported soy. If so, then availability could be affected while this is carried out.

However he expects the market to see a more serious effect in a few months, when the soy currently being used would have been used.

“A lower supply from China could mean an upward trend in prices in the current period,” he said.

According to statistics from the European Commission, the European Union imported some 68,000 tonnes of soy or soy products from China in 2007, including soy beans, soy bean flour, soy sauce, soy protein concentrates, and textured protein substances. The total value was given at around €34m.

The main exporters of soy to the EU are Brazil and the US, however, so those channels will remain unaffected.

Price level increases

Soy prices already look to be straining as a result of other issues affecting the market.

On 1st December soy giant Solae announced a global price increase for its soy ingredients, effective immediately or as contracts allow. The level of the increase varies between the ingredients – between 15 and 18 per cent for some, but less for others.

Amongst the several reasons sighted were significantly lower levels of protein in this year’s North American soy bean crop, compared to previous years.

Solae did not cite the melamine issue in China as having an effect on global prices. But Jordan Rizetto, marketing director for Europe, said it is possible that market prices will be hit.

“One would expect some price increase at all points of the chain, including at retail,” he told FoodNavigator.com.

Long-term effects

Klein Essink does not expect the melamine issue to last long-term in respect of Chinese soy.

“I am sure China will solve the problems and things will go back to normal,” he said, giving a three to six month likely time frame.

“The effect on price and availability will depend on speed and quality improvements in China.”

In terms of consumer acceptance of soy products, Klein Essink does not expect the EU measures to have a great effect, since most do not associate China as a source.

Rather, the effect could be bigger on the total credibility of products from China, and manufacturers may be more inclined to think twice before sourcing ingredients from there.

Rizetto, on the other hand, said that consumers are conscious and aware of quality – not only for soy but also for other products hit by melamine contamination, such as dairy and chocolate.

“As [food scares] become more and more comment consumers look more at labels and brands – and could make choices on more reliable brands. Soy is now on the radar screen.”

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