German chemicals giant BASF AG says that it has deciphered the genetic code of a bacterium which should allow more efficient production of lysine, an amino acid used as protein in animal feed.

The company says it has applied for patent protection for its findings, achieved in partnership with U.S. biotech company Integrated Genomics Inc.

BASF, the world's third largest producer of lysine, has faced pressure on lysine prices recently, amid competition from Asia, particularly China.

"It has been a problem business for the company, anything that can lower production costs will help," says James Knight, an analyst at Merrill Lynch in London.

January's ban on meat and bonemeal feed in the European Union, in the wake of the detection of bovine spongiform encephalopathy or mad cow disease, has opened up possiblities for lysine.

The amino acid is essential in animal nutrition, and it can be added to corn and maize to provide an alternative to soy, which contains three percent lysine. Soy prices have soared after the ban on meat and bonemeal.

Demand for lysine is growing at a lower double digit rate, BASF said. Last year 460,000 metric tonnes worth about 660 million euros was sold worldwide. The company aims to protect the genes used to improve the lysine production.

"We have found about 1,500 unknown genes, determined their function and have filed patent applications for them," says Markus Pompejus, head of BASF's lysine research project.

Reuters