U.S. Soybean Meal Futures Reach New Highs on Rising Demand for Soybean Meal
InsightSoyProteinOffer and demandWE
July 29, 2022
Soybean meal futures have risen sharply this week amid strong US domestic demand for physical soybean meal. The month-one August contract, which hit a new high on Friday, traded at its widest premium to the September contract since 2014.
CBOT Soybean Meal Futures increased by more than 15% last week. Soybean meal is an essential feed ingredient for pork, poultry and aquaculture. Soybeans are ground to make soybean meal and soybean oil, which is used as a food product and to make biofuels.
Rising soybean meal prices come as hot, dry conditions in the U.S. Midwest threaten to put pressure on the new soybean crop. Weather in August and September has the biggest impact on U.S. soybean yields, and the short-term forecast, as the calendar shifts to August, is not favorable for the formation and filling of pods. With the U.S. soybean balance sheet extremely thin, yields of new crops will have a direct influence on soybean price.
Track the progress of the new US soybean crop using Gro’s US Soybean Monitor here. The monitor includes displays of the Gro Soybean Yield Forecast Model, Soybean Balance Sheet, Gro Drought Index, as well as crush rate and export graphs.
The difference between the cost of raw soybeans and the combined sales values of derived products is known as the crush spread and represents the potential profit margin for soybean processors.
Previously, grind spreads widened due to higher soybean oil prices. For much of 2021 and 2022, soybean oil futures have been supported by supply constraints from palm oil producers in Indonesia and Malaysia, and the prospect of new demand for making biofuels, as Gro wrote about here. But following the recent drop in palm oil prices, which compete with soybean oil for many uses, soybean oil futures have lost some of their luster.
In 2014, soybean meal futures spreads also widened sharply as soybean supply tightened due to drought conditions and rising demand. U.S. Soybean End Stocks in 2013/14 were 35% lower than the previous year, limiting the availability of soybeans used for grinding. Today, the soybean supply is tight again, with 2022/23 ending stocks forecast at their lowest level in seven years.