US soybean processors are profiting from widening crush spreads as soybean meal and soybean oil prices rally. Crush margins are expected to remain elevated into 2022 as the looming Brazilian soybean crop weighs on global soybean prices and demand for oil and meal remains robust.
Soybeans are crushed to make soybean meal, used in animal feed, and soybean oil, used as a food product and to make biofuels. Continued strength in soybean meal and soybean oil prices could mean high costs for protein processors. Input costs for nearly every packaged food manufacturer could rise as well.
The US has the second largest soybean processing industry after China. View Gro’s US Soybean Crush Monitor display, which automatically updates with monthly and annual crush volumes as well as uses of the processed products.
CBOT soybean meal futures have rallied over 15% in the past four weeks, reaching their highest level since August. Meanwhile, soybean futures have gained just 4%, widening the spread between soybeans and soybean meal. The difference between the cost of raw soybeans and the combined sales values of the derived products is known as the crush spread and represents the potential profit margin for soybean processors.
Previously, crush spreads were widening due to rising soybean oil prices, as the prospect of huge demand, via biodiesel and renewable diesel, supported soybean oil futures for much of 2021, as Gro highlighted here. More recently, the soybean meal cash market has been driving crush spreads. Soybean meal basis levels in parts of the Eastern Corn Belt are at their highest levels in years on strong soybean meal export demand and rising demand from the domestic livestock industry due to limited supplies of lysine, a key ingredient in animal feed rations.
Thursday’s export sales report saw soybean meal export sales for the 2021/22 marketing year tally at 183,000 metric tonnes for the week ended November 12. Total soybean meal export commitments now stand at 5.143 million tonnes, up 7.2% from a year ago. Just six weeks into the marketing year, exporters have already committed around 40% of the USDA's export forecast for the full year.
US soybean meal is typically destined for Mexico, Colombia, Canada, and the Philippines. This year, above average sales to Mexico, Canada, and Ecuador have driven demand.
Meanwhile, export demand for raw soybeans has dwindled, with purchases by China, the biggest buyer of US soybeans, down 34% compared with this time last year. And with Brazil’s big soybean crop off to an early start, suggesting Brazil could start shipping as early as late January, the traditional window of opportunity for the US to sell soybeans to China appears to be narrowing.
Gro’s Brazil Soybean Monitor display provides a range of important information about the country’s soybean crop, including Gro’s in-season yield forecast model, which will begin generating estimates by mid-December; drought readings and other growing conditions; and a supply and demand balance sheet.