Soybean meal – normality during emergency state?

After a period of approximately two months, during which global flows of soybean meal were drastically shifted, producing a price increases of up to 70 usd / ton, the distribution of the product returned to its normal rhythm.

Two of the three major producers of soybeans, Brazil and Argentina, are in the final phase of harvesting, both confirming great productions of 123 ml, respectively 49 million tons. For Brazil, this year's production represents an absolute record in this area. Although both states are still affected by the COVID 19 pandemic, the production and distribution of soybeans in local factories continues, with small logistical restrictions.

The return to normality, if we can even discuss such a term under the current conditions, is reflected by the decrease in the international price of soybean meal. During the month of March, the price culminated to a level of about 500 USD / ton in all European destinations, based on a weak offer from the South American supplier. The main reasons were the maritime traffic jams in the loading ports, in conjunction with the demanding measures generated by these countries regarding the fight against COVID 19.

Consequently, during March, less than 10 ships with cargo arrived in the entire European continent, far too little to meet local consumption. For April, there is already an improvement in the supply for the old continent, with more stable freight flows that direct the price on the downward slope. Following that, from May to June we will return to normal prices below 400 usd / ton.

A few words about the other global player in soybean meal trade, already in the middle of their 19/20 crop year 19/20. The estimated volume of US soybeans crushed during the 2019/20 marketing year will be 1% higher than previously thought, due to rising demand for soymeal to replace DDGS as a feed component, the USDA said in its monthly Wasde report.

The USDA estimates a total of 57.8 million metric tons of soybeans will go through the grind during the year to September, up 1% from last month’s view and up 1.5% on the year.

“Soybean crush is raised on higher soybean meal exports and increased domestic disappearance,” the USDA said. “Domestic soybean meal use is forecast higher, with an expected reduction in available supplies of DDGS resulting from lower ethanol production,” it said.

The higher crush rate will move US meal production up by 2% for 2019/20 to just shy of 45 million tonnes, compared to 44.27 million last marketing year.

Domestic meal demand is expected to rise by the same amount to 33.6 million, with the export estimate up nearly 2% to 12.2 million.

Meanwhile, the forecast of US domestic soy oil demand from both the biodiesel sector and the food sector was lowered 3.8% and 1.3% respectively following lockdown efforts to curb the spread of Covid-19.

Higher soy oil exports, however, will partially compensate for the domestic demand loss with exports pegged 14% higher at 2.4 billion pounds.

US meal and oil exports are expected to rise as the world’s number one exporter Argentina, is slowing domestic crush rates.

Argentina’s soymeal export estimate was lower 3% to 29 million mt while its soyoil export forecast was cut 5% to 5.5 million mt.