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Why soybean meal might be the next big thing

Getty/iStockphoto/deepspacedave Soybean meal pile
Undervalued, high demand, potential global production issues to come.

Like soybean futures, soybean meal futures peaked in price in late spring. The April 9, 2021 USDA report pegged U.S. soybean meal ending stocks for the 2020/21 crop year at a tight 350 thousand short tons, which spurred prices higher for another few weeks.

December soybean meal futures were as high as $428.50 per ton on early May 12, 2021 due to the notion of substantially lower supplies. Then, at midday on May 12, the USDA report shed a new negative tone on ending stocks.

The ending stocks for the 2020/21 crop year increased to 400 thousand short tons with ending stocks for the 2021/22 crop year pegged even larger at 450 thousand short tons.

This increase in supply was enough to put a top in the market. Soybean meal prices have been in a downward price channel ever since.

Is the price low here?

Throughout the summer on USDA reports, ending stocks for soybean meal continued to gradually grow. On the Sept.10 USDA report, soybean meal ending stocks for the 2021/22 season were pegged at a larger 500 thousand short tons.

Things finally changed on the Oct. 12 report, when USDA changed its tune and dropped ending stocks for 2021/22 down to 400 thousand short tons!

The next trading day soybean meal futures did an “about face” for price and began to work higher. Technically speaking, December 2021 soybean meal futures tested near $309 on charts, which was a critical support level from September of 2020.

Currently, soybean meal futures seem to be probing for a low. Supplies may be viewed as sufficient for now but are at a bargain price. There are looming factors around the corner which might ignite an unexpected rally. End users need to strongly consider using this opportunity to lock in needs at these year-low price values!

Factors to monitor in the months ahead

Domestic demand for soybean meal has held mostly steady for the past few years. There are ebbs and flows in poultry and hog production over the years, yet primarily soymeal feed demand has remained strong and steady.

While the poultry and swine sectors are the biggest users of U.S. soybean meal, the dairy and beef industry also incorporate soybean meal into feed rations. With other grain feed costs on the high side, soybean meal at these cheaper prices may encourage more domestic use.

Weather around the world is of great concern in the coming months, especially since South America has nearly 85% odds of enduring La Nina conditions (hot and dry) during their key production months of December through early March. They are still recovering from last year’s parched growing conditions.

The world’s largest exporter of soybean meal is Argentina, Brazil is second, the United States is third.

If there are additional production issues for soybeans in South America in the coming months, that will directly correlate to the production and availability of soybean meal for Argentina and Brazil to be able to export.

Global production of soybean meal for export might be the biggest component of a price rally.

Recently the country of Bangladesh paused exports to nearby India to keep soymeal supplies at home, foreseeing the potential of lower global supplies unfolding.

Global Ending stocks of soymeal have been slowly trending lower for 4 years. There can be no room for error in production issues in South America. If you are an end user of soymeal, this is your opportunity to buy on sale.

Daily chart of December 2021 Soybean meal futures

Continuous monthly chart of front month soybean meal futures

Reach Naomi Blohm at 800-334-9779, on Twitter @naomiblohm, or email [email protected].

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

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