Part one in a three-part series on the soybean market.
The 2020-21 marketing year had all the thrills of a roller coaster ride for soybean farmers – highs that were too short-lived and downturns that were excruciatingly long as growers tried to figure out how and when to price their crop.
It also brought a resurgence of the old food vs. fuel debate from 2008 and 2009 when new demand for renewable fuels including ethanol from corn and biodiesel from soy oil pushed corn to $8 per bushel and soybeans to $14 per bushel.
“I really see it as an episodic marketing year,” said Mac Marshall, vice president, market intelligence with the United Soybean Board and the U. S. Soybean Export Council. “Not that each year doesn’t have its episodes. But I feel like this one was marked by a couple of different points.
“If we go back to Sept. 1 of last year and look at the September through January period, you had this $4 appreciation in the per bushel price,” Marshall said in an interview with Delta Farm Press. “That was all predicated on a rapidly changing environment and expected carryout.”
In August of 2020, USDA was forecasting a 4.3- to 4.4-billion-bushel crop that would have meant ample supplies to meet expected demand. Then, Agriculture Department economists began to take into account the dry weather in parts of the country and the derecho storm that hit Iowa, and the production estimate came down to 4.1 billion bushels.
“But, more excitedly, in that September-October-November period and, especially, in October and November, that peak export period for whole beans, week after week after week the export reports came in ahead of expectations,” he noted. “And the backdrop to all this was crush margins were overall pretty attractive.
“So it was both that domestic utilization of the whole beans as well as that robust export piece where China was coming back to the market in a big way. You put those together and that was drawing down our expected carryout, all on the whole bean side. From that September through January period you had that whole bean piece really leading the whole complex.”
From January on the markets have been a “mixed bag,” said Marshall. “The trend since January that has carried through and persists now is where you've had this divergence in the prices or in the price movement of meal and oil.
“We have had a new administration and a lot more emphasis on bio-based energy solutions that’s led to aggressive bidding from the energy complex for soybean oil.”
Soybean oil prices hit an all-time high of 74 cents per pound in late June amid announcements of new facilities such as the Northeast Biodiesel plant in Greenfield, Mass., and retrofits of legacy biofuel plants in other parts of the country.
“This has led to really aggressive bidding for feedstocks and bean prices have come up appreciably,” he noted. “Relative to January we’ve seen those oil prices come down, but we’re still up about 37 percent as of this morning while meal prices are down 20 percent.
“It’s created this environment with all this surge of demand for oil within the U.S. where the incentive for crush is fundamentally changing on a long-term basis. You go back seven or eight years the share of the crushed value from oil is about a third and for meal two-thirds. Now it’s close to parity.”
For more information on the soybean markets, visit https://ussoy.org/markets-with-mac-june-2021/?persona=feed-ingredients-animal-consumption&pillar=consistent-supply®ion=americas&goal=inform-educate.
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