US Soybean Prices To Remain High Amid a Record US Crop

Prices near Record Highs, Even after Record US Production

Despite the record crop in the US, soybean prices remain high as consumption shows no signs of slowing down. The US harvested the largest soybean crop on record in September and October 2021. Production reached a massive 4,435 million bushels. Slightly more than the previous record of 4,428 million bushels in 2018/19. However, even with the enormous crop, soybean prices in the US are still near historic highs, as commodity prices increase worldwide. Economies are recovering post-Covid, driving demand for commodities in general, and the foodservice industry is reopening, driving demand for oils. Soybeans will be crushed at a record pace in 2021/22 as demand for oils and soybean meal booms. An estimated 2,215 million bushels could be crushed in the 2021/22 season, the highest on record and 3.5% more than the last crop year. Exports are forecast to fall back to 2,090 million bushels from the record 2,261 million bushels exported in 2020/21. This is mostly due to strong domestic demand in the US, and also cheaper soybeans offered from Brazil.

Strong Demand for Soybean Oil and Meal Means Crush Margins are Positive

As most of the world re-opens and Covid-19 restrictions are lifted, consumption of food oils is accelerating once more, both in the US and globally. Palm oil and rapeseed oil prices smashed all previous price records in February, and the ongoing conflict between Ukraine and Russia, top two sunflower producers, is adding pressure to the already bullish sentiments. Soybean oil prices are also at record levels, but are still comparatively inexpensive, given the price of other major seed oils. The March USDA estimate increased the use of soybean oil in the US food, feed, and other industrial category to 14,385 million lbs, up by 100 million lbs from the February estimate. Soybean oil used for biodiesel is estimated at 10.7 billion lbs for 2021/22, up 23% from last year. This has however long been priced in, since the first USDA estimates of almost a year ago.

Soybean meal prices are finding support from unprecedented inflation in the US. As higher consumer prices hit households hard, there is a switch to cheaper protein sources, like chicken and pork, at the expense of beef. Soybean meal is a major feed ingredient in poultry and pig feed, so the increased demand for poultry and pork means increased demand for soybean meal.

Crush margins in the US are positive, owing to the rising soybean oil and meal prices, even with US soybean prices near USD 17.00 / bu. For the week ending March 4th, the difference in the value of soybean oil and meal, to that of soybeans was a solid USD 3.39/bu, which is much higher than USD 1.78/bu in March last year. This indicates soybean crushers will keep buying soybeans at current prices, despite prices being historically high.

Increasing Global Consumption and Poor Brazilian Crop Further Supporting US Prices

Global soybean consumption is estimated at 364 million mt for 2021/22, up 0.4% from the previous marketing year. This is much lower than the initial estimates at the start of the year of 377 million mt. World consumption has now increased every year for the last 12 years. The rate at which consumption is forecast to increase in 2021/22 is the slowest (0.4%) in more than a decade, and a direct result of the lower than expected Brazilian crop. Brazil’s production was estimated at only 127 million mt in the latest USDA report, from 144 million mt in earlier reports..

The threat of world production falling significantly short of global demand in the near future is also a real possibility when looking at long-term production and consumption trends. This is further supporting prices in the current season, as most buyers would like to increase their inventory in anticipation of such an event. See the Tridge Analysis, Lessons from the High Soybean Prices of 2012 and 2022, for risks associated with long-term production and consumption.