Strong export demand to limit downside movement of global soymeal prices

About three-quarters of global oilmeal trade is contributed by soymeal. Nevertheless, this feed ingredient has lost some of its market share, between 2011/12 and 2013/14, when the trade stood at merely 1 million tons. Interestingly

other oil meals, which represent much smaller market shares, have shown larger volume growth during this period. Cause of drop in soymeal trade was tightening soybean supplies in the exporting countries. Expanding supplies of rapeseed, sunflower seed, and palm kernel provided alternative oilseed meals which curbed growth of global soymeal trade. Total import demand was kept in check by high meal prices, driven mostly by soybean meal.
For domestic US soybean meal usage, the longer term outlook still appears bright. Global demand in coming months shall be the major price driver for soymeal. Preference for soymeal has grown year after year, irrespective of record-high prices since past two years. Soymeal consumption is being driven by an ever-increasing demand for protein. Consumption pace has picked up from countries like China, South East Asia, Brazil and the Middle East in recent years.
Additionally rise in beef prices have provided price incentive for rapid expansion of both poultry and pork producers, who consume soymeal in large quantity. However United States had a record crop in 2014, and similar was the situation of the South American crop in early 2015, therefore in near future supplies of soymeal should not be a concern for the industry. There will be adequate supplies of soybeans for crushing for the first time since the 2006-07 crop years. However, USDA’s average price forecast for US season soymeal has also declined from near $540/ton to a current forecast of $360/ton in 2015/16. U.S. soybean meal exports for 2014/15 in June 10 WASDE report are forecast down 100,000 short tons in USDA to 12.7 million, but a revitalized domestic market may more than compensate for the reduction. Domestic consumption of soybean meal in 2015 may increase to 31.1 million tons, versus May month’s forecast at 30.9 million and the 2013/14 total of 29.5 million. The June report also stated that feed demand has improved with lower costs and a robust recovery in hog production, which was held down last year by a sharp increase in disease-related pig deaths. As of March 1, the U.S. hog inventory was up 7 percent from a year earlier with a dramatic improvement in pigs per litter. Producers are also feeding hogs for longer periods to achieve heavier market weights. For 2015/16, domestic use of soybean meal is seen 100,000 tons higher this month to 32 million.
Moving forward, lower soymeal prices and stable to declining supplies of competing meals might boost exports of US soymeal this season, and this can allow the US market to capture nearly 90 percent of global meal trade growth. All in all, world soymeal prices this year are most likely to remain below the highs seen during last two years but prices shall be frequently supported by strong global demand.

Abhijeet Banerjee, Commodity Expert