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USDA Cuts World Supply of Soybean Meal

The world supply of soybean meal is shrinking. USDA cut its estimate for both the U.S. and global soybean crush, justifying sky-high soybean meal futures. According to World Agricultural Supply and Demand Estimates released today, the U.S. soybean crush is now forecast at 2.23 billion bushels, down 15 million from last month. USDA cut the global soybean crush by 3.4 million tons, with China, Pakistan, and Argentina all expected to crush fewer beans.

The department reduced its estimate for Argentina’s soybean production by 4.5 million metric tons (MMT) to 41 MMT, compared to last month’s estimate, and cut Argentina’s estimated soybean meal crush by 550,000 MT. If the estimates play out, soybean production in Argentina, the world’s largest exporter of meal, could be the second-lowest in two decades. As worsening drought dampens the outlook for soybean production in Argentina, the outlook for soybean meal prices continues to rise. Last week, March soybean meal futures hit a new high just short of $500/ton. Since Argentina kicked off its planting season last November, the March contract has rallied 18%.

On two occasions last year, the Argentine government adopted a special exchange rate to encourage soybean exports. That policy has now ended, but Argentine farmers are holding onto to their remaining beans waiting for new incentives, leaving crushers short of soybeans ahead of harvest. Argentine crushers have been shipping beans in from Brazil to supplement domestic supplies, but they will still need to compete fiercely with exporters for domestic supplies.

Nearly all soybean meal is used as animal feed, and global demand for meal has grown substantially. A recent Allied Market Research report noted that the world’s soybean meal market, worth $59.2 billion in 2021, is expected to break $94 billion by 2031. Demand for soybean meal will likely remain high and supplies will remain tight, at least in the near term. As a result, high soybean meal prices will continue to chip away at dairy producers’ bottom lines.

February 8, 2023

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