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About Soybean Meal (SM)
Soybean Meal and Soybean Oil are by product of Soybean processing.
Though these commodities are not annually produced, we have chosen
to include the Soybean Bean products with Soybeans, due to the
relationship between Soybeans and its products.
After soybeans are harvested, the bulk of the crop is sold to
soybean processors, called crushers, because of the old practice
of using a mechanical press to separate the oil and meal contents
from the soybean known as crushing. Today, most processors use
chemical methods of extraction, which is more efficient. Each
bushel of Soybeans produces 11 pounds of Soybean Oil and 48 pounds
of Soybean Meal.
The main demand for Soybean Meal is from the livestock industry.
Soybean Meal is predominantly used as a Live Stock feed. Almost
90 percent of the Soymeal produced is used to satisfy the basic
protein and amino acid requirements of livestock such as cattle,
hogs, and poultry. Demand for Soymeal has a direct correlation
to the demand for animal feed. Also, since animal feeds are a
very elastic market, meaning one feed can be substituted for another,
the relative pricing of other feeds and meal products such as
corn, fish meal, and rapeseed meals have a great deal of impact
on Soymeal prices.
The major demand for soyoil is from the food industry. Soyoil
is in a lot of products that you use everyday. Margarine, shortening,
salad oils, and cooking oils usually contain some Soyoil content.
As mentioned in the supply section, the edible oil market has
very elastic demand, meaning that consumers are very flexible
in their oil consumption and many products are excellent substitutions
for Soyoil. As a result the relative pricing of animal oils substitutes
and oil seed substitutes also play a major role in the demand
for Soyoil. Because of the elastic nature of demand for Soyoil,
Soyoil accounts for approximately twenty percent of the total
world edible oil consumption.
To understand the production cycle of the Soybean products one
must understand the production of Soybeans. Since Soybeans are
harvested by mid November, production of products tends to increase
to meet demand and consumers tend to begin to build stocks. However,
Soybean producers tend to withhold supply right after harvest
for tax purposes, and the freezing of interior waterways slows
transportation of Soybeans to processors, so supplies tend to
begin to get a little tight in the first part of the year. But,
as farmers market their crops to raise cashflow for the planting
effort and the interior waterways free up, the price of both Soybean
Meal and Oil fall along with Soybeans in the later part of January
and early February.
Concerns over the status of the South American Soybean crop,
which is typically pollinating or being made in February and March,
coupled with a lack of immediate available supply and Soybean
planting concerns tends to drive Soybean Meal and Soybean Oil
prices higher until mid May, when the mid western crop is planted.
Planting progress and the fact that the South American crop is
now impervious to damage and close to harvest, tends to weigh
on Soybean and Soybean product prices. The main growing regions
of South America are Brazil and Argentina. Argentina is a major
Cattle producing nation as well, so it does not export much of
its Soybean Meal (in fact Argentina is typically a net importer
of Soybean Meal). Brazil on the other hand tends to export all
of its Soybean Meal, as well as the bulk of its Soybean Oil. Therefore,
as pollination of the United States Soybean Crop approaches, both
of the Soybean product markets tend to rally, but Soybean Meal
does so with more vigor, while Soybean Oil tends to halt its decline.
As summer wears on, Soybean Meal and Soybean Oil tend to fall
along with the Soybeans. In the beginning of August however, Soybean
Meal tends to bottom. Soybean Meal is primarily a livestock feed.
So as the South American Soybean Crop is being processed, and
the products exported, more Soybean Oil is being exported than
Soybean meal, especially with summer on this side of the equator
being winter on the other side. In most years, the best the Soybean
Oil market can do is to hold steady, while Soybeans and Soybean
Meal rally somewhat.
Soybean meal tends to outperform both Soybeans and Soybean Oil
from early August through to mid September, as the United States
Soybean Crop is being prepared for harvest. Because of Soybean
Meals fat, amino acid, and protein contents, this product is an
ideal winter feed. So not only is demand running brisk for winter
feed in South America, US Cattlemen tend to stock up in early
September for their winter feed needs. Soybean Oil however is
being flooded with South American supply, as well as supply from
competing products, such as rapeseed oil and palm oil, which have
also been recently harvested.
As harvest approaches, supplies of US Soybeans and especially
products is pretty thin. Therefore for roughly a month after the
harvest is completed, Soybean products remain in tight supply
situations. This tends to be exaggerated by the fact that farmers,
as well as processors, tend to withhold supply near year end to
postpone tax burden into the new year. Soybean Oil has tended
to lead this early winter rally, with Soybean Oil being the strongest
member of the Soybean Complex from October through December
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