Tepid Soybean Meal Export Demand Influenced by Lower Grain Prices

Very few factors influence the demand for agriculture commodities as the availability and relative price of substitutes. Over the past few months, global soybean meal trade from major exporters has slowed down 11 percent from last year for the Aug – Oct period. This decline is particularly strong in South America where exports from Argentina and Brazil are down 13 and 24 percent, respectively. Tighter soybean supplies have led to reduced exportable supplies of soybean meal in Brazil, whereas slow soybean sales to processors have led to subdued exports in Argentina.

U.S. Soybean meal exports are also down 12 percent from last year, in total commitments (outstanding sales plus accumulated exports) for the week ending December 1. Normally, slowing soybean meal exports from key competitors present an opportunity for the United States to expand exports. This year, however, soybean meal exports are declining to key markets such as Canada, Mexico, Asia, and Europe. This contrasts with a 27 percent increase in soybean export commitments, when including China and Unknown destinations.

One possible explanation for this decline in meal exports is reflected in the relative price of soybean meal to other feed ingredients such as wheat and corn. Over the past few months, soybean prices have remained near or somewhat higher than last year, despite the record U.S. crop. The prices of beans are strengthened by limited soybean availability in South America, and coupled with strong import demand this has helped support meal prices as well. In contrast, large supplies of corn and wheat have depressed prices for these commodities, making them more affordable in feed rations. A comparison of average grain and soybean meal prices for the September to November period in 2015 and 2016 shows a relative price decline of 27 percent and 12 percent for wheat and corn, respectively. This is likely helping to strengthen demand for these commodities at the expense of soybean meal.

EU Impact on Global Soybean Trade

As the EU is the largest importer of soybean meal, altering the mix of its soybean and soybean meal imports can influence trade. Recently, the EU has been supplying a greater proportion of its demand for soybean meal through imports of soybeans for crush. Whether this is a function of reduced meal availability in exporter countries or a reaction to improved profitability of producing meal domestically is irrelevant, as it is nevertheless contributing to the tepid global demand for imported soybean meal.

Accordingly, USDA is reducing its forecast for European Union soybean meal imports with an offsetting boost in soybean imports. Soybean imports are forecast as 13.8 million tons, projected to create an ample supply of soy products. This in turn, is expected to offset weak growth in rapeseed and sunflowerseed crush. This slowing of imports is evident when current year exports of soybean meal are contrasted with 2015. For the period August through October, global exports of soybean meal to the EU are down 18 percent from last year.

Still, the EU is forecast to import 20.3 million tons of soybean meal in 2016/17, up 7 percent over last year despite lower grain prices. Domestic corn supplies relative to last year remain flat while wheat supplies are down nearly 9 percent. This is likely helping maintain demand for protein meals. Soybean imports are further buoyed by the recent decline in soybean oil exports, particularly out of Brazil. With limited soybean oil consumption in the EU, it can export the surplus at prices which helps support crush margins.

OVERVIEW

Global oilseed production is forecast higher this month, primarily on larger soybean crops in India and Canada more than offsetting a reduction in South Africa. Production forecasts are also raised for peanuts in India, sunflowerseed in Russia, and cottonseed in Australia. Soybean imports are projected higher on stronger demand from the EU and South Africa, while soybean exports are up slightly on greater supplies from Canada. Global soybean stocks are up this month, led by Argentina and India. Soybean meal imports are down this month mainly as reductions for the EU, Venezuela, and Indonesia, are more than offsetting gains in Iraq. As a result, meal exports are lowered and stocks are raised for major South American exporters. Global vegetable oil exports are slightly down this month. The U.S. season-average farm price is up 25 cents at $9.45 per bushel.

SOYBEAN PRICES

U.S. export bids in November, FOB Gulf, averaged $391/ton, up $3 from last month.

For the week ending December 1, U.S. 2016/17 soybean export commitments (outstanding sales plus accumulated exports) to China totaled 27.2 million tons compared to 20.2 million a year ago. Total commitments to the world are 43.2 million tons, compared to 34.1 million for the same period last year.

2016/17 TRADE OUTLOOK CHANGES

  • United States soybean meal exports are down 181,000 tons to 10.7 million on slowing demand, and rapeseed imports are up 114,000 tons to 811,000 on changing biofuel policies.
  • Argentina soybean meal exports are down 1.1 million tons to 31.6 million, and soybean exports are down 250,000 tons to 9.0 million on slowing demand.
  • Brazil soybean meal and soybean oil exports are down 300,000 tons and 100,000 tons to 15.2 million and 1.4 million, respectively, on slowing demand.
  • Canada soybean exports are up 400,000 tons to 4.4 million, on reports of greater exportable supplies.
  • European Union
    • Soybean imports are up 800,000 tons to 13.8 million reflecting favorable crush margins and insufficient domestic production of rapeseed and sunflowerseed. (Soybean meal imports are down 700,000 tons to 20.3 million following boosted soybean imports.)
    • Sunflowerseed oil imports are raised 100,000 tons to 1.4 million on strong demand and larger exportable supplies in FSU countries.
  • India
    • Soybean meal exports are doubled to 1.8 million tons, on larger crop and crush forecasts.
    • Soybean oil imports are lowered 200,000 tons to 3.8 million on reports of a larger crop and higher domestic production.
  • Indonesia
    • Palm oil exports are down 300,000 tons to 25.7 million on slowing global demand.
    • Soybean meal imports are down 100,000 tons to 4.6 million on lower demand.
  • Iraq soybean meal imports are up 115,000 tons to 165,000 on stronger domestic demand from the poultry sector.
  • Nigeria soybean imports are slashed 100,000 tons to 50,000 on declining trade trends.
  • Russia sunflowerseed oil exports are up 100,000 tons to 2.0 million, following larger sunflowerseed production forecast and higher crush.
  • South Africa soybean imports are raised 100,000 tons to 300,000 on lower crop prospects.
  • Turkey soybean imports are lowered 100,000 tons to 2.2 million reflecting weaker domestic consumption driven by lower poultry and egg export projections.
  • Venezuela soybean meal imports are down 150,000 tons to 600,000 reflecting declining trade trends.

2015/16 TRADE CHANGES

Select countries – based on trade data

  • Bolivia soybean exports are halved to 100,000 tons.
  • Chile soybean meal imports are up 105,000 tons to 680,000.
  • Egypt soybean meal imports are lowered 126,000 tons to 2.2 million.
  • European Union soybean meal imports are down 333,000 tons to 19.0 million, while soybean imports are up 130,000 tons to 14.7 million.
  • India soybean meal exports are up 246,000 tons to 396,000.
  • Indonesia palm oil exports are down 700,000 tons to 23.3 million.
  • Iraq soybean meal imports are up 115,000 tons to 165,000.
  • Malaysia soybean meal imports are lowered 150,000 tons to 1.3 million, and palm oil imports are lowered 150,000 tons to 800,000.
  • Nigeria soybean imports are slashed 113,000 tons to 12,000, and soybean meal imports are cut 150,000 tons to zero.
  • Philippines soybean meal imports are raised 160,000 tons to 2.7 million.
  • Saudi Arabia soybean imports are reduced 129,000 tons to 596,000.
  • Syria soybean meal imports are lowered 100,000 tons to 35,000.
  • Uzbekistan soybean meal imports are down 102,000 tons to 98,000.
  • Venezuela soybean meal imports are reduced 150,000 tons to 550,000.
  • Vietnam soybean imports are raised 100,000 tons to 1.5 million.