Soy crush boom to hit feedgrain prices

Glacier FarmMedia – Feedgrain prices are set to fall in coming years as soybean crush capacity soars in the United States, says an analyst.

Annual crush capacity is expected to grow by 800 million bushels as grain companies capitalize on new policies like California’s Low Carbon Fuel Standard that promote the use of soybean-based renewable diesel.

About 650 million bushels of that new capacity are already being built with the rest to come by 2025.

Why it matters: Increased demand for soybean meal could drive up corn prices, which worries cattle producers.

The existing crush is about 2.2 billion bu., so the expansion will add another one-third to that total.

“We’re going to have enough meal come on fast enough that the price of meal will go down relative to what it has been,” Marty Ruikka, president of the ProExporter Network, said in a recent webinar hosted by the U.S. Soybean Export Council.

That will in turn drive down the price of U.S. corn distillers grain, which is a substitute for soybean meal in some feed rations.

“You won’t see distillers grains trading at a premium to corn,” he said. “It will probably trade on par with corn.”

That is good news for people in the livestock business. It will result in increased meat production but consumption will stay the same in the U.S. market, which means more U.S. meat exports.

Ruikka said soybean crush expansion had been occurring in South America and destination markets like China for a “very long time.” That trend has come to a halt while the U.S. experiences its growth phase.

“We’re going to be in an adjustment period probably for the next six years and then we’ll get to a new equilibrium,” he said.

The upshot is that the U.S. will be exporting more lower-priced soybean meal to markets around the world for the next handful of years.

Jake Buekert, chair of the Alberta Cattle Feeders’ Association, said the western Canadian cattle industry does not use soybean meal but it does import U.S. corn during drought years like last year. He wonders what effect the expanding U.S. soybean crush will have on corn prices.

“If there’s a lot more demand on the soybean side, we could see less corn acres in the U.S., meaning that corn prices could go up,” said Buekert.

Canadian cattle feeders also import U.S. distillers grain, which typically fetches a 10 to 15 per cent price premium over barley due to its protein content.

If Ruikka’s forecast is right, the price of U.S. distillers grain will fall, which would be beneficial for Canadian cattle feeders.

Buekert is a little concerned about all the feedgrain being gobbled up by the biofuel sector. Cattle feeders are getting more offers of distillers grain and other byproducts of the biofuel process.

“I just don’t know how much we’re able to feed it going forward but I guess we’ll figure that out as we go,” said Buekert. “We’re pretty resilient that way. We seem to make something work.”

He questions Ruikka’s assertion that U.S. meat production will rise due to falling soybean prices.

That will not be the case in the cattle industry because it doesn’t use soybean meal. Hog, poultry and dairy producers, however, do make use of soymeal. Also, margins in the cow-calf sector are dismal right now due in part to a lack of meat packing capacity.

Cattle herds are contracting in North America as farmers quit the business and get into grain production, which has been more lucrative of late.

– This article was originally published at The Western Producer.