Fundamentally Speaking

Earlier this month the USDA increased the U.S. soybean crush for the 2020/21 season by 15 million bushels (mb) to a record 2.195 billion bushels (bb) linked to a record early season processing pace and very attractive crush margins.

With regard to the first item, the National Oilseed Processors Association (NOPA) said its members, which handle about 95 percent of all soybeans processed in the United States, crushed 181.018 mb of soybeans last month, down from a record 185.245 mb in October but up from 164.909 mb in November 2019.

It was the largest November crush on record, eclipsing the previous mark of 166.959 mb set in November 2018.

It was also the third largest monthly crush ever, behind only October 2020 and March 2020.

Meanwhile even with the surge in soybeans to six-year highs, strong soybean meal exports and the lowest world vegetable oil stocks-to-use ratio in at least 20 years has kept soybean meal and soybean oil values rallying just as hard.

Gains in these two markets have been accentuated recently by labor strife at a number of soybean crushing plants in Argentina, the world's largest exporter of both soymeal and bean oil given ideas that some demand may be kicked back to the U.S.

This graphic shows the 2020 Central Illinois soybean crush margin with the 20-year average and plus and minus one standard deviation band in $/bushel.

The standard deviation again is a measure of volatility, or more specifically dispersion around the mean.

Soybean crush margins and also soybean prices themselves exhibit the most volatility in the August/September period which, not coincidentally, is the make or break period for U.S. soybean development and prices are the most volatile during this time of the growing season.

The current Central Illinois soybean crush margin of $1.95 per bushel is quite high, well above the 20-year average of $1.26 for this time of year and close to the plus one standard deviation level of $2.05/bushel.

Interesting is the fact that the 20-year average shows crush margins usually peaking right at the beginning of September and falling from there right into year end.

This year however, Central Illinois soybean crush margins pushed higher right into early November, fell from there and have since rebounded over the past two weeks.

All this time, margins have not only been well above the 20-year average but even rose above the plus one standard deviation line that signifies values in the upper 19% of the 20-year trading range, similar to what was seen from mid-March to early April.

The fact is that soybean processing margins currently are quite profitable which could very well lead to more upward revisions in the 2020/21 soybean crush in subsequent WASDE reports.

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