Fundamentally Speaking

Looks like we are finally getting some sort of retrenchment in soybean meal values as the market is grossly overbought on a technical basis. Still, it has been an impressive contra-seasonal rally that carried the spot contract over $110 per ton higher in just five weeks.

A lot of factors have contributed to this surge, including firm cash market supplies, especially in the Eastern Corn Belt where some processors have experienced unexpected downtime.

Have also had strong exporter demand for soymeal since a drought slashed SBM supplies in Argentina, normally the world's largest soymeal exporter. More recently, concerning weather in Brazil where northern and central parts of the country are experiencing very dry and hot conditions while the southern states have labored under excess precipitation has buoyed values.

Finally, you have had a huge amount of fund buying, both on a flat-price basis and spread off versus short soybean oil positions. The latest weekly export sales report shows soybean meal export sales at 5.946 million tons, the second highest amount ever for this point in the marketing year next to 2014-15. It is 42.8% of the USDA export projection earlier this month of 13.878 million metric tons or 15.3 million short tons which was unchanged from the October WASDE. That is the highest percentage in that regard since the 2015-16 season, the last of four straight years where early season export sales of U.S. soybean meal were quite strong, resulting in final USDA export projection quite a bit higher than where it had pegged sales in the November WASDE report.

So far, 1.26 million tons have shipped, the fourth highest ever but only 9.1% of the November WASDE export figure. We are hearing that the rally in our prices has made our overseas sales more of a challenge so we will have to see whether a decent early sales pace translates into a record year for U.S. exports as predicted by USDA.

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