Fundamentally Speaking

Soybean Crush Margins

Joel Karlin
By  Joel Karlin , DTN Contributing Analyst
Chart by Joel Karlin, DTN Contributing Analyst

Soybean meal action has been dynamic over the past two weeks -- after making four-month lows, values have popped more than $55 per ton and are now at the highest levels since June.

This has boosted soybean crush margin values by at least 60 cents per bushel despite the ongoing slide in soybean oil prices.

This chart looks at the weekly soybean crush margins in dollars per bushel on the left-hand axis while on the right-hand axis is soybean, soybean meal and soybean oil prices all expressed in dollars per pound.

A bushel of soybeans weighs approximately 60 pounds, and a bushel of soybeans produces about 44 pounds of soybean meal.

That same bushel of soybeans also produces 11 pounds of soybean oil so the crush margin is enhanced with rising meal and oil prices and/or falling soybean values and vice-versa.

Since there is so much more meal value than oil value it would appear that soybean meal would have greater weight in determining the profitability of soybean crush margins, but the chart and correlation statistics indicate that more often than not soybean oil is the real driver.

The chart shows movements in the soybean crush itself have become more volatile in recent years and no more so than over the past few weeks where at the end of June the board crush margin fell to near $0.46/bushel and then zoomed to an all-time high of $3.55 just six weeks later.

It plunged to $1.40/bushel just last week and is now back over the $2.00 per bushel level.

It seems more often than not, the spikes and drops in the crush margin are linked to action in the soybean oil market and no matter what time period, soybean oil has the higher correlation to changes in the crush margin than does soybean meal or even soybean prices.

Interesting to note that the surge in the crush margins to all-time highs coincided with soybean oil accounting for the greatest share of the combined soybean crush value at over 50%.


To comment, please Log In or Join our Community .