Fundamentally Speaking

In its latest WASDE report, the USDA maintained the U.S. soybean crush at a record-high 2.49 billion bushels (bb) to meet the projected 2 percent increase in domestic soybean meal demand, as well as a growth in soybean meal exports.

In actuality, the forecast for higher soybean crush volumes year over year is supported by soybean oil demand both domestically and overseas.

Recently, greater clarity about the future of the U.S. biofuels policy has given this market a boost and with a record South American soybean crop, increasingly large amounts of soybean meal being generated by the record crush are pushing prices lower, triggering both increased domestic feed consumption and making our values more competitive vs. Argentine competition.

As a result, spot CME soybean oil values have recently pushed to their highest levels since October of 2023 while nearby soybean meal values have plummeted to their lowest levels since March of 2016.

Note that when you crush a bushel of soybeans which is 60 pounds you get about 44 pounds of 48% protein soybean meal and 11 pounds of soybean oil with the rest being soybean hulls.

So, soybean meal usually constitutes the bulk of the combined soybean crush value which is the amount of soybean oil generated times the price per pound and soybean meal times the price per ton as soybeans are about a 20% oilseed.

Yet the current values show that soybean oil is now accounting for about half of the soybean crush value vs. its historical average of about 37%.

This chart shows soybean oil's percent contribution of the combined soybean crush value over the past 30 years along with the average and plus and minus one and two standard deviation lines.

Currently, soybean oil is right at 50% of the combined soybean crush value, well above the 37.5% average, the plus one standard deviation line of 42.7% and even the plus two standard deviation line of 47.9% which is where values have traded just 2.5% of the time over the past 30 years and only in May of 2022 was this exceeded.

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