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- CRB Fundamentals - 2008 Commodity Articles

Soybean Meal

Soybean meal is produced through processing and separating soybeans into oil and meal components. By weight, soybean meal accounts for about 35% of the weight of raw soybeans (at 13% moisture). If the soybeans are of particularly good quality, then the processor can get more meal weight by including more hulls in the meal while still meeting the 48% protein minimum. Soybean meal can be further processed into soy flour and isolated soy protein, but the bulk of soybean meal is used as animal feed for poultry, hogs and cattle. Soybean meal accounts for about two-thirds of the world's high-protein animal feed, followed by cottonseed and rapeseed meal, which together account for less than 20%. Soybean meal consumption has been moving to record highs in recent years. The soybean meal marketing year begins in October and ends in September. Soybean meal futures and options are traded on the Chicago Board of Trade (CBOT). The CBOT soybean meal futures contract calls for the delivery of 100 tons of soybean meal produced by conditioning ground soybeans and reducing the oil content of the conditioned product and having a minimum of 48.0% protein, minimum of 0.5% fat, maximum of 3.5% fiber, and maximum of 12.0% moisture.

Soybean crush - The term soybean "crush" refers to both the physical processing of soybeans and also to the dollar-value premium received for processing soybeans into their component products of meal and oil. The conventional model says that processing 60 pounds (one bushel) of soybeans produces 11 pounds of soybean oil, 44 pounds of 48% protein soybean meal, 3 pounds of hulls, and 1 pound of waste. The Gross Processing Margin (GPM) or crush equals (0.22 times Soybean Meal Prices in dollars per ton) + (11 times Soybean Oil prices in cents/pound) - Soybean prices in $/bushel. A higher crush value will occur when the price of the meal and oil products are strong relative to soybeans, e.g., because of supply disruptions or because of an increase in demand for the products. When the crush value is high, companies will have a strong incentive to buy raw soybeans and boost the output of the products. That supply increase should eventually bring the crush value back into line with the long-term equilibrium.

Prices - Soybean meal futures prices at the Chicago Board of Trade in 2007 started the year at about $191 per ton. Except for brief dips in April and again in July, the price rallied the entire year to finally close at about $342 per ton. The rally continued into early 2008 hitting a high of about $375 per ton in February of 2008. Regarding cash prices, the average price of soybean meal (48% solvent) in Decatur, Illinois in the 2006-07 marketing year (i.e., October 2006 to September 2007) through May of 2007, averaged $192.68 per short ton, up by +10.63 yr/yr.

Supply - World soybean meal production in 2006-07 rose +5.6% yr/yr to 152.974 million metric tons, which was a new record high. The world's largest soybean meal producers are the U.S. with 25% of world production in 2006-07, China with 19%, Brazil with 14%, and the European Union with 7%. U.S. production of soybean meal in 2007-08 rose +1.6% yr/yr 42.585 million short tons, which was a new record high. U.S. soybean meal stocks in 2007-08 (Oct 1) fell -4.5% yr/yr to 300,000 short tons, down from last year's 6-year high of 314,000 short tons.

Demand - World consumption of soybean meal in 2006-07 rose +4.2% to 151.362 million metric tons, which was a new record high. The U.S. accounted for 20% of that consumption and the European Union accounted for 22%. U.S. consumption of soybean meal in 2006-07 rose +2.2% yr/yr to 30.754 million metric tons, which was a new record high.

Trade - World exports of soybean meal in 2006-07 rose +3.3% to 53.078 million metric tons, which was a new record high. Brazil accounted for 22% of world exports in 2004-05 and the U.S. accounted for 15%. World imports of soybean meal in 2006-07 rose +2.8% yr/yr to 51.661 million metric tons, which was a new record high. U.S. exports of soybean meal in 2007-08 rose +0.6% yr/yr to a record high of 8.400 million short tons. U.S. imports of soybean meal in 2007-08 were unchanged from the previous year at 165,000 short tons, remaining well below the record high of 285,000 short tons seen in 2003-04.

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