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Buyer''s Market for Soybean Meal

March 27, 2010
 
 
 
Rising feed costs during the past few years hit livestock producers hard since feed accounts for the majority of input costs. That, coupled with lower market prices and a declining economy, meant many livestock producers struggled.

According to USDA's Livestock, Dairy and Poultry Outlook report, all livestock inventory numbers declined in 2009. But some segments, such as poultry, are expected to increase production this year; cattle, dairy, lamb and pork production is expected to be flat or down.

Reduced supplies will strengthen prices for livestock. In addition, feed input prices are expected to be lower, even though the market will continue to be volatile.

For livestock producers, this may offer a much-needed break when purchasing protein inputs, such as soybean meal. The key, however, is to lock in feed needs as market prices fluctuate.
As with other feed inputs, the difficult and delayed harvest affected quantity and quality. Add into the mix abundant supplies in other countries and soybean meal prices could become more reasonable.

Competitive price outlook. According to a report from the 2010 Agricultural Outlook Forum, the amount of domestic soybean meal use for feeding is down 10% from the peak year of 2006/07.
This decline is due in part to lack of growth in the livestock sector and in part to increased availability of substitute protein supplies, such as distillers' grains and canola meal. Soybean meal prices for 2010/11 are projected to average $260 per short ton, down 12% from the midpoint of the projected range for 2009/10, according to the report.

Other analysts also expect soybean meal prices to move lower. "Soybean meal prices have moved down to account for the South American crop,” says Bill Biedermann of Allendale. "Stocks will tighten in the U.S. in upcoming reports, and a spring weather rally is expected with current snowpack and positive weather forecasts. Once crops are planted, there is little justification for a rally as abundant South American supplies and improved U.S. crop prospects pressure values into the fall.

"Unless there is a significant supply problem, the market will return to benefit end users [buyer's market],” he adds. Of course, there are other factors that can change this outlook, he says. "Perceived inflation greater than 3% or deflation could change the outlook significantly.”

Watch quality. Soybean meal is often considered to be relatively consistent in terms of protein content. As with other crops, though, harvest conditions can impact protein levels. Some feed mills in the Upper Plains report meal reductions of 1% to 1.5% in average protein. Other areas are reporting higher protein content.

The American Soybean Association and U.S. Soybean Export Council conduct a survey every year regarding the quality of the U.S. soybean crop. According to the survey, average protein concentration was 1.2% higher and average oil was 0.5% lower in the 2009 crop compared with the 2008 soybean crop. The 2009 crop had nearly identical quality characteristics to the long-term average recorded during the past 23 years (35.3% protein and 18.7% oil). As in other years, western Corn Belt states tended to have lower protein concentrations than the average U.S. crop.

It is a good practice to test feed inputs for nutrient content prior to formulating a ration, says Ki Fanning, a nutritionist with Great Plains Livestock Consulting Inc. Once you know the nutrient content, you can determine the most economical protein supplement to include in a ration. You also may want to consult a nutritionist to determine the best options for providing protein in feed rations this year and take advantage of reduced feed prices.



You can e-mail Kim Watson-Potts at kwatson@farmjournal.com.

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FEATURED IN: Farm Journal - Early Spring 2010

 
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