Soybean Meal Prices Explained

Soybean meal prices regained their track as most buying countries doubled their purchases. This trend is particularly present in the U.S. as it sets a new record of increased supply, strong demand, and competitive prices. Steady demand from the Philippines, Canada, and Mexico made the country’s export volume up to 10%. 

Additionally, rising demand from Vietnam and Egypt grew to 153%. This stems from the booming poultry and aquaculture sectors of the countries. Moreover, the growing calorie intake of middle-income countries is projected to increase to 7%. This contributes to the increasing demand for soy products.

Why are soybean meal prices fluctuating?

1. Increased Soybean Production

The current market outlook shows that soybean production is bouncing back. Argentina’s (the fourth largest soybean producer) improving weather means normal crop production supply.

Similarly, the United States (the second largest soybean meal producer) predicted a marginally higher yield next year. Additionally, USDA predicted a 5% increase in Brazilian soybean meal production due to the country’s improving farming conditions.

Overall, this improved soybean production and supply are a great offset from last year’s record however, these may cause a supply surplus which directly affects soybean meal prices.

2. Weaker Demand from China

China is the world’s largest importer of soybeans accounting for about 60% of global soybean trade. However, China’s demand for soybeans weakens due to a decline in hog production. Hog prices in China have fallen sharply since the beginning of the year due to African Swine Fever (ASF).

USDA Foreign Agricultural Service (FAS) observes that ASF has become endemic in the country which increases hog production costs.

In response, hog growers switch to growing other low-production animals such as chicken and cattle. This factor and the country’s current economic deflation significantly impact global trade, particularly soybean meal prices.

3. Strengthening of the US Dollar

The US dollar has been strengthening against other currencies in recent months which makes soybeans more expensive for buyers in other countries.  This is because soybeans are priced in US dollars, so when the dollar strengthens, it makes soybeans more expensive for buyers who use other currencies.

4. Growing Demand for Protein-Rich Food for Humans and Animals

While factors seem headwinds for soybean meal marketability, the need for a sustainable food supply will slowly make up for its prices in the future.

Soybean’s high protein properties make it a useful component in the animal feed and human food industries. This is due to the health benefits associated with this protein-enriched food and the increasing population. With the price of rice spiking, food experts eye soybean meal as a good alternative for human consumption.

Thus, this initiative will likely fuel soybean meal prices in the future.

Which variables impact the price of soybean meal?

• Increased Soybean Production
• Weaker Demand from China
• Strengthening of the US Dollar
• Growing Demand for Protein-Rich Food for Humans and Animals
• Weather 
• Government Policies

Where does soybean meal come from?

Soybean meal is a high-protein byproduct of soybean oil extraction. It is a major feed ingredient for livestock and poultry. Additionally, it is used in other products such as tofu, tempeh, and soymilk.

Our World in Data’s record shows that three-quarters of global soy production (77%) is fed to livestock for meat and dairy production. The USA started using soybean meal in their livestock and poultry in the mid-1930s.

Forty years later, soybean feed production increased due to the expansion of agriculture and aquaculture businesses and in the early 1990s, it accelerated due to a growing demand from developing countries.

These are two main methods of making soybean meal:

1. Mechanical Extraction – The older and simpler method. It involves crushing soybeans and pressing them to remove the oil. The leftover meal is ground into a fine powder. Mechanically extracted soybean meal typically contains about 48% protein.

2. Solvent Extraction – A much more modern and efficient method. It involves using a solvent such as hexane to dissolve the oil from the soybeans. The solvent is evaporated, leaving behind the soybean meal. Solvent-extracted soybean meal typically contains about 50% protein.

The finished output mainly comes from these top producing countries such as China, the United States, Brazil, Argentina, and the European Union.

What is the future price of soybean meal?

The increasing production of biofuel and the steady inquiry from the poultry industry are still the top soybean meal price drivers. The expansion of biofuel (particularly in the U.S.) led to a higher domestic crush of soybeans, resulting in more soybean meal available for export. This supply helped keep prices competitive, benefiting countries like Mexico and Canada (the top importers of U.S. soybean meal).

Also, the swine market rapidly contributes opportunities. Countries with expanding swine industries (the Philippines, Vietnam, and Indonesia) registered increased soybean meal imports to support their livestock production. For instance, the Philippines imported 2.6 million metric tons of U.S. soybean meal, making it the largest buyer. Similarly, Vietnam and Indonesia bumped up their imports by 110% and 49% respectively.

On the restraint side, the announcement of China to reduce its soybean meal imports created uncertainty in the market. China is one of the largest importers of soybean meal and any reduction in its imports can lead to a decrease in global demand and potentially lower prices.

This situation highlights the delicate balance between supply and demand in the soybean meal market and the impact of geopolitical decisions on global trade dynamics.

Overall, market analysts projected a price estimation of $450 per metric ton by 2030, an 11.11% increase from its current trading price.