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Soybean Basis Up, Up and Away


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One can beg the question: Is it supply or demand that is controlling soybean prices? The answer would be both, but in the end, supply, or lack thereof, is the culprit. The U.S. saw China buy up soybeans at a quick pace early in the crop year but has since slowed purchases. Japan and Mexico have also been buyers of U.S. soybeans, but China is responsible for at least 65% of U.S. exports. Even still, export basis at the Pacific Northwest has been absent in the nearby months for quite some time and the soonest basis bid published there is for September 2021.

Demand is also strong for soybean byproducts meal and oil. Processed soybeans are the world’s largest source of animal protein feed and the second largest source of vegetable oil. The U.S. is the world’s leading soybean producer and the second-leading exporter. Soybeans comprise about 90% of U.S. oilseed production, while other oilseeds, including peanuts, sunflower seed, canola and flax, make up the remainder, according to the USDA Economic Research Service (ERS).

Domestic demand for U.S. soybean meal and oil is rising rapidly on thriving meat exports and stable crude oil usage, notes USDA. Soybean oil demand as a feedstock has also seen a pick-up due to rising biodiesel purchases.

According to the March 11 USDA ERS Oil Crops Outlook, January crush volumes were the second highest on record at nearly 197 mb, up 4% year over year. Through the first five months of the marketing year, 2020-21 crush volumes total 949 mb, a nearly 6% increase over the same period last year. The increase in crush demand derives from strong margins for soybean meal and soybean oil. https://usda.library.cornell.edu/…

Will the U.S. “run out” of soybeans for domestic usage? USDA said, “Due to the limited supply of soybeans, the ability of the domestic crush sector to continue at its record pace is limited.”

There is always the likelihood soybeans will have to be imported into the U.S., and rumors of soybean oil imports have been swirling with no confirmation yet. Regardless of what happens, you can expect that soybean basis has nowhere to go but up.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow her on Twitter @MaryCKenn



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