The U.S. Department of Agriculture has already projected that U.S. soymeal exports will hit a record 10.7 million tons (1 ton = 1.102 metric tons) this year, but they could well top even that lofty forecast if domestic feed users switch from pricey meal to relatively cheap distillers’ grains (DDG) and free up more meal supplies for the export market.
A combination of diminished export interest and a strong domestic production pace has dragged DDG prices to their lowest levels in four years, just as soymeal prices remain solidly underpinned by enduring tightness in domestic supplies.
The result has been a widening in the price spread between soymeal and DDGs in several key markets, which is expected to promote widespread product switching by feedlot purchasing managers, and which may allow for even more soymeal shipments to overseas buyers.
U.S. soymeal exporters will face stiff competition from other vendors over the coming months during what is the high season for South American shippers, but they should still be able to tap into record-high global import interest and potentially top the 11 million tonne level by the time the 2014/15 crop year is over.
U.S. soymeal exporters are already enjoying a banner year with 2013/14 exports and sales both running at the fastest pace on record thanks to continuing strong demand from major consumers such as China as well as diminished export competition from top seller Argentina due to trade disruptions stemming from Argentine economic woes and burdensome government debt.
But as impressive as the current-year exploits have been, the most striking feature of the U.S. soymeal export ledger is the unprecedented strength of sales booked for the forthcoming marketing year. Those sales scaled a record high months ago and look set to top 3 million tons well before that crop year has even begun.
Most of the larger feedlots will have already covered their immediate feed needs and so will be mainly making purchases to cover their 2015 requirements.
But many will have the ability to adjust feed rations over the much nearer term, and are expected to overweight any DDG purchases during that time frame in response to the prevailing prices, and correspondingly cut back on higher priced substitutes such as soymeal. This in turn could free up larger amounts of domestic soymeal supplies, which fleet-footed exporters may be able to find a high-priced home for ahead of other suppliers. (Reuters)