MIRACLE: Agricultural products are 30% of total commodity markets by trading activity and production volume. Soybeans and its oil and soybean meal by-products are the world’s 2nd most important and traded commodity after crude oil. This so-called ‘miracle bean’ is both high in protein and low in saturated fat and used across an endless array of both human foods and animal feeds. Prices have been pressured as supply ramps up in biggest producers Brazil, US, and Argentina, and the largest buyer, China seeks to contain its huge import needs. Though supply uncertainty may rise along with the chances of El Niño weather disruption hitting yields.
CRUSH: Most soybeans are crushed to make oil and meal. A bushel of 60 pounds of soybeans typically yields 11 pounds of soybean oil and 44 of meal. The ‘crush margin’ measures the profitability of this process. It’s the ag equivalent of the crack spread refining margin of crude oil to gasoline. The recent plunge in crush margins (see chart) is a real time indicator of soybean demand and also the earnings for the big listed processors like Bunge (BG) or Archer-Daniel (ADM). The current crush margin has slumped from record profitability levels but is still at long term average levels implying further room to fall before seeing any significant market response.
PRODUCTS: Soybean meal is the most important protein source for farm animals. It is made from crushed soybeans and toasted to be used as a high-protein and amino acid, and low fiber, feed for poultry, pigs and cattle. It is often grown along with corn and there is a significant price correlation. Soybean oil is made from crushed soybeans and refined into cooking oil, used as a food ingredient from margarine to mayonnaise, and increasingly as a biofuel. This has raised its correlation with recently falling energy prices. It also competes with alternative, and usually interchangeable, edible oils that are derived from sunflower, rapeseed, linseed, and castor seed.
All data, figures & charts are valid as of 08/05/2023