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Exports buoy soymeal cash basis

10/10/2012 @ 2:15pm

Strong U.S. soymeal export demand is buoying cash basis levels, as depleted South American supplies turn world importers to the U.S.

Soymeal prices on U.S. cash markets, where the product is sold for spot delivery, is currently priced above futures prices, as demand for it hasn't wavered despite the record high prices of 2012.

In central Illinois, cash soymeal has been consistently trading above futures values, with supplies lost from South America helping make U.S. inventories more valuable.

Brazil and Argentina incurred significant soybean crop losses earlier this year, tightening world supplies. Soymeal accounts for 68% of the world's protein meal supplies, so soybean production has a large impact on world meal prices.

Brazil is the world's largest poultry exporter and sustains the largest beef herd in the world, and Argentina is the world's largest exporter of soymeal and soyoil.

Soymeal, a tan-colored, powdery substance made from crushed soybeans is a key ingredient in chicken feed. The poultry industry is the largest user of meal particularly in the U.S.

"Export demand is still a strong factor influencing soymeal prices," said Bill Nelson, analyst with Doane Advisory Services in St. Louis.

Outstanding export commitments for U.S. soymeal in the 2012-13 marketing year that began Oct. 1 stand at 2.53 million tons, well above the 1.64 million tons reported at the same time last year, Mr. Nelson said.

Cash meal basis levels at river terminals in St. Louis range from $18 to $40 a ton over October futures, according to data from the U.S. Department of Agriculture. Export terminals at the Pacific Northwest are quoting bids from $40-$69 ton over October futures, USDA reported Wednesday. Basis represents the difference between spot prices for physical soymeal and futures prices.

Cash basis levels have dipped from prices recorded weeks ago, but remain at historically high levels.

Adding to the firm basis theme is the limited amount of soybean supplies available for processing in the midst of harvest, said Hugh Whalen, commodity risk consultant with MID-CO Commodities in Bloomington, Ill.

Farmers haven't been aggressive sellers of freshly harvested soybeans this year, forcing domestic processors and exporters to raise cash bids, as both compete for the same supplies, Mr. Whalen said.

The push for soybean supplies is escalating amid stout export demand for both soybeans and soymeal.

USDA reported last week that nearly 82% of the projected U.S. soybean exports for the marketing year that ends in August 2013 were already sold.

The push for exports has immediate consequences for near-term supplies, as almost all of the sales will be for shipment before South America harvests its crops in early 2013, Mr. Whalen said.

Most of the support for prices comes from prospects for tighter supplies down the road when farmers stop selling supplies, making it tougher to source inventories to process.

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