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"The apparent decline in soybean meal consumption per animal is
likely associated with increased feeding of distillers dried
grain," said Darrel Good. "This pattern of substitution will
likely continue into the near future as ethanol production
expands. That substitution could be large next year if corn used
for ethanol production expands by 550 million bushels -- 34
percent -- as projected by the USDA. "Declining domestic meal
demand and increasing soybean oil demand for biodiesel may
eventually result in the soybean crush being driven by oil
demand rather than meal demand."
Good said that if this occurs, soybean meal prices may remain
relatively low, providing producers of soybeans and livestock
the best of both worlds -- low-priced meal and soybean prices
supported by high soybean oil prices.
"If biodiesel production continues to expand, however,
production may have to shift away from soybeans to crops with a
higher oil yield," he noted.
Good's comments came as he reviewed the use of domestic
soybeans. The pace of soybean crushing slowed in April as
consumption of soybean meal declined. With four months left in
the 2005-06 marketing year, it now appears that the crush will
fall short of the current USDA projection.
The domestic crush of soybeans in April 2006 was reported by
the Census Bureau at 135.3 million bushels, 4.1 million less
than crush during April 2005. The crush during the first eight
months of the 2005-06 marketing year totaled 1.164 billion
bushels, only 12.3 million, or 1.07 percent, more than crushed
during the same period last year.
"Almost all of that increase occurred in September 2005,"
said Good. "The crush during the seven months ending in April
2006 was almost identical to the crush during the period October
2004 through April 2005. The crush during the period February
through April 2006 was slightly smaller than the crush during
the same period last year."
For the year, the USDA projects the domestic soybean crush at
1.72 billion bushels. That is 24 million bushels, or 1.42
percent, larger than the crush during the previous marketing
year.
"To reach the projection, crush during the final four months
of the year will need to total 55.7 million bushels," said Good.
"That is 11.7 million bushels -- 2.1 percent -- more than
crushed during the same period last year."
The slowdown in the pace of the domestic soybean crush
reflects a decline in the rate of soybean meal consumption.
Domestic use plus exports of soybean meal for the period October
2005 through April 2006 totaled 24.1 million tons, which is
410,000 tons less, or 1.7 percent, than consumed during the same
period last year.
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 "Use in April 2006, however, totaled only 3.07 million tons, 6.2
percent less than use during April 2005," said Good. "Even though
the domestic crush of soybeans, and therefore meal production, was
small in April 2006, stocks of meal at processing plants at the end
of April were at a two-year high.
"Domestic use of soybean meal during the first seven months of
the 2005-06 marketing year is estimated at 19.411 million tons, 1.3
percent less than during the same period last year. Domestic use in
April 2006, however, appeared to be 4.6 percent less than during
April 2005."
Good noted that the declining use of soybean meal, both
domestically and in the export market, has been reflected in the
price of soybean meal. The average monthly price of soybean meal in
central Illinois (rail, 48 percent protein) peaked at $193 in
December 2005 and declined to an average of about $175 in May 2006.
That compares with an average of nearly $199 in May 2005.
"While the domestic use of soybean meal is slowing, the pace of
domestic soybean oil use has been brisk, running about 3.8 percent
above the level of use during the 2004-05 marketing year," said
Good. "The long-term average rate of increase is about 2 percent per
year. The large increase in domestic use this year is associated
with expanding biodiesel production."
Despite increasing domestic use and a slowdown in the rate of
crush, soybean oil stocks continue to grow. Stocks at the end of
April 2006 were estimated at 2.751 billion pounds, 1.053 billion
larger than at the start of the 2005-06 marketing year. Stocks are
currently at the highest level in four years.
"Increasing stocks reflect a decline in soybean oil exports --
down 23 percent so far this year -- and a record soybean oil yield
from the 2005 soybean crop," said Good. "The average yield from
September 2005 through April 2006 was 11.62 pounds per bushel,
compared to 11.31 pounds during the same period last year.
"Even though soybean oil stocks are increasing, soybean oil
prices have increased sharply in the past six weeks. The average
price in May 2006 in central Illinois will be close to 24.8 cents
per pound, 6 percent above the May 2005 average."
[University
of Illinois College of Agricultural, Consumer and Environmental
Sciences news release]
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