The two basic products of soybeans are soybean meal and soybean oil. Soybean meal is the dominant protein supplement used in U.S. livestock and poultry feeds. Animal feed utilized 98% percent of the total meal produced. In the protein-short areas of the world and elsewhere, soybean meal is finding increasing use in human food products.
Soybean meal is a market with acceptable volitility. When you are considering a trade in soybean meal market some of the basic fundamentals that you should consider are:
1. Soybeans Each bushel of soybeans produces about 48 pounds of soybean meal and 11 pounds of soybean oil so the soybean meal market is often closely tied with developments in the soybean market. It is important to look at the soybean crop size and crop conditions, and the level of surplus or shortfall in the U.S. and Brazil.
2. Dried Distillers Grain With Soluble (DDGS) The production of bio-diesel creates a byproduct know as DDGS. DDGS can be mixed into livestock feed the same way that soybean meal is. DDGS is becoming a major direct competitor of soybean meal. The more bio-diesel that is produced, the more DDGS that comes into the market. DDGS lowers demand for soybean meal and its price, and increases the demand for the soybean oil and its price.
3. China The are a number of factors contributing to an increase in Chinese soybean meal demand. Chinese income growth and urbanization have shifted the food mix away from starchy staple grains toward higher protein livestock products. To meet the increasing demand, Chinese livestock production is trending toward large-scale commercial operations that use larger proportions of soybean meal in feed rations.
4. USDA Crop Reports The USDA publishes several key crop reports that are helpful in your research and trading of soybean meal futures and soybean meal options. In addition to the USDA crop reports, the National Oilseed Processors Association releases a monthly soybean crush report. The Soybean Crush report provides a sense of the amount of soybeans that are being processed into soybean oil and soybean meal.
5. Corn Soybean meal is a substitute for corn for feed purposes; therefore, the price of one affects the demand and price of the other.
These are just some of the basic fundamentals to keep in mind when you are considering a trade in the soybean meal market. Before opening up a commodity account to trade soybean meal you should consult with a licensed commodity broker that follows the soybean meal market to discuss investment strategies.
