Frankfort, Indiana, soybean farmer and USB director Mike Beard admits that for years his
focus has been on soybean yield and crop marketing, believing that to be the path to profitability. Lower prices have made him question that simplistic view of crop economics.
“My soybeans ultimately feed animals all over the world,” Beard says. “While they are the best source for protein for many species, it may be possible through processing and/or composition manipulation to better meet the nutritional needs of the animals we nourish. From this standpoint, I need to know what compositional values exist in the soybeans I produce, and I need to recognize the desires of the marketplace to feed the world’s meat animals.”
Demand for soybean oil and meal are the critical factors determining market value for soybeans. Both components are important, but when it comes to providing value to farmers, meal is the engine that drives profitability.
Although the market price per pound for soybean oil is typically higher than the price per pound of meal, the comparison doesn’t mean oil contributes more value per bushel of soybeans. There is about four times more meal than oil in a bushel of soybeans.
“Until oil delivers four times more value per pound than meal, the meal will provide more value per bushel,” says Nick Bajjalie, president of Integrative Nutrition in Decatur, Illinois. “While oil is typically higher on a per pound basis, when you look at their contributions on a per bushel of soybeans basis, meal is usually between 65 to 70 percent of the total product value.”
Bruce Weber, director of soybean product line grain marketing for CHS Inc., says comparatively, soybean oil is more stable long-term than meal. Oil can be easily stored for extended periods and pulled into the product pipeline when the market demands. Meal tends to move through the value chain more quickly.
“The need for both oil and meal makes processing plants run, depending upon what the market wants at the time,” Weber says. “Meal is more important to the price structure and the impacts of supply and demand are much closer.”
Weber says soybeans are highly valued as a meal crop. Oil uses are important to the overall product value, but buyers have more choices in the market if they’re looking for oil. Soybean meal is a different story.
“Soybean meal is still what drives profitability for processing plants and farmers,” Weber adds.