World Grain - October 2011 - 86

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FEATURE: U.S. SOY CRUSHERS FACE CHALLENGES

U.S. soymeal and DDG production, 2000-11 in million tonnes 45 40 35 30 25 20 15 10 5 0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Soymeal DDG

Source: U.S. Department of Agriculture, Rabobank

port said the production pace will slow sharply over the next three years compared to the last ﬁve years, suggesting dissipating competition from DDGS. The change in ethanol policy may also help reverse another trend that was hurting U.S. soybean crushers. The report noted that per capita consumption of meat in the U.S. appears to be peaking, and with it domestic demand for soymeal. Some of the contraction in demand growth is due to market saturation, some is due to the aging demographic and some is related to changing lifestyles. However, U.S. ethanol policy has likely played a role as ethanol subsidies provide a relative cost advantage for corn to be used for fuel rather than for livestock or poultry feed, which are the primary markets for soymeal. “This gradually makes U.S. animal protein production more expensive and therefore less affordable domestically and less competitive globally. POTENTIAL POSITIVE DEVELOPMENTS In addition to the change in ethanol policy, the reported highlighted some potential developments that could beneﬁt U.S. soybean crushers. • Animal protein production is growing rapidly in the Black Sea region due to cheap and plentiful grain supplies. However, both Russia and Ukraine are import-

ers of soymeal, as there is a mismatch between grain and oilseed meal production. Rabobank said it is possible that Russia could become a more signiﬁcant importer of soymeal, which could help U.S. crushers. But both countries product sunﬂower, and Ukraine is a big exporter of rapeseed which could eventually reduce the region’s soymeal import needs. • Rabobank believes that China may be importing over 20 million tonnes of corn within ﬁve years’ time to meet its growing demand of poultry and livestock feed. However, it is also possible, and quite economical, for China to import meat as a complement to corn imports. China is by far the world’s largest pork producer, and if it outsourced 2% of its pork production to the U.S., it would require an increase in U.S. output of 10%. Assuming hog production accounts for 25% of meal demand, U.S. soybean processing utilization would improve by 2.5%, a meaningful sum, Rabobank said. • Another possible driver for improve soybean crushing margins in the U.S. is growth in biodiesel production. But without the $1-per-galllon biodiesel tax credit, which expires at the end of this year, the odds of signiﬁcantly increased production in this industry are virtually nil.
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