Soybean Meal Demand Offers Reason For Positive Outlook

Soybean headlines over the past couple of years have largely been dominated by tariffs, trade wars and, more specifically, the ever-evolving relationship between the U.S. and China. Against the backdrop of trade dynamics that have been challenging, to say the least, there has nevertheless been some positive news for South Dakota soybean farmers on the export front.

Trade agreements open up new opportunities for soybean producers

"What you haven't seen is some of these trade agreements with countries looking to adjust their trade flows and make up for some of these trade deficits," said Tom Kersting. "And that means they're going to be buying more ag products, and one of the things they're targeting is soybean meal."

Kersting is CEO of South Dakota Soybean Processors (SDSP), which oversees facilities in Miller/St. Lawrence, Volga and Mitchell that collectively boast a crush capacity of approximately 120 million bushels per year. SDSP has expanded market opportunities for soybean producers in South Dakota, most recently with its third facility, High Plains Processing, coming online last fall.

Much of the push for increased crush capacity in South Dakota has been driven by demand for soybean oil and its use in clean fuels, including biodiesel, renewable diesel and sustainable aviation fuel (SAF). But that's not to say soybean meal hasn't continued to be relevant on the demand side of the equation.

"The Pacific Northwest export markets have been particularly strong over the last year and a half," said Kersting, referring to the network of ports along the Oregon and Washington coastline, from which agricultural products are shipped across the Pacific Ocean primarily to Asian destinations. "We're sending more and more soybean meal out that way. A lot of that goes to the Philippines, but there are also emerging markets in places like Thailand and Vietnam. Indonesia is potentially going to be coming onboard, too."

What is driving new and emerging markets for soybean meal?

One reason for increased trade with some of these new and emerging markets is linked to the shift in trade relations with China, the world's largest purchaser of soybeans, which has caused the U.S. to look for other destinations for its products. But there are secondary factors at play that are worth mentioning, too.

For starters, Southeast Asia has seen regionwide economic growth over the past several decades and, with it, the establishment of a more substantial middle class. This sort of development often leads to changes in nutritional preferences, with staple grains and legumes giving way to animal proteins. That demand shift necessitates more animal agriculture production, which creates demand for feedstuffs — including protein- and energy-rich soybean meal.

Second, many of these new and emerging markets have limited domestic crush capacity. Whereas the majority of China's purchases have historically been whole soybeans, Kersting indicated there is increased interest in soybean meal with these new markets because it does not require the same level of processing infrastructure in place in order to make its way into animal feed formulations. "We knew (soybean meal demand) had the potential to increase dramatically out there, but it was really nice to see that come to fruition," said Kersting.

Domestic demand for soybean meal is surging, too

Kersting also pointed out that domestic demand for soybean meal is trending in a positive direction. "We continue to see protein demand increasing domestically," he said, noting that the surge in popularity of GLP-1 weight loss programs is "impacting people's decisions to put more protein in their diets." With protein demand comes the need for increased production from the animal agriculture sector, which, in turn, places more demand on the feed industry. That is a positive for soybean meal prices.

Lower corn prices may also influence that market movement. When corn is relatively affordable, soybean meal tends to get pulled along with it as animal ag producers seek to find the right balance of energy, protein and essential amino acids. "Cheap corn fuels soybean meal demand," said Kersting.

A Bright Outlook for Soybean Meal

As U.S. trade partnerships diversify and protein consumption rises at home and abroad, the future remains hopeful. Continued growth in both global feed markets and local and regional processing capacity will help secure a key role for soybean meal in driving demand for soybeans grown here in South Dakota. For more information on soybean meal demand, talk to your local district director or visit sdsoybean.org.