Soybean meal pricing and world pork production

Let’s start this weeks discussion with soybean meal pricing. In Chicago, September bean meal topped out at $368 per ton on June 11. Yesterday (July 16), it closed at $287.50, an $80/ton price decline in one month. This large drop in price suggests traders in Chicago think world and US stocks of soybeans and the resulting bean meal will be adequate prior to delivery of new crop beans.


On the other hand, the soybean trade apparently doesn’t think so, at least in the upper Midwest. I have tracked soybean meal bids from the Cargill plant at Sioux City for years. The historic bean meal basis is in the range of $-5 to $-10 versus Chicago, with some seasonality in that basis, as might be expected. Currently, the basis for August meal is $+30 and it is $+75 for September before dropping to $-5 for October. This September to October swing is a change of $80/t. I’ve heard of similar basis patterns at other processors in the upper Midwest. This suggests these plants are having a hard time sourcing soybeans for processing and expect this problem to continue until harvest begins. Current bids for soybeans at the Cargill plant at Sioux City are $+0.80/bu for July, $+0.65/bu for August and $-0.60 for the last half of September.


Synthetic amino acid prices haven’t risen to the same relative levels. In my discussions with a number of swine nutritionists, all are in agreement that swine grow-finish diets should be formulated right now with a maximum inclusion of synthetic amino acids to limit the amount of soybean meal in the diet and keep diet costs down. An added benefit of higher inclusion rates of synthetic amino acids is the fact that feed intake shouldn’t drop as fast in summer heat since less heat is released in their digestion versus the heat generated in the digestion of soybean meal. Assuming it will warm up yet this summer (they are forecasting a high temperature in Mankato of 63 F today, a new record for the lowest high temperature on this date), this becomes an important tool in management of pigs for summer heat relief.


On another note, PigInternational ( released a table of breeding herd inventories for the 30 largest countries in the world in 2008. China is the giant of pork production, with 49.907 million animals in the swine breeding herd. The US is as distance second, with 6.081 million, followed by Russia (4.22 million), Vietnam (4.150 million), Brazil (3.04 million), Spain (2.542 million), Germany (2.296 million), Philippines (2.195 million), Canada (1.381 million) and Denmark (1.289 million). While several of these countries are reducing the size of their herds due to unfavorable economic conditions (US, Canada, Denmark, Spain), several are in major expansion modes (China, Russia, Vietnam).


The China expansion is notable since they are so large in terms of pork production. In 2007 and early 2008, the Chinese industry was devastated by a mystery disease that was never fully diagnosed, but thought to be PRRS. They have apparently stabilized their herd health and reports that I’ve read suggest a major effort by the government to move their industry from backyard sows to commercial production systems. Apparently they have been successful as they are reported to be producing sufficient pork to meet their internal needs (note that exports from the US to China are very much lower than last year, even when accounting for pork entering China via Hong Kong), with some reports suggesting a new government program to support producers as local prices have fallen below cost of production

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