Grain Spreads: Meal Plan

Sean LuskGeneral Commentary

It is my belief that today’s push higher in soybeans is all about the Argentina meal story. During quarterly earnings call last week, ADM CEO told investors he expects Argentine crushers to run out of soybeans to crush sometime in November. This is a concern other crusher have expressed due to limited supplies after drought ravaged the 2022-23 crop. U.S. soymeal exports are expected to ramp up as the result of limited Argentine supplies. U.S. meal shipments jumped 7.5% in 2022-23 and are expected to rise another 5.2% in 2023-24 to a record 15.3 million short tons.  Today, managed and speculative money chased meal and soybeans higher in anticipation that global demand will rely on the US and Brazil soybean crushing output to cover. Soymeal traded to two-month highs with managed funds buying 5K contracts to add to their net long which puts the managed long 92K contracts per CFTC. Soybeans also saw speculative money pump up the market with 10K contracts of buying. This puts the managed money net long in beans again versus holding a small net short last week. 

Soybean export news has improved lately, with back-to-back weeks with marketing-year high weekly export sales being augmented by daily sales announcements. Forecast precipitation across the central U.S. may also presage improved shipping conditions on the Mississippi River. Talk of less-than-ideal South American growing conditions has offered background support but it’s way too early for a weather premium to be built as the crop is still being planted.  Nevertheless, post-harvest strength seems likely to emerge in my opinion given some unknowns amid escalating geopolitical tensions.

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Sean Lusk

Vice President Commercial Hedging Division

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