Be Aware of Possible Protein Price Scenarios

June 25, 2014 — With all eyes on the milk prices lately, it seems equally important to review protein prices. With no real good substitute for soymeal or canola meal, farmers need to purchase it. What is happening in the protein market currently? Senior market analyst Matt Mattke of Stewart-Peterson, Inc. joined us on today’s DairyLine to discuss:

July soybean meal future contracts have climbed from a low of about $390 per ton to $508 per ton. That’s only $46 per ton less than the 2012 high when prices peaked due to drought conditions.

Soybean export commitments, as of week 31, are running about 4.8 percent ahead of 2012-13. That’s following a year where commitments were up 27.3 percent from 2011-12. At this point in the marketing year, total export commitments have never been this high.

Why is there so much interest in soybean meal this year? Three possible reasons are:

  • Freight and logistics advantages in the U.S.
  • Another is stability. Uncertainty and risk of port strikes in South America make the U.S. a more reliable source of product.

    Matt Mattke Stewart-Peterson, Inc.

    Matt Mattke Stewart-Peterson, Inc.

  • Plus, there’s always the argument U.S. meal is of higher quality and consistency.

What do you think might next for soybeans prices?  Where to from here?

We always encourage producers to review possible scenarios in preparation for the coming months, especially with weather always playing a factor in the summer. A first possible scenario is if we have good weather, the price of soybean meal could fall to around $304.

A second is if we have poor weather, the price could rally up to $600.

And, a third is a change in demand for protein could be trigged by a sharp increase in the value of the U.S. Dollar. This could send the price to the 2008 low of $235.

Of course there are even more scenarios to consider as time progresses. The point is to be prepared and not let good milk-feed margins prevent you from thinking about what could happen tomorrow.

If you’d like to hear Matt Mattke’s interview in its entirety, or previous “At the Corner of Strategy and Discipline” podcasts, please visit stewart-peterson.com and click on the News and Events tab on the home page. And, you can read Matt’s column on this topic in DairyBusiness East this month.

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