European soybean meal prices to stay low in near term on record harvest, increased supply

European soybean meal prices are expected to remain low in the short term due to a record harvest and certain government policies in producing countries that have increased supply in the European market, according to Alessandro Vitiello, a commodity trader based in Italy.

Platts, part of S&P Global Commodity Insights, assessed soybean meal FOB Netherlands for the July period at Eur305/mt on June 10, down from Eur317/mt a month earlier.

Vitiello attributed the price decline to the large stocks of soybean meal available. Many European feed mills rushed to import and stockpile feed materials in anticipation of the EU's deforestation regulation, which has yet to take effect.

He noted that the significant crushing of soybeans over the past nine months has contributed to the abundant supply of soybean meal in Europe.

"The main reason for the increase in soybean crushing has been the elevated prices of vegetable oils, such as palm oil and rapeseed oil. Mills have been forced to crush soybeans to meet the demand for both soybean meal and oil for biodiesel production, which has pressured soybean meal prices," he said.

In May, Brazil's soybean meal exports reached 2.4 million mt, with cumulative exports from January to May setting records, driven by ample supplies and competitive pricing, according to S&P Commodity Insights analysts. They expect product supplies to remain high as Brazil enters its peak crushing period.

Argentina, the leading exporter of soybean meal, temporarily lowered the export tariff on soybean meal from 31% to 24.5%, which has also contributed to the increased supply in the European market.

Commodity Insights analysts anticipate that exporters will increase their commitments in the official government system to take advantage of the tax benefits before the end of the reduced export taxes for the soybean complex on June 30.

Vitiello said that the crush margin has been hovering around $55-$60/mt in Q1 and Q2. However, due to the volatility of margin dynamics, the margin for June and August is projected to decrease to approximately $22-$23/mt. This margin is very close to the variable cost of production, meaning that if it falls below this level, mills would have to halt operations to avoid losses.

"I believe we are at a time of year when prices typically bottom out at this level. While prices are expected to remain weak in the very short term, I am confident that they will rise in about three months," Vitiello said.