US agricultural cooperatives are building new soyabean crushing plants at the fastest rate in two decades as farmers in the world's top producer prepare to sow another record area with soya. The growth worldwide in the number of consumers with income to spend on pork and chicken has led to a rapid rise in demand for food to raise animals. Crushing plants produce high-protein soyameal feed for livestock and soyaoil for food and fuel.
US processors are expected to open plants with capacity to process at least 120 million bushels of soyabeans in 2019, up around 5 percent from existing capacity of an estimated 1.9 billion bushels. The last time outright capacity grew that much was in 1997-98, according to US Department of Agriculture and soya industry data.
Strong demand for feed has boosted crushing margins, the measure of profitability for the plants. Margins stand at more than a $1 per bushel, the strongest for 18 months, according to the CME Group. The margins have encouraged processors to build more plants.
"Margins on soyabean processing were very good, some of the best we've had in many years. And when the industry has good margins, you expand production," said Mark Sandeen, vice president of product marketing at farmer cooperative Ag Processing Inc (AGP). Growth in feed demand means crushing capacity worldwide will need to expand further.
Global soya production would have to increase by 20 percent over the next decade to keep up with feed consumption, said Tom Hammer, president of industry group National Oilseed Processing Association. US soya plantings totaled a record 90.2 million acres this year and the USDA in a preliminary forecast set plantings next year at 91.0 million acres. And while industry capacity could reach 2 billion bushels in under two years, the USDA said crushings likely will not reach that level until 2020-21.
AGP broke ground earlier this year on a new soya plant in Aberdeen, South Dakota, that will have annual capacity to process 40 million bushels. Another cooperative, North Dakota Soyabean Processors, planned to build a similarly sized facility for an estimated $287 million near the town of Spiritwood.
The plants will increase demand for local soyabeans, potentially pushing up prices that farmers nearby will receive for their crops, and reducing transport costs. Ryan Wagner, who grows soyabeans about 50 miles away from the new soya plant in South Dakota, said the processor could add 10 to 15 cents to the local soyabean price - an amount that might mean the difference between making or losing money.
Chicago Board of Trade soyabean futures on Friday were $9.89-3/4 per bushel, down 2-1/4 cents. "That basis will be nice but in the long run I think the greater economic impact will be the attraction of more opportunities for raising livestock because of the new supply of soyabean meal," Wagner said.
"We are already starting to see interest in our area for more pork and poultry production since the announcement." Family-owned Zeeland Farm Services plans to build the second plant in the state of Michigan with capacity of 40 million bushels, to open in 2019. The company built Michigan's first soyabean processor in 1996 in Zeeland.
The company will supply soyabean meal to hog, turkey, dairy and aquaculture farms in Michigan and export both soyameal and soyaoil, said Cliff Meeuwsen, president of Zeeland. Due to a lack of processing plants in Michigan, much of the soyabeans there are shipped to Ohio where merchant giants Archer Daniels Midland Co, Bunge Ltd and Cargill Inc have plants.
Soyameal then gets shipped back to Michigan to feed animals, raising costs. "We hope to cut those costs out, thereby raising the price of soyabeans to producers and cutting the cost of feed and protein to livestock producers," Zeeland's Meeuwsen said.
Earlier this year Perdue Farms opened a processor with capacity for 17.5 million bushels in Pennsylvania, that state's first large-scale soya crushing plant. Many of the new facilities are in places outside the central US Midwest soya belt, taking advantage of increased supplies from farmers in those areas that have switched to soyabeans from less profitable crops such as wheat.
Grain handlers will increase their profits by building the plants, as the margins are bigger for crushing than they are for simply buying and shipping soyabeans, said Mike Steenhoek, executive director of the Soyabean Transportation Coalition.
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