Spring/summer crush rate expected to fall 3 to 5 percent short of April – September 2015 rate
Members of the National Oilseed Processors Association reported that 926 million bushels of soybeans were crushed between October 2015 and March 2016.1 That is 26 million bushels less than one year ago. The rate of soybean crush is determined in large part by the margin achievable between the value received for oil and meal versus the price processors must pay for soybean supplies. This is referred to as the “crush margin.”
Soybean plants run most efficiently at about 95 percent of their rated production capacity, but can operate at up to 110 percent of that capacity level. When margins are well above their full production costs (60 to 70 cents per bushel), most plants will push to run at around 110 percent. When margins are around or below full production costs, most plants run closer to 95 percent.
While crush margins vary considerably from plant to plant, a good barometer of the margin is “board crush.” From October 2014 through March 2015, board crush ran from 95 cents to $1.98 per bushel compared to the range during October 2015 and March 2016 of 54 cents to 96 cents per bushel.2
[Board crush equals the price of soybean oil futures multiplied by the standard oil yield per bushel plus the price of soybean meal futures multiplied by the standard meal yield per bushel minus the price of soybean futures.]
Monthly Crush Rate and Board Crush
Current margins are running in the mid-50 cent range, so most plants are not profitable. While full production costs are not being covered by margins, the variable cost of production for most processing plants are being achieved – and then some. Most plants have variable costs of just 30 cents per bushel, so if a plant shuts down with margins between 30 cents and 65 cents, they lose more money than if they run at a 55 cent margin.
The crush rate is seasonal and we expect the monthly industry crush to decline from April through September 2016 from the rate experienced between October and March of each year. A processing plant must take two to four weeks down each year for annual maintenance on equipment in order to maintain efficient production while minimizing operating costs. This maintenance for all plants is always scheduled sometime between early April and late September. Expect the crush rate this spring and summer to be 3 to 5 percent below the rate achieved from April through September 2015.
1 National Oilseed Processors Association. “March 2016 Statistical Report.” http://share.thomsonreuters.com/filevista/public/7051/mar-16-crush.pdf. April 15, 2016.
2 CME Group. “Soybean Futures Quotes.” http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean.html. April 2016.