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Usset: soybean demand surge echoes ethanol boom of two decades ago

The bullish combination of renewed purchases by China and surging domestic crush has the U.S. soybean market poised for a breakout.

University of Minnesota Extension grain market economist Ed Usset says the latest NOPA report showed crush levels nearly five percent above expectations.

“The crush was 10 million bushels more than the market expected, it was a big deal. And it kind of throws back to the way I felt about the ethanol market and corn demand 15 to 20 years ago.”

At that time, he tells Brownfield USDA couldn’t keep up with how quickly ethanol production ramped up.

“We’ve got the same thing going on in soybeans right now. We’ve had something like 11 or 12 new plants or major expansions at existing soybean crushing plants open in just the last two and-a-half years, with a few more yet to come.”

However, Usset points out the amount of soybeans China has committed to buying the next three years pales in comparison to before.

“At the end of the year (assuming an extra 10 million bushels a month) we’ll have crushed 120 million more bushels that we expected, and that’s roughly 10 percent of what we exported to China just three years ago.”

He says it will take a while for domestic crush to replace the loss in soybean exports.