“Destination crush doesn’t work.”

When discussing a US Delta Soy Crush investment thesis, several industry experts whom I respect shared this sentiment with me. And I understand why. From 1997 through 2003 five soybean plants in the US Delta closed (Helena AR, Little Rock AR, Clarksdale MS, Vicksburg MS, Marks MS). It’s a season burned into the memory of the folks who lived through it. 

But times have changed. Delta crush deserves another look. Over the next couple weeks watch as I make the case. I contend there’s not a better place for crush expansion, if done with the right understanding of how this region functions. 

Here’s five topics I’ll discuss that support my conviction: 

1)  Local soybean supply growth
 

2)  Delta meal demand growth
 

3)  Changing freight dynamics
 

4)  Future trends in soybean and meal exports
 

5)  Future winter crop crush opportunities
 

Let’s tackle Number 1 today. 

We grow a pile more beans in the Delta. 

Arkansas, Louisiana, Mississippi Soybean Production: 

2000       135 mil
2023       318 mil bu (+235% vs US +151%) 

Driven by reduced cotton acres and improving yields, Delta bean supply grew considerably faster than the US as a whole. And with no meaningful crush expansion, all this growth can only go to the export market in NOLA. 

But that reliance on the export market is becoming increasingly difficult.  Check out the 2 attached charts. They show cumulative US Gulf exports compared to cumulative Delta harvested bushels Mid August through November in 2000 vs 2023. 

In 2000, weekly gulf exports easily absorbed 100% of Delta harvest. One could argue exports were actually LIMITED by lack of Delta harvest volume.

By 2023, the Delta outgrew its market. This second chart shows ~50 mil bushels of Delta beans had no home in the early days of October. Keep in mind, this assumes 100% of exports came from AR, MS and LA. We all know that’s not exactly true. As we move into October northern bushels are also added to the export mix, making things actually worse than this chart suggests. But it illustrates the point. 

The result: more storage. On farm storage in 2000 was 195 mil bushels in AR+MS (no LA data). By 2023…360 mil. Up 85%. In the same time period US on farm storage was up only 20%. And this doesn’t capture temporary storage like bags that have also proliferated. 

Bonus points for those of you still reading….I’m not sure how CME U/X bean spreads ever have any strength with this reality. Delta supply will continue to run over export demand in late September. Why would delivery econs drive futures spreads higher in that scenario? 

But back to Delta crush. Point number 1 is Delta bean supply has outgrown its primary market of gulf exports. This forces basis levels down at harvest and leaves room for a local crusher to buy beans economically. 

Next post I’ll discuss meal demand.