Can Delta Soybean Meal Compete??

This is Part 2 in a series taking a fresh look at soy crush expansion in the US Delta. 

To recap, from 1997-2003 five Delta soy crush plants shuttered. I think things have changed and smart Delta crush expansion could work today. Here are the 5 supporting factors I’m discussing: 

1)  Local soybean supply growth (see previous post)
 

2)  Delta meal demand growth (this post)
 

3)  Changing freight dynamics
 

4)  Future trends in soybean and meal exports
 

5)  Future cover crop/swing crush opportunities
 

The Delta bean story is straightforward, but this meal story is nuanced and technical. 

Let’s compare meal demand in 2000 vs 2022/23: 

                                                                                                          2000                              2022/23

AR, MS, LA Domestic Meal Demand*                                     3.8 Mil ST                          4.7 Mil ST

NOLA Meal Exports*                                                                5.5 Mil ST                          7.6 Mil ST

Delta Meal Total Addressable Market                                     9.3 Mil ST.                       12.3 Mil ST

Total Demand Change                                                                                                            (+32%)

Total demand up 32%, supporting ~550 mil bushels crush. Sounds great! But it’s not that simple. 

The attached map shows major feedmill locations around the Delta.     

Clearly, not all the mills are close enough to the Delta to work. 

Mississippi is a real opportunity. There’s over 1 mil tons of meal demand in that SE MS cluster. A Delta crush location in MS can reach it (looking at you Oxbow Crush). I surmise there’s another 500k-700k tons of accessible domestic demand across the rest of the Delta combined, which isn’t enough to fully support another plant in any one location. So other than the Mississippi play, hitting the meal export market is a prerequisite for a new crush plant. 

The BIG question is: Can Delta produced meal compete in the export pipeline? 

I think yes. 

Here is my logic as simple as I can write it.   

> US Meal exports must grow in order for crush to expand
> Crush needs to expand
> Existing Miss & Ohio river plants support ~6-7 mln tons of annual NOLA exports
> 2023 NOLA exports were 7.6 mln tons
> Additional NOLA exports require RAIL delivered meal supply
> Rail rates from the Midwest are ~$40-$60/ton
> Barge rates from the Delta are ~$8-$15/ton
> $25-$52 in meal freight savings allows Delta crushers to pay $.55-$1.14/bu more for beans 

I think most months in most years, right sized Delta crushers can buy beans cheap enough to compete against Midwest rail shippers to NOLA (or the TX gulf for that matter), especially Aug/Sep/FH Oct. 

The sleeper story in all of this is that as freight costs have grown…freight spreads have also, changing competitive advantages. 

More on freight dynamics next post.