How long can the era of high demand for soybeans (and corn) and corresponding high prices last? During a recent webinar, Jim Sutter, CEO of the United States Soybean Export Council, wondered aloud whether the soybean market and commodities markets in general are entering into a “demand supercycle” like the one a few years ago that fueled a worldwide boom in commodity prices.
As Sutter pointed out during another webinar on the latest World Agricultural Supply and Demand Estimates released March 10, a couple of years ago at this time, farmers were looking at a carryout of a billion bushels of soybeans. Today it’s a tenth of that.
At the moment, soybean prices are slackening a bit as world demand shifts to South America. But during a special Soy Suite web event, Bo DeLong, vice president of The DeLong Company, said, “We expect demand for soybeans to remain quite strong.” He expects to see an increase in soy acreage this year. He said customers may hesitate at higher prices but “will just have to accept them.” DeLong is an integrated ag logistics company that specializes in shipping containerized soybeans.
When asked which countries will be increasing their imports of United States soy, DeLong promptly named China and southeast Asia. He said non-GMO, No. 1 and No. 2 beans and higher-protein beans all promise “enormous growth markets” in that region. He added that DeLong is “always looking for markets that want something differentiated, not just commodity beans.”
In the longer term, it’s not just that China continues to rebuild its hog herd and that Southeast Asia is coping with new outbreaks of African swine flu—although both are true. It’s not just that marketing organizations like USSEC have done an outstanding job of diversifying, opening up and expanding markets for U.S. soybeans and meal in markets like Egypt, Algeria, Bangladesh and southeast Asia—although they have. It isn’t just that soy growers have successfully developed demand for new soy products like high-oleic soybean oil for new industrial uses—although they have. And it certainly isn’t because trade tensions between the U.S. and China are over—they aren’t.
Behind these demand sources loom the targets many companies, and countries, have set themselves to become net-zero carbon emitters, as well as the attention to climate initiatives being pushed by the Biden administration and the United Nations. Soybeans and soy products are key in many of these initiatives, and not just for food uses. Indeed, Ken Eriksen, senior vice president-agribusiness for IHS Markit, thinks the world may be shortly facing a shortage of grain feedstocks.
Chinese demand
In a presentation at the 2020 Global Grain Geneva event in Switzerland, held virtually on Nov. 17 to 19. Xiaoping Zhang, U.S. Soybean Export Council regional director for greater China, explained the structural factors that will likely keep Chinese demand for U.S. soybeans high in the near future.
As China has rebuilt its swine herd and monitored renewed local outbreaks of African swine fever, demand for poultry feed in the country also grew, as chicken replaced some pork in the diet. So did the demand for processed and half-processed seafood from online stores and supermarkets. Locally produced soybean prices “skyrocketed” during these changes and consolidations, Zhang said, making U.S. beans more attractive. Zhang believes China’s continued move to urbanization and the accompanying growth in demand for meat, dairy and other high-quality proteins will continue to drive demand for U.S. soybeans into the future.
Sustainability and Soy Mark
Sustainability has been a major topic at every single soybean event held so far this year. In more and more markets, the perceived quality of soybeans is no longer just about the beans themselves, but also about their carbon footprint and impacts on the environment. U.S. soybeans already have a transportation advantage; to that will be added a sustainability advantage.
Eriksen points out that the U.S. grain transportation footprint is cleaner than Brazil’s, which still relies more on trucks despite recent infrastructure and port investment. “A lot of companies are paying attention to farmgate-to-table carbon footprints,” he said. “Our farmers are already the most sustainable in the world.”
This January, the United Soybean Board launched an initiative it calls Soy Mark, a certification of sustainably grown soybeans. The USB is teaming up with partners from Soylent and DuPont Nutrition & Biosciences in a pilot program that ran through March 19, identifying those companies’ products and ingredients as being made with sustainably grown U.S. soy. The companies will use the new Sustainably Grown U.S. Soy Mark, which recognizes soy ingredients that have originated from a system of continuous improvement. The goal of this food industry innovation is to improve sustainability in product supply chains “from farm to fork.”
The Sustainably Grown U.S. Soy Mark seeks to increase demand for soybeans grown by U.S. farmers who commit to practices such as conservation tillage, cover crops and responsible nutrient management. The mark applies to those soybean acres grown under best practices on-farm. Products carrying the Soy Mark contain ingredients that are U.S.-grown; comply with all U.S. environmental regulations; protect highly erodible soils and wetlands; and are grown on family farms with responsible labor practices.
The USB’s Belinda Burrier has been a prime promoter of the mark, which she uses on the beans she grows on her Maryland farm. “It feels good knowing that when I grow this nutrient-dense protein, I am not only helping the food industry feed millions of families across the country sustainably but also contributing to a cleaner planet for the next generation,” Burrier said.
Sustainability advantage
Are sustainability considerations adding value to U.S. soybeans in the overseas marketplace right now? When asked about China and southeast Asia, DeLong said, “We haven’t seen [that interest] in the southeast Asian market yet.” But he added that interest is great in Mexico (the second-largest market for U.S. beans) and in the European Union. He notes that Mexico is a member of the Roundtable for Sustainable Soy, “an international initiative in which soy producers, merchants and processors work together with banks and social organizations to ensure the worldwide sustainable cultivation of soy and the social responsibility of the soy sector,” according to its website.
As certifications like the Soy Mark take hold, organizations like USSEC believes they will benefit U.S. exporters. The fact that the U.S. has been expanding production of soybeans and corn while actually shrinking farm acreage, instead of clearing rain forest, is making a big impression overseas, according to Brian Babb, regional director for Europe and Middle East-North Africa for USSEC. “Sustainability is in the thought processes of all the [importing countries].” At a recent forum, Babb said, “U.S. soy on average has a carbon footprint 10 to 15 times less than South American soy.”
North Africa adding crush capacity
Even as Chinese demand keeps growing, USSEC has been leading efforts to diversify overseas markets for U.S. soybeans. Two years ago, Algeria built a soybean crush plant, and has plans to open two more this year, according to Babb. Right now, its one plant serves the domestic needs of its 50 million people, but if the two additional plants open this year as scheduled, the country will be able to sell both meal and oil to neighboring countries.
Babb said as countries build out their own crush capacity, they are more likely to import U.S. beans and crush them themselves, rather than importing the meal and oil from Argentina or Brazil. Between 10 and 15 years ago, Egypt began building out its crush capacity. The result is that Egypt is now the third largest market for U.S. beans, after China and Mexico. Tunisia, Morocco and Saudi Arabia are also increasing imports of U.S. soybeans. The U.S. exports 60 million tons of whole beans a year, as opposed to about 12 million tons of meal and 1 million tons of oil, Babb said.
In 2020, Bangladesh doubled its imports of U.S. soybeans, following the elimination of a soybean-meal tariff, according to Kevin Roepke, regional director of south Asia and sub-Saharan Africa for USSEC.
In sub-Saharan Africa, USSEC partnered with the World Initiative for Soy in Human Health and the U.S. Grains Council to host the first-ever Africa Trade Exchange, designed to highlight the region to U.S. exporters, as well as introduce sub-Saharan Africa importers to USSEC members. A Soy Excellence Center also launched in Nigeria in 2020. According to Roepke, “The event marked a landmark moment for USSEC market development in Sub-Saharan Africa. The center will be the foundation for technical and trade servicing, as well as building capacity within the continent and making the [soy] leaders of tomorrow.”
Biodiesel
The future of soy is not just in food. The American Soybean Association has been a strong supporter of the biodiesel tax incentive. The latest federal incentive extension, enacted in December 2019, runs through 2022. The biodiesel tax incentive has been calculated to add 13% to the value of every bushel of soybeans. Some states added their own biodiesel tax incentives. Soybean oil is the feedstock for about half the biodiesel used in the U.S., according to the USB. Used cooking oils, animal fats and other sources can be used as feedstocks.
The biodiesel market has grown from 2005 when the tax incentive was first introduced to 2 billion gallons in 2017. From 2020 to 2021, an estimated 8 billion pounds of soybean oil are expected to go toward producing cleaner biodiesel, according to the USB.
High-oleic soybean oil is also in great demand for food uses. It tolerates higher temperatures than other types of cooking oil and has a heart-healthy fats profile, recommending it to chefs.
High-oleic soybean oils have been so successfully marketed for industrial uses—in asphalt paving, for instance—that demand may outstrip supply in the short term. Polly Ruhland, CEO of the USB, said during a panel at the recent Commodity Classic, “We have driven demand for high-oleic soybeans—and now we don’t enough acres growing. We didn’t think demand would grow this fast.”
David Murray can be reached at [email protected].
