Global soy strategies on display at USSEC meeting

Soy growers were buoyant as they met in St. Louis to promote themselves and make deals at the “Gateway to U.S. Soy” event. The annual meeting of the U. S. Soybean Export Council was a joint event co-sponsored by the Soya and Specialty Grains Association.

Celebrating its 15th anniversary, USSEC has been working steadily to grow markets for United States soybeans and soy products. The relationships it builds with customers are best nurtured face to face, said Monte Peterson, chair of USSEC, at a press conference. For that reason, he welcomed the resumption of the face-to-face GTE event. It was a “hybrid” event, with its presentations also available on Zoom for the thousands of participants from around the globe in different time zones.

USSEC is one of the most forward-looking U.S. trade groups, strategizing far into the future. Peterson noted that U.S. soy producers had representatives working with soy producers and potential customers in China for 13 years before China imported a single U.S. soybean. That patient laying of groundwork paid off years later, when U.S. soybean exports to China boomed.

China trade remains strong

Chinese demand is expected to remain strong. In a session focusing on China, Simon Rabinovitch, Asian economics editor of The Economist magazine, said trade relations are good, despite press storms. “Phase 1 seems to be working well, and the recovery of China’s hog herd is ongoing.” Even if the size of the hog herd stays the same, he said, the continuing consolidation and replacement of traditional swill feeds with healthier grains feeds means the market for soy-based feeds could still grow.

Rabinovitch also said that while political tensions still exist between China and America, the threat of foreign companies “decoupling” from China has led them to be more welcoming. “There are more openings to [foreign] insurers and banks that at any time in the past few decades. We’ve moved past the tariff wars. The U.S. needs to ship soybeans, and China needs to buy,” he said.

Diversifying markets

Today the groundwork that opened the China market is being replicated in many markets across the globe to ensure that U.S. soybean producers will never be too dependent on any one market—not even China.

“U.S. soy producers had the vision to invest internationally,” said Jim Sutter, executive director of USSEC. “We continue to look for markets in countries with growing populations, developing economies and low protein consumption.” He noted that the U.S. is growing soy markets in Mexico, the Philippines, Vietnam, Egypt, the European Union and Japan as well as China. Aquaculture is one of the fastest-growing markets for soymeal globally, he said, and the biodiesel and renewable fuels market is growing significantly as well.

This year, soybean exports from the U.S. will set a record overall—but not in any one country. The USSEC strategy for promoting U.S. soybean exports revolves around access, technical expertise and work with in-country experts. It’s the demonstrable quality of U.S. soybeans that seals the deal, said Sutter. “We want to be a supplier of choice, regardless of market segment.”

The 2020-21 growing season saw a soy productivity boom that offset drought in a few states. While the Dakotas and Minnesota saw drought conditions and reduced productivity, other states including Ohio, Indiana, Illinois, Missouri, Alabama, New York and Texas all saw record soy yields. The U.S. Department of Agriculture has said the U.S. is on track to produce the third largest soy crop ever at 3.4 billion bushels. Order books into next year are already strong.

Sustainability

The U.S. soy industry leads the world in the transparency of its metrics, said Sutter. A potential buyer interested in protein content, amino acid balance, oil content or sustainability can learn about all those things when buying U.S. soy products.

Sustainability is especially important as customers around the world are paying more attention to where their food comes from and how it is grown, harvested and processed. Sutter pointed out that in the past three decades, U.S. soy growers have decreased soil erosion 66% while increasing production by 96% on roughly the same amount of acreage. “U.S.-grown soy requires no deforestation,” he noted.

It was partly because of U.S. soy sustainability—as certified in the Soy Sustainability Assurance Protocol—that led the Tokyo Olympic Committee to procure American soybean oil to be mixed with both asphalt and concrete in the construction for this year’s Tokyo Olympics. Earlier this year, the SSAP metric celebrated a milestone of 100 million tons certified.

India has also OK’d a one-time easing of import duties on U.S. soy, even allowing GMO soybeans in to ease a domestic shortfall.

Specialty grains

Eric Wenberg, executive director of the Specialty Soya Grains Alliance, said SSGA is also celebrating its 25th anniversary. Specialty soy growers, like soy growers generally, have prospered by taking the long view. In some years, identity-preserved varieties of soybeans have made up as much as 10% of soy exports by value, although in bulk terms their volume is still small. The higher-value premium grains are most often shipped in containers. “Containers are the lifeblood of our business,” said Bob Sinner, chairman of the SSGA. Producers have suffered as a variety of factors have led to a container crunch and delays in obtaining empty containers to ship ag products to Asian destinations. The issues have prompted an investigation by the Federal Maritime Commission. “The fastest-growing U.S. ‘export’ is empty containers,” said Sinner. He urged that shipping reforms be passed on Congress.

Nevertheless, the outlook is bright once those issues have been resolved, said Sinner. “The world demand for IP non-GMO products has been staggering, far exceeding the supply,” said Sinner, from markets like the pet food industry as well as food companies. Wenberg said the domestic market for specialty grains stretches from the central Plains to the East Coast.

Veg oil market movements

One session, titled “When Balance Sheets Don’t Balance: Global Veg Oil,” focused on the worldwide market for veg oil. Dr. Julian McGill, a global veg oil analyst and head of southeast Asia at LMC International who is based in Kuala Lumpur, said two forces are currently driving the global veg oil market: A “remarkable” increase in U.S. biodiesel, and the decline of supply from southeast Asia, especially palm oil.

The surge in U.S. veg oil futures came because of the election of Joe Biden and speculation that his climate-focused administration would enact a number of measures to encourage or require more use of biodiesel. McGill showed charts demonstrating that the price of U.S. soybean oil diverged upward from the global market price right around election time. He said he doesn’t think the administration intended to support biodiesel, but there are few alternatives for earning certain types of carbon credits.

While fuel blends are hitting current “blendwalls,” he said, sustainable aviation fuel is the “next frontier” of biodiesel.

These two factors have pushed up the global “arms race” for sources of biodiesel, said McGill. The palm oil slowdown comes as Indonesia is recovering from an El Nino drought, which affected thirsty palm oil trees. Malaysia n palm groves suffer from a different issue: labor shortages. The country has a labor shortfall of between 35,000 and 40,000 workers and has seen no yield growth in a decade.

“There is no longer a ‘back wind’ of palm oil supply in the global veg oil market,” said McGill.

David Murray can be reached at [email protected].