A top executive for Cargill, one of the world’s leading ag companies, promised soybean farmers “an exciting 2021” because of rising demand combined with supply constraints, resulting in higher prices. Joe Stone, an agribusiness veteran and head of Cargill’s agricultural supply chain and corporate trading division, made his remarks on a Jan. 6 “Soy Suite” webinar hosted by Jim Sutter, CEO of the U.S. Soybean Export Council, charted the future of soybeans. Stone was introduced by Monte Peterson, chairman of USSEC.
Stone pointed out that world demand for protein from both animals and vegetables has risen by 250% since 1990.
China recovery
Stone said he was “amazed” at how quickly China has recovered from the effects of the African swine flu, which wiped out perhaps as much as 80% of China’s swine herd (although reliable figures are hard to come by). But there’s no doubt that China is rapidly rebuilding its herd, in the process modernizing its inefficient hog-raising operations along more modern lines.
In response to a question from Sutter as to whether the current buying spree by China is true demand or stock-building, Stone said China allowed its soybean stocks to be drawn down over the past four or five years. China has a strong focus on food self-sufficiency.
“Demand-drive markets last longer than supply-drive markets,’ Stone noted. He said supply constraints—including dry conditions in Brazil and Argentina— have provided “jet fuel” to soybean prices. He even hinted that, depending on how long the drought conditions last in Brazil, the market could be facing a “demand rationing” model by summer.
Stone pointed out that Cargill has recently completed a $224 million expansion and modernization of a crush facility in Sidney, Ohio, and has also bought a large “world-class” crush facility in China, which he said Cargill bought at a public auction held on the Alibaba online platform.
Meat alternatives
When Sutter asked about the future of meat alternatives, such as plant-based proteins and cell-grown meats, Stone replied that Cargill “is a protein company.” Since 2017, Cargill has invested in Memphis Meats, a leading U.S. cultured-meat company. In 2019, Cargill invested in Aleph Farms, an Israel-based cell-cultured protein company focused on growing “complex” meat varieties like steak. Unlike plant-based protein, cultured meat products are grown from muscle cells, but cultured in a lab. In the future he said, both plant-based protein and cell-based meats will be “part of the dinner table,” although he believes that will accompany rising demand for traditional animal protein due to population growth. “They are all part of food security solutions,” he said.
Stone called food sustainability “the defining issue of our time” and said ag businesses will be part of the solution. As yet, he said, there is no sustainability premium in the market for companies that buy Cargill’s food ingredients. “China represents 60% of world trade, and they are more concerned with food security than sustainability,” he said. There is also increasing demand for food “transparency,” which Stone defied as sustainability plus traceability.
Carbon farming
So-called “carbon farming” has been part of the sustainability debate, and Stone said Cargill is working with 750 U.S. farmers across 12 programs covering 300,000 acres on improved soil health processes that increase carbon retention and capture. He said he has encountered willingness among farmers to participate in carbon markets but said, “You have to make carbon credits easy for them.” The carbon offset market, in which companies buy carbon credits, “continues to grow at a substantial rate,” and Stone believes that being able to market U.S. crops and both sustainable and carbon-neutral practices will give them a marketing advantage around the world. He also believes biodiesel will be a demand source for U.S. farmers, although he cautioned it’s difficult to make prediction about biodiesel because so much of that market depends on policy decisions.
Aquaculture is an area where Stone said Cargill continues to invest. Demand for farmed shrimp and tilapia dropped during the pandemic, due to restrictions on restaurants, because most shrimp and tilapia are consumed there. He said it currently takes a pound of feed to produce a pound of (farmed) salmon but he thinks that ratio can be improved.
Outside of China, Stone pointed to the South Asian markets as a focus for growth for soybean marketers. Southern Africa is promising for the future, but in the near term will see slower growth in protein demand “for a whole host of reasons,” he said.
“We will have an exciting 2021” for soybean farmers, Stone predicted “We have not hit the top of the market yet! The Argentine weather will tell much of the story. Will the drought continue or break?”
David Murray can be reached at [email protected].
