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Boatloads of bushels

Article cover photo
Rolland Schnell and other Iowa farmers look to China to consume what's projected as the fourth record soybean crop in a row. (Photo: Joseph L. Murphy/Iowa Soybean Association)

By Matthew Wilde, ISA senior writer

United States soybean exports hit new heights during the last marketing year.

Luckily for the nation’s farmers harvesting what’s projected to be a fourth record soybean crop in a row, exports are expected to soar even higher this year. If worldwide demand continues to increase, the sky is the limit for sales.

Soybean exports for the 2016/17 marketing year, which ended Aug. 31, are estimated at 2.15 billion bushels. The U.S. Department of Agriculture (USDA) increased the total by 50 million bushels in August based on strong end-of-the year sales.

The government projects 2017/18 U.S. soybean exports at 2.225 billion bushels, 75 million bushels more than the previous year.

Analysts say several factors are behind the meteoric rise in soybean exports the last 30 years: worldwide population increase, rising incomes and protein demand, etc. But to John Baize, a nationally-renowned oilseed consultant from Falls Church, Virginia, one thing particularly stands out.

“Farmers invested a lot of soybean checkoff money to achieve it,” Baize says. “What we’re doing today for exports is phenomenal.”

Only 802 million bushels were sold to foreign buyers in 1987, according to USDA statistics.

“It’s good to remind farmers about that,” Baize continues. “The world market for soybeans would not be as large if it wasn’t for the soybean industry investing resources to promote their products.”

The global growth rate the past two decades is relatively stable, he continues. International soybean demand has increased 16 million metric tons (nearly 590 million bushels), on average, each of the last four years, according to Baize. The USDA predicts the increase will be 15 million metric tons (551.1 million bushels) this year.

Analysts expect the growth rate to slow but demand will remain strong. Baize says an additional 80 million metric tons (nearly 3 billion bushels) of soybeans or more will be needed to feed the world by 2027.

Even though Brazil and Argentina will vie for larger market share worldwide for decades to come, Baize predicts the U.S. will be just fine competing against their major rivals.

Brisk construction continues in Shanghai and other cities in China to house a growing population. Twenty-five percent or more of the U.S. crop will go to China, the worlds largest soybean buyer. (Photo: Joseph L. Murphy/Iowa Soybean Association)

“Buyers like the quality and consistency of U.S. soybeans, and the dependability of our transportation system,” Baize says. “We will have a huge crop, but it will find a home and a price to move it.”

World's largest buyer

Twenty-five percent or more of the U.S. crop will go to China, the world’s largest buyer of soybeans. 

The country imported about 1.1 billion bushels of soybeans from the United States during the 2015/16 marketing year, or more than 36 percent of its needs. As of early August, China exceeded that by 300 million bushels, according to Chad Hart, Iowa State University Extension and Outreach grain economist. 

 “That’s just the growth, which is tremendous,” Hart says. “It’s like two-thirds of Iowa’s production.”

 The USDA predicts overall Chinese imports will grow by 110.2 million bushels to nearly 3.5 billion this year, possibly higher.

There’s no indication soybean exports to China, home to about 1.4 billion people, will slow anytime soon. An estimated 300 to 400 million citizens are expected to join the middle class in the next decade. 

Increased protein consumption typically accompanies a higher standard of living.

During an historic 10-day all-Iowa ag trade mission to China in July, growth projections and associated soybean needs were reaffirmed by the government. Chinese buyers agreed to purchase more than $6.5 billion of U.S. soybeans, or about 600 million bushels, during two contract signing ceremonies before and after the trade mission.

“China is looking for a reliable partner,” says Gov. Kim Reynolds, who led the delegation represented by every commodity and farm organization in the state, including the Iowa Soybean Association (ISA). 

One out of every four rows of Iowa soybeans end up in China, officials say.

“There’s a three-prong approach to the popularity of soybeans in China: meal for animals, oil for food consumption and industrial uses and crushing for jobs,” Hart says. “I think you will see other Southeast Asia countries follow a similar path. That bodes well for us longer term.”

China accounted for nearly 58 percent of U.S. soybean exports during the 2015/16 marketing year, data shows. The European Union was a distant second at nearly 11 percent, followed by Southeast Asia at just over 8 percent. Japan, Taiwan and South Korea come in at 8 percent and North America accounts for more than 7 percent.

Opportunities abound

Hart says countries to watch in the near-term as far as soybean demand are Indonesia, Malaysia and Vietnam.

“There’s tremendous opportunities to grow outside of China,” he adds.

Past ISA President Rolland Schnell agrees. Besides participating in the July trade mission to China, the Newton farmer discussed soybean supply and demand with a group of Southeast Asia buyers — many from Hart’s watch list — when they toured Midwest farms and agriculture facilities in early August.

Countries with burgeoning economies will need more soybeans to fulfill protein and feed needs, Schnell says.

“I see container shipments increasing,” he adds. 

In many countries, demand and infrastructure aren't available to handle cargo ships filled with bulk soybeans. Twenty-foot containers, which hold about 800 bushels of soybeans each,
are the preferred method of shipment.

“One of my long-term goals is to narrow the basis numbers in central Iowa,” Schnell says. “If we can fill more containers with soybeans, I think we can do that.”

Jusef Kusuma, owner of PT. Sinar Agung Agro in Jakarta, Indonesia, is doing his part. 

The soybean importer has dramatically ramped up purchases from the United States. Soybeans are bagged and resold to other companies to make tofu and tempe.

In 2010, Kusuma bought 10 containers per month. Today, he buys 300 to 400. 

“U.S. soybeans are very good quality,” says Kusuma, who was part of the Southeast Asia trade group that visited Iowa this summer. “I see the demand for more protein in the future.”

Indonesia is the fourth most populous country in the world.

As much as demand has grown, supply has matched it and then some with record production in the U.S. and South America.

With stagnant U.S. soybean demand, Hart says strong exports kept prices hovering around break even this year, though a few weather-driven price rallies provided opportunities for profit.

A 20-percent drop in production in the U.S., Brazil or Argentina, given current and future demand, would likely spark a major spike in prices, Hart says.

“The market wants to run, it just doesn’t know which way,” he adds.

For permission to republish articles or to request high-res photos contact Aaron Putze at aputze@iasoybeans.com.

©2017 Iowa Soybean Association On-Farm Network®. All rights reserved. On-Farm Network® is a registered trademark of the Iowa Soybean Association, Ankeny, IA.Portions of some On-Farm Network trials are paid for in total or in part by the soybean checkoff.

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August 2017 Contact Ann Clinton for past publications.