U.S. Swifts to a New European Soybean Clients: Germany & Italy
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In the U.S., multiple factors have boosted Soybean production over the last decade. These factors included government policies supporting agricultural production through protection or subsidies, biofuel mandates, international demand, and periods of high prices for agricultural commodities. Soybeans used in the United States are typically produced domestically. Over 80 percent of U.S. Soybean acreage is concentrated in the upper Midwest, where the crop is frequently rotated with corn.
According to a study conducted by the National Oilseed Processors Association and the United Soybean Board, Soybean is a cornerstone of American agriculture, contributing $124 billion to the U.S. economy in 2022. Soybeans were once considered a niche crop before U.S. farmers realized their potential for animal feed, protein use, and export value. The total value of the U.S. Soybean crop was $45.7 billion. Illinois, Iowa, and Minnesota were the top states by Soybean crop value. For Soybean derivative exports, 81% was whole Soybeans, 16% Soybean Meal, and 2% Soybean Oil.
“The average Soybean production in the county was 31 bushels in 1980. Today, that same acre produces 51 bushels on average,” Soybean farmer Meagan Kaiser and the United Soybean Board chair said. The global Soybean market exploded recently, with U.S. production at the forefront. For example, in the early 2000s, the U.S. made about $9 billion from all Oilseed crop exports combined. By 2021, the cash coming in from Soybean exports alone skyrocketed to $26.4 billion, according to the USDA.
However, the U.S. has since lost its dominance, partly thanks to its reliance on a single export market: China. China is the largest importer of Soybeans in the world, making up about 60% of the total Soybean trade. According to the USDA, nearly half of the value of U.S. Soybean exports head to China.
Over 30 or 40 years, Brazil dramatically increased Soybean acreage and production. Brazil is a relatively low-cost place to produce corn and Soybeans. The export market is very competitive, and the U.S. needs to be cost-competitive with Brazil and Argentina. The heated international competition has pushed the American market to explore alternative uses for Soybeans, including biofuels, renewable diesel, and bioplastics.
As per AgFlow data, the U.S. exported 25.3 million tons of Soybeans in Jan – Sep 2023. The key markets were China (13 million tons), Germany (2.3 million tons), Mexico (1.8 million tons), Japan (1.4 million tons), Indonesia (1.4 million tons) and Italy (1 million tons).
Soybean Value Chain
Soybeans rely on a multimodal network when transported to market, with the sequence of methods mainly determined by the final destination. Soybeans that remain domestically are often crushed. In this case, trucks deliver the bulk of the crop (86%) while rail provides 12% and barge only 2%.
On the other hand, exports overwhelmingly rely on barge and rail. Since Soybeans are primarily produced in the central U.S., they must often be moved long distances to reach port facilities when exported. Soybeans planted in the Corn Belt overwhelmingly travel by barge down the Mississippi River to the Gulf when shipped. Soybeans produced in the Northern Plains are moved by rail to ports in the Pacific Northwest. As a result, 62% of the Soybean transportation is via barge and 29% via rail when exported. Trucking only represents 9% in this case.
Large U.S. buyers of Soybean-derived ingredients include margarine and mayonnaise producers (e.g., Unilever USA) and vegetable Oil producers (Conagra Brands). Restaurants are heavy users of Soybean Oil, which is used directly in bakery products and as a cooking Oil, and Soybean Meal, which is used indirectly in meat products produced with Soybean Meal. The four most prominent limited-service restaurants in the U.S. are McDonald’s Yum! Brands (Taco Bell, Pizza Hut, KFC), Starbucks, and Restaurant Brands International. Regarding food retailers, the four most significant in the U.S. are Walmart, Kroger, Albertsons Companies, and Ahold Delhaize USA.
About 85 percent of global Soybean production is crushed into Meal and vegetable Oil. The other 15 percent is sold as whole beans. Of the Soybeans crushed, 80 percent is used for Meal, and 20 percent for vegetable Oil. For the Meal: virtually all (98 percent) is used to feed animals (e.g., pigs, poultry, cattle, and farmed fish); 2 percent is processed for food use.
For the Oil: most (95 percent) is for food use—cooking Oil and processed food products such as margarine, dressings, and mayonnaise—with the remainder (5 percent) used for industrial products such as fatty acids, soaps, and biodiesel.
According to the American Soybean Association, total gross value of production was $1,608 per hectare in 2021. Total operating costs were $453. The total allocated overhead was $817. Key overhead costs were opportunity cost of land (rental rate) – $383 and capital recovery of machinery & equipment – $292. The value of output less total costs listed was $338. Yield was 3.63 mt/ha. So, price at harvest was $440 per metric ton.
Price paid to farmers was $397 on average in 2020/2021. Georgia ($478), South Carolina ($441), and Virginia ($437) were the top 3 states that paid higher prices to Soybean farmers. Texas was the lowest, with $334.
The US quoted Kenya the highest CFR price, $606 on average, in Jan – Sep 2023. The country also offered higher CFR prices for Far Eastern countries (Indonesia: $603 and Japan: $600). Interestingly, the US offered the different CFR price to the Netherlands ($567) and Spain ($587).
For selected countries, trends of CFR price showed precisely a similar situation for China, Egypt, and Mexico in Jan – Sep 2023. The price started falling since the last January. It dropped in May, rose in July, and then showed a downward trend.
Soybean Oil Trade
U.S. Soybean Oil production amounted to approximately 26.2 billion pounds in 2022. In 2021, the United States exported Soybean Oil worth $901 million, making it the world’s 3rd largest exporter of Soybean Oil. In the same year, Soybean Oil was the 262nd most exported product in the United States. The main destinations of Soybean Oil exports from the United States are South Korea ($209M), Guatemala ($103M), India ($93.8M), Mexico ($75.7M), and the Dominican Republic ($62.4M).
The same year , the United States imported Soybean Oil worth $211M, becoming the world’s 17th largest importer of Soybean Oil. United States imports Soybean Oil primarily from Canada ($198M), Spain ($7.49M), Mexico ($2.74M), Turkey ($552k), and Argentina ($458k).
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