Soybean outlook controlled by exportsKNOXVILLE, Tenn. — Telling the story of soybean exports in the last 30 years requires a little more work than for corn and wheat. The primary products of soybeans — soybean meal and soybean oil — play a much larger role in exports than do the corresponding products of corn and wheat. As a result, the U.S.Department of Agriculture tracks production and utilization data for soybean meal and soybean oil separately from unprocessed beans.
By: Daryll E. Ray,
KNOXVILLE, Tenn. — Telling the story of soybean exports in the last 30 years requires a little more work than for corn and wheat. The primary products of soybeans — soybean meal and soybean oil — play a much larger role in exports than do the corresponding products of corn and wheat. As a result, the U.S.Department of Agriculture tracks production and utilization data for soybean meal and soybean oil separately from unprocessed beans.
To get a picture of the scope of world trade that results from the raising of soybeans, we have added the meal and oil numbers to those of unprocessed soybeans to create a variable known as soybean complex. This is particularly important because exporters and importers trade in various proportions of the three products. As a result, looking at soybeans alone gives an incomplete picture of the impact of trade on the producers of soybeans.
Exports play a much larger role in soybeans than they do in corn and wheat. The proportion of the world’s corn crop that is exported has roughly fallen from 20 to 10 percent over the last 30 years, whereas wheat exports have hovered around the 20 percent level during the same time period. Soybean complex exports as a share of world production, on the other hand, started the period near the 60 percent level, fell to below 50 percent and then began a fairly steady climb to the mid-60 percent level as the result of Chinese imports.
U.S. soybean growers are slightly more dependent upon domestic markets than the Brazilians and Argentines. During most years since 1980, U.S. soybean complex exports have accounted for less than half of the crop. Most of the domestic consumption is in the form of soybean meal fed to animals and soybean oil used for food.
While U.S. soybean complex exports have increased from 26 million metric tons to 48 million metric tons in the last 30 years, the U.S. share of world exports has fallen from 60 percent to 30 percent. This change has been the result of the dramatic increase in soybean production in Brazil and Argentina. In the future, the biggest increase in non-U.S. exports of soybean complex undoubtedly will come from Brazil because of its large land area. Given a relatively fixed crop area, the U.S. will continue to see its share of world soybean complex exports fall.
For the most part, in the last 30 years, the value of soybean complex exports — using season average farmgate prices for soybeans and market season average prices for soybean meal and oil — has varied from $5 billion to $8 billion as the volume of exports increased. The major exceptions were the 1995 to ‘96 period and the years since 2007. In both of these periods, prices were well above the other years, with the most dramatic price peak occurring in 2008.
Factors for the future
The future profitability of U.S. soybean production depends upon a couple of factors. First, during the 2009 crop year, China imported 42.5 million metric tons of soybeans, 29 percent of world soybean complex exports. While China has stated its intention to continue to import two-thirds of its soybean needs, a reduction in its imports — or even a slowing of its rate of increase in imports — would have negative price consequences. Second, a combination of yield and Brazilian production-growth-increases at a rate faster than the growth in world demand could also send prices downward. In the absence of the decision of the Chinese to begin to import soybeans, the picture during the last 15 years might have looked very different.
Editor’s Note: Ray is director of the University of Tennessee’s Agricultural Policy Analysis Center in Knoxville.