Weekly Insights: Long-Term World Soybean Outlook
Long-Term World Soybean Outlook
The long-term report includes fundamental 10-year long-term forecasts for cotton, coarse grains, rice, soybeans, and wheat for 17 countries and regions. The report distills and conveys big-picture trends found in the global data on a semi-annual basis. The following is focused on the world soybean market. United States Department of Agriculture (USDA) Foreign Agricultural Service (FAS) provides the historical data. Resting in the background of the analysis are the past estimates of global population growth, both for individual countries and accumulating to the global situation. The United Nations (UN) publishes historical global estimates of population.
The following chart clearly depicts that global population increases in a monotonous steady upward slope. In the November update of this report, 2027 population peaked at 8.3 billion. In this update, the forecast is extended three years to 2030 with global population now extended to 8.5 billion. The 2020 population is estimated at 7.8 billion. As a starting point, world population is projected up 8.6% over the next decade, which will drive consumption increases.
World Population and Asian Growth Zone
Source: United Nations
The Asian Growth Center of China, India, Other Asia, and East Asia currently accounts for 52% of the world population, but by 2030 only accounts for 51%. The forecast assumes continued PCC increases as incomes improve. The Asian Growth Center of China, India, Other Asia, and East Asia is experiencing great growth in food consumption but has limited acreage available for cultivation. The current situation presents two key challenges. The first is how to meet the increase in food consumption? The second is how to deliver the food to the people?
The Asian Growth Center consists of extreme poverty that is enjoying economic growth, which is very important for commodity consumption, but especially food products, because as income increases, a wealthier person responds by switching to high-end food products, eating at restaurants and might even hire a chef. Although they are spending more money on eating, the volume of coarse grains, wheat and protein meals consumed might not increase. By comparison, as income increases for poor people, they respond by adding ingredients to a basic diet. Eating tastier food often requires vegetable oil, meat, fruits, and vegetables. Meat production requires feed rations of grains and protein meals that is converted into weight gain. For example, if 1.6 pounds of feed is required to add one pound of chicken, switching, or just adding chicken to the dish results in an increase in Per Capita Consumption (PCC) of grains and protein meals. As meat consumption increases, a natural evolution is from backyard operations to commercial operations to gain economies of scale. African Swine Fever (ASF) and COVID-19 are accelerating the trend toward commercial animal production, which will increase use of commercial feed rations. Commercial operations are more efficient at converting feed rations into meat due to feed rations that are more precise. The feed ration requires exact nutritional requirements that come from grains and soybean meal versus table scraps.
International Report Countries and Regions (Soybean Net Trade)
Source: USDA and Higby Barrett
As consumption increases over time, trade also increases. From 2011 to 2020, Asian Growth Center imports of soybeans increased 88% and over the next 10 years, imports of soybeans are forecast to increase 43%.
Chinese Soybean Imports and Argentina, U.S., and Brazil Production
Source: USDA and Higby Barrett
Per Capita Consumption and Domestic Consumption
Soybean world PCC averaged 43 pounds in 1990. By 2000, that had increased to 62 pounds, up 42%. China’s consumption grew strongly during that decade before it began its massive soybean import program. However, China’s PCC was only 19 pounds in 1990 compared to 304 pounds in the U.S. By 2000, China’s PCC was at 47 pounds whereas the U.S. was at 383 pounds. Argentina and Brazil also saw outstanding growth in the 1990s. Argentina increased from 502 pounds to 1,091 pounds. Brazil’s gain was from 226 pounds to 310 pounds.
The years 2000 to 2010 found world PCC increasing from 62 pounds to 81 pounds despite the U.S. decreasing from 383 pounds to 344 pounds. The decline in U.S. PCC is easily associated with the competition of distillers dried grains that competed on price with soybean meal. Argentina’s PCC jumped from 1,091 pounds to 2,135 pounds. Brazil went from 310 pounds to 436 pounds. China at 47 pounds in 2000 advanced to 110 pounds.
The forecast for world PCC use over the next ten years from 2021 to 2030 increases from 107 pounds to 127 pounds or an 18% increase. For these same years, the Argentina forecast advances 7%, Brazil by 14%, China by 36% and the U.S. by 7%. After a pause in 2018 and 2019, China’s PCC is expected to roar back, as domestic animal operations are aggressively expanding.
Soybean Per Capita Consumption
Source: USDA and Higby Barrett
Recent addition of new U.S. crush capacity coupled with better-than-expected demand for soybean meal have resulted in strong monthly crush figures. Spurring some recent optimism has been the shuttering of U.S. ethanol facilities that has resulted in reduced competition in feed rations from distillers dried grains (DDGS). A change in U.S. renewable fuel policy would migrate canola meal/DDGS feed rations back towards corn/SBM feed ration. The new soybean crushing plants provide local consumption that is improving the local soybean basis, which will encourage more local soybean production. Likewise, the availability of local soybean meal will lower the cost of animal feed and encourage more animal production. For example, in 2020, Zeeland Farms Soya opened a 3,425 ton-per-day plant in Ithaca, Michigan. The northern and western Corn Belt expansion has resulted in farmers located in the expansion areas receiving deeply discounted soybean prices due to the long distance to market. Local animal operations receive expensive soybean meal due to the long distance from a soybean crushing plant
In 2019, Ag Processing Inc. (AGP) opened a 60 million bushel per year soybean crushing plant in Aberdeen, South Dakota and CHS Inc. announced it is expanding its Fairmont, Minnesota facility. With USDA estimated June 1, 2019 soybean stocks for South Dakota at 140 million bushels or 60% higher than the previous record high year, the July opening provided farmers with much needed consumption to clear out bin space and enabled the new soybean crusher to purchase very affordable soybeans. On January 15, 2020, Quality Roasters in Reese, Michigan opened a 64-short ton-per-day expeller plant to service the organic market.
Cargill is making a major investment in its Sidney, Ohio crushing plant. The crushing expansion is to fuel soybean oil feedstock for its companion oil refining facility. The idea of a Spiritwood, North Dakota farmer-owned plant has been abandoned. With that proposed plant officially dead, expect another proposal for a soybean crushing plant in the general area to be announced shortly. Approximately 100 miles southeast from Spiritwood is a very good location for a new plant.
Mid-Iowa Cooperative is building a plant that should be operational in 2022. The plant will require more investors, which means the odds of it being built is less than 50%. The plant will crush 38.5 million bushels of soybeans annually, or 110,000 bushels daily, to produce 847,000 tons of soybean meal per year (2,420 tons per day), 462 million pounds of crude soybean oil per year (1.32 million pounds per day), and 77,000 tons of pelleted soybean hulls per year (220 tons per day).
At peak capacity, approximately 150 trucks will access the plant per day. The plant’s proximity to the Iowa Northern Railway will contribute to efficient traffic-flow patterns around the logistics park. Rail cars will also be loaded out with crude soybean meal or oil. At peak capacity, the plant will load/unload approximately 35 railcars per day.
Agydsa is building a new plant in Jalisco, Mexico, with a crushing capacity of 4,000 metric tons per day, which is expected to become operational in November. A 4,000-metric ton-per-day crushing plant will require Mexico to increase imports 1.4 million metric tons, annually. Information on when or if the plant will open is difficult to obtain, but soybean exports to Mexico have increased, which is consistent with a new plant opening.
The plant will reduce the need for some soybean meal imports but will support the Mexican animal operations. As is being learned during COVID-19 and the U.S./China trade war, the diversification of the supply chain is very important. During periods that involve trade restrictions, such as trade wars and disease issues that prevent meat exports, having multiple buyers is advisable.
Global soybean utilization is estimated at 381 MMT in 2020. No surprise that China is the largest constituent of the total at 122 MMT. The U.S. is the second largest consumer at 64 MMT. Argentina and Brazil are nearly identical at 50 MMT and 49 MMT, respectively. The four-country total is 278 MMT or three-quarters of total the global utilization.
Higby Barrett’s world outlook for 2030 totals 489 MMT, which represents an increase of 18%, which is more aggressive than other forecasts. Higby Barret believes world government policies have aggressively protected agriculture, which have reduced or eliminated the impacts of a financial downturn on agriculture. For example, U.S. farmer cash receipts was down 3%, but total farm income was up 23%. With world soybean acreage increasing and world government policies encouraging consumption, Higby Barrett’s forecast predicts the rate of consumption will slow by 11%, or 318% lower than the rate of growth for the previous 10 years.
Higby Barrett does not understand the long term forecasts for dramatic decreases in the rate of consumption. Higby Barrett’s long term forecast will likely be too conservative. The reality is as the world continues to outsource labor to impoverished countries, the marginal increase in salaries will result in meat consumption increasing. The barrier of transportation has largely been solved. Without a devastating war that destroys the infrastructure required to deliver the food, world food consumption should continue to increase faster than analysts believe possible.
In the forecast period, China remains the dominant user at 167 MMT or a gain of 38%. For reference, between 2011 and 2020, China soybean use surged 61%. The Asian Growth Area experienced a 55% increase from 2011 to 2020 and is forecast to increase 39% over the next 10 years.
Soybean Domestic Consumption (top 5)
Source: USDA and Higby Barrett
Yields
The primary reason for lower world consumption is the assumption crop yields will increase at a slower rate than the previous ten years. The global soybean yield increase over the past decade was 25%, and the next decade is expected to be 7%. Corn and soybean yield inputs are enjoying a tremendous amount of research and development money that could push the yields higher than forecasted.
Acreage and Production
The main factor limiting Argentina soybean acreage expansion is the tax structure (Argentina Export Tax Changes), which encourages crushing over exports. In response to declining soybean exports that generate foreign reserves, Argentina has temporarily cut soybean export taxes by three percentage points, to 30%, to increase exports. Soybean meal and soybean oil tariffs will temporarily be cut to 28% and increase incrementally until January. History suggests that when Argentina alters its export taxes there can be considerable impacts on global soybean production and trade flows.
Brazil is a major supplier of the land required to meet world demand. Brazil, unlike many major grain and oilseed producers, has a considerable amount of land available to be converted into agricultural production. This feature has helped fuel the expansion of Brazilian soybean production since the 21st Century, but along with the expansion has come increased environmental concerns regarding the areas that have been converted from natural habitats to cropland. The Soybean Moratorium applies only to the Amazon Biome and not the Cerrado region. With the Cerrado region being approximately 789,600 square miles or the size of England, France, Germany, Italy and Spain combined, it is unlikely the Soybean Moratorium will have an appreciative impact on soybean acreage expansion.
Brazil Biome Territories
The currency impact is very important to the world soybean market. Because commodities are quoted in U.S. dollars, the resulting price signal to Brazilian farmers in reais is record high prices and profits for two straight years.
The 2021 soybean area is 132 million hectares. By 2030, the area forecast is expected to be 156 million, a gain of 19%. The increase in soybean acreage between 2011 and 2020 was 24%. Increases in the world soybean production is being driven by Brazil. From 2011 to 2020, world soybean production increased to 370 MMT or an increase of 54%. The projection between 2021 and 2030 is for production to reach 477 MMT or increase by 27%.
U.S. Continuous Soybean Future Converted to Brazilian Reais
(Reais per Bushel)
Source: ICE
Soybean Production (top 5)
Source: USDA and Higby Barrett
Countries and Regions
Argentina, Australia, Brazil, Canada, China, India, Japan, Mexico, United States
Africa
Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde Islands, Central African, Republic, Chad, Comoro Islands, Congo, Egypt, Equatorial Guinea, Ethiopia, French Equatorial, French North Africa, French West Africa, Gabon, Gambia, Ghana, Ivory Coast, Kenya, Lesotho, Liberia, Libya, Malagasy Republic, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Niger, Portuguese Guinea, Reunion, Rwanda, Sao Tome Principe, Senegal, Seychelles, Sierra Leone, Somali Republic, South Africa, Spanish Africa, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda, Zaire, Zambia, Zimbabwe
East Asia
Indonesia, Malaysia, Singapore, South Korea, Taiwan, Thailand
European Union-28
Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom
Former Soviet Union
Armenia, Azerbaijan, Byelorussia, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan
Middle East
Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, Turkey, United Arab Emirates, Yemen
Other Asia
Afghanistan, Bangladesh, Brunei, French Pacific Islands, Fiji, Indochina, Khmer Republic, North Korea, Laos, Macao, Myanmar (Burma), Nepal, New Caledonia, New Hebrides, New Zealand, Other Pacific Islands, Outer Mongolia, Pakistan, Papua New Guinea, Philippines, Portuguese Timor, Sri Lanka, Tonga Island, Vietnam, Western Samoa
Other Europe
Albania, Bosnia and Herzegovina, Greenland, Iceland, Montenegro, Norway, Serbia, Switzerland
Other Latin America
Bahamas, Barbados, Bermuda, Belize, Bolivia, British West Indies, Chile, Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Martinique, Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, St. Kitts, St. Lucia, St. Vincent, Suriname, Trinidad-Tobago, Uruguay, Venezuela
