Ron Davidson, Executive Director, Soy Canada
CONTRARY TO THE circumstances that existed for the 2018 to 2019 soybean crops, it is certainly a welcome change to prepare Soy Canada
commentary when soybean demand and prices are not only strong but are projected to remain so for at least the coming year.
Previous articles have focussed primarily on current events that were impacting the Canadian/ Manitoba soybean sector at particular points in time. The observations and perspectives that follow reflect a somewhat broader and longer horizon.
Soybean production in Manitoba recorded a remarkable expansion from only 36,700 tonnes in 2001 to 1,162,800 tonnes in 2020. At the same time, equally extraordinary developments were occurring elsewhere in the global soybean sector. These transformations have resulted in a major reordering of the previously established parameters of global soybean production and trade.
REORDERING OF WORLD SOYBEAN PRODUCERS AND EXPORTERS
On a global basis, soybean exports soared from 55.5 million tonnes in 2001 to 169.72 million tonnes in 2020, an increase of 114.22 million tonnes or 206%. Although steady increases in U.S. production and exports were significant contributors to the more than doubling of global trade, the U.S. played only a secondary role in notably more dramatic and rapid changes that were occurring in Brazil.
During the 20-year period, Brazilian production leapfrogged from being equivalent to only 31% of U.S. production in 2001 to representing 119% of U.S. production in 2020. Brazil surpassed U.S. production in 2017, 2019 and 2020 — and was reverted to second place by only 0.8 million tonnes in 2018.
In the case of exports, Brazil surpassed the U.S. in 2013/2014 and continued by an expanding margin that reached as high as 46.36 million tonnes in 2019/2020.
The rapid increase in Brazil’s production and exports during the last two decades has been supported by three significant contributing factors:
- land area devoted to soybeans increased from 35 million acres in 2000 to 94 million acres in 2020, primarily as a result of the conversion of permanent pasture to cropland (a process that could continue for many more years);
- for the past six years, but particularly since 2020, Brazilian producers have benefited from a substantially weaker Brazilian currency that has notably enhanced the relative price competitiveness of Brazilian soybeans in the global marketplace; and
- Brazil has invested heavily in road and port infrastructure required to transport soybeans north and northeast out of the interior soybean producing states of Mato Grosso and Goias.
NOT ALL SOYBEANS ARE CREATED EQUAL
Confronted with the loss of its longstanding positions as the number one producer and as the largest exporter of soybeans, the U.S. soybean sector has invested in a series of initiatives intended to protect international market share in the context of a rapidly increasing supply of competitively priced soybeans from South America. These actions include:
- continuous, direct contact with foreign importers and processors through a global network of United States Soybean Export Council (USSEC) representatives divided into eight international regions: Americas, Greater China, Greater Europe, Middle East and North Africa, Northeast Asia, South Asia, Southeast Asia, and Sub-Saharan Africa;
- aggressive promotion of the U.S. Soy Sustainability Assurance Protocol (SSAP) based substantively upon U.S. government mandatory requirements and voluntary programs, particularly the USDA managed, audited and funded national Farm Service Agency (FSA) services and National Conservation Reserve Program (NCRP), both of which are funded by the U.S. government; and
- launch of a Dare to Compare digital global marketing campaign that highlights research indicating U.S. soy offers preferable and cost- saving nutritional profile, sustainability, and refining characteristics compared to other soybean producers.
REORDERING OF WORLD SOYBEAN IMPORTERS
While Brazil has secured the pole position on soybean production and exports, China has been the singular and unchallenged star player of the last two decades on imports.
In 2000/2001, China imported 13 million tonnes accounting for 24% of total global imports at that time. During the same year, the European Union imported 19 million tonnes or 35% of global imports.
By the end of 2020/2021, it is projected that China will have imported 100 million tonnes accounting for 60% of global trade and that imports by the EU+UK will have decreased to 15 million tonnes or 9% of global trade.
During the same two-decade period, Japan’s imports have decreased gradually from five to three million tonnes. Conversely, imports by Mexico have increased from four to six million and imports by Southeast Asia are approaching 10 million tonnes.
While potentially available land could support a strengthening of Brazil’s position as the leading producer and exporter of soybeans, the prospects for further expansion of China’s role as the globe’s preeminent importer may become constrained by an ageing and either an already or soon to be decreasing population.
Nevertheless, given the projections of continued growth of both the global population and the global middle class, rising demand for high-quality soybean protein and oil would seem to be assured throughout the foreseeable future. A less concentrated and more diversified import market could benefit all participants in the global soybean sector.