As demand for soy grows along with the world’s population, competition for that burgeoning market grows, too. Today, as U.S. soy enjoys historic demand all over the world, it also must fend off rising competition for share of the market.
Competition is everywhere. U.S. soy is competing against other countries, other feed sources and other products. American soy has risen to the top as the most sustainable and highest quality in the marketplace, backed by an abundant supply that can be reliably moved across country and seas.
Along with the growth of demand, competition grows, too, and with it the need to examine threats to U.S. soy’s ability to compete globally. Soybean farmers encounter competition in non-traditional forms, too, including an aging transportation infrastructure and weeds with resistance to herbicides, diseases, insects and even weather.
All of these limiting factors compete with your profitability.
Competitive Threats
Although the United States is the most cost-effective and reliable supplier of soybeans, concern about the integrity of America’s transportation infrastructure, which is currently the best in the world, is growing. The transportation system is aging and in need of ongoing investment in order for U.S. soy to maintain its reputation for delivery reliability and efficiency.
Last year serves as a great example. The volume of soybeans is growing, and the freight-rail industry is experiencing difficulty accommodating it – particularly in areas like the upper Midwest, where farmers depend on rail transportation to export terminals in the Pacific Northwest. In the past, it took grain cars from states such as North Dakota, South Dakota, Nebraska and western Minnesota five to six days to get to the Pacific Northwest, with a five- to six-day return trip.
By early 2014, that journey had increased to eight days with an eight-day return trip. This increases the transit time from farm to customer and decreases the reliability of those shipments, both important factors to foreign buyers.
The rail transportation system is not the only one presenting challenges. So are the nation’s inland waterways and ports.
The American Society of Civil Engineers gave the nation’s inland waterway system a D-grade in its 2013 infrastructure report card. Nearly 50 percent of the nation’s 257 locks are classified as functionally obsolete. On the upper Mississippi and Illinois River system, 57 percent of the locks were built in the 1930s with a projected 50-year lifespan.
More than 60 percent of grain exports are transported via inland waterways, and, ultimately, 95 percent of U.S. agricultural exports and imports are transported through U.S. harbors.
“The U.S. soybean industry has developed this unique reputation as the pre-eminent supplier of soybeans and soy products in the international marketplace,” says Mike Steenhoek, executive director of the Soy Transportation Coalition. “The thing about good reputations is that they take years to amass and moments to evaporate.”
Steenhoek, who recently spoke with a group of visiting Brazilian farmers who were envious of the U.S. infrastructure, says the development of better transportation systems in competing countries could threaten U.S. farmers.
“It’s great to see that the infrastructure here in the United States is still doing its job,” Steenhoek says. “But our competitors are actively improving their infrastructure, and we could easily fall behind. It’s vital to U.S. soybean farmers and the U.S. soy industry that we protect this advantage.”
Competition from foreign countries is intensifying, and farmers need to be aware of those countries’ growing number of soybean acres, which could affect the domestic market.
Soy and the Food Industry
The food industry’s move away from trans fats has opened up a share of that market for other edible oils. The primary source of trans fats is partially hydrogenated soybean oil, which has long been popular among U.S. food manufacturers for its low cost and flexibility in meeting the demands of a wide variety of applications.
The oilseed and food-processing industries have been in the process of phasing out trans fats for several years. Researchers developed high oleic soybean varieties, which produce oil that doesn’t require hydrogenation, allowing it to avoid trans fats. With those varieties now available, high oleic soybean oil has some catching up to do to recapture U.S. soybean oil’s market share.
“High-stability oils from canola and other oils are being touted for their high potential in the food industry and have had several years of a head start,” says Frank J. Flider, oilseed consultant. “The competition has been fierce and taken 4 billion pounds of annual demand away from soy.”
Farmers have an opportunity to help fend off these competitors by growing a stable supply of high oleic soybeans, a great motivator for food companies to use it. Ask your seed rep if high oleic is available in your area.
Fighting for Share of Ration
U.S. soy’s competitive advantages are many, but challenges do exist. Soybean meal faces competition from alternative feed ingredients and other countries that are producing more and more soybeans each year.
According to Iowa State University statistics, approximately 6 million short tons of soybean meal have been replaced by dried distillers grains with solubles (DDGS) used in combination with synthetic amino acids each year over the last five years. It’s projected that this byproduct of the ethanol-manufacturing process will replace that amount again this year.
As ethanol production in the United States has expanded in recent years in accordance with the U.S. Renewable Fuels Standard, the production of DDGS has increased proportionally. Increasingly available supplies of DDGS are being used in livestock feed rations, both domestically and overseas.
Sam Huenefeldt, marketing manager at an ADM plant in Quincy, Illinois, says that one way U.S. soybean farmers can help meet animal agriculture customers’ needs is by planting varieties that deliver high yield and high protein. Higher-protein soybeans create more demand, which can increase the price farmers receive.
“Processors with the better product can demand a higher price for their meal, and those with the lower-quality product can even be excluded from a sale,” Huenefeldt says.
According to a study from Iowa State University, U.S. soybean meal has the highest content of five essential amino acids for both poultry and swine feed uses. And those amino acids in soybean meal are also highly digestible.
However, the same study found that Brazil produces soybean meal with the highest protein levels. So continuing to improve the protein content in the U.S. soybean crop is a long-term strategy to keep U.S. soybean meal competitive in a global soybean market.
Quality means different things to different customers. While poultry and livestock farmers require high protein levels, other customers need oil. Either way, quality is just one of the many important factors customers consider.
“We may buy some soybeans from Paraguay, because of the higher oil or cheaper price maybe, but the logistics are much smoother when purchasing from the U.S.,” says Manif Lakhdhar, a Tunisian soy buyer. “It is very important for us to get the soybeans in a certain range of time.”
Perceptions like Lakhdhar’s can change quickly, making it important that the U.S. soy industry maintain its competitive advantages of high quality, sustainable, abundant supply, reliable transportation and exceptional customer service.
As farmers look to the future to produce a crop that continues to outshine the competition, they can take comfort in knowing that the checkoff understands the playing field, is sizing up the competition and is making sure U.S. soy remains at the top.
Source: Unitedsoybean