Supply vs. demand
By Jennifer Carrico
The 2012 growing season lacked moisture to maximize grain production in many parts of the Midwest and High Plains. However, in Iowa, the nation's No. 1 producer of soybeans, the drought didn't affect the soybean crop as much as it did the corn crop.
"Even with the drought, we had the seventh largest soybean crop in history," said Grant Kimberley, director of market development for the Iowa Soybean Association. "Supplies are smaller than we'd like to have, but with the continual increases in yield and production, farmers have continued to produce large amounts of soybeans."
Kimberley said global demand for soybeans has also helped push the need for more soybeans and helped keep the prices up.
"The global demand for U.S. soybeans has certainly helped keep the price of up for farmers. We need a strong export market to diminish the quantity we have," he said.
The global soybean competition keeps the price for farmers up as well. In the past marketing year, U.S. soybean farmers exported more than 1.8 billion bushels for soy, valued at more than $23 billion.
"We keep our eyes on the global market and international competition," he said. "Soybean demand remains robust in places like China, and soymeal exports have also been strong. Even with a projected large crop from South America this year, U.S. soybean exports should remain steady due to perpetual logistic bottlenecks at ports in South America."
Northwest Iowa farmer Jim Stillman currently serves as chairman of the United Soybean Board. He has hosted trade groups from China and Taiwan at his farm near Emmetsburg.
"The trade groups are mostly concerned about if we will have enough soybeans to export to them," said Stillman. "They like to visit the fields where the grain is produced. Our export customers like our soybeans because of the consistent quality we can provide."
The USDA World Agricultural Supply and Demand Estimates report released on Feb. 8, projects the nations soybean reserves will likely be at their lowest level in 50 years by the end of the 2011/2012 marketing year, at 125 million bushels. That number is down 10 million from the previous month's projections due to increased domestic crush and strong export demand.
China continues to be the No. 1 importer of U.S. soybeans, receives 25 percent of the nation's total production. "To make that number more real, think of it as one of every four rows of soybeans in a field is exported to China," said Kimberley.
He said with the continuing rise of the middle class in Asia, those people want to add meat and protein to their diet, which is the driver of soybean exports out of the U.S.
The rising middle-class populations in southeast Asia, Mexico and the Middle East continue to increase the demand for soybeans, soymeal and soybean oil for both human and livestock production.
Stillman said the export market is not only for human consumption of soy products, but also for a growing livestock industry in countries like China.
"Processed soybeans are used for feeding hogs, chickens and fish. Animal agriculture continues to have a strong need for our product," he added.
Kimberley said it is important to continue to have good relations with the export customers internationally as amount in soybeans and soybean products exported continues to grow.
"Our soybean exports continue to grow as we see populations and incomes improving in the countries to which we export," he said. "It's hard to say what we will see in population increases in the next 10 years, but we know we will continue to see growth in China and the need for more soy in that country."
Iowa Soybean Association CEO Kirk Leeds said in a release that global demand for soybeans continues to be off the charts, while domestic demand continues to remain better than expected as well.
"In addition to needing another good crop this year, we also need additional soybean acres in Iowa and the United States. Soybeans are a viable option for farmers and the demand is there," he said.
Stillman will be shifting some of his acres over to soybeans this year. Traditionally he has planted two-thirds of his farm in corn and the rest in soybeans, but after two drought years he said soybeans faired better than corn and he plans to return his farm to 50 percent corn and 50 percent soybeans.
He also realizes that he is fortunate when it comes to marketing his grain, as his town has a large feedmill, a soybean crusher and an elevator to market soybeans as well as an ethanol plant to market corn.
With all those options and a good infrastructure to move grain where needed, Stillman said it adds to the value of his crops.
"Our export markets appreciate that we have the infrastructure in place to get them the product in a more timely manner than some of our international competitors," he said. "They are willing to pay a little more for our soybeans because they know they will get a high-quality product when they need it."
The average price range for 2012/2013 is projected at $13.55 to $15.05 per bushel, which is up five cents on both ends of the range, according to the WASDE report.
Globally, soybean production in Brazil is up 1 million tons from the January report, which will offset production in Argentina, which is down 1 million tons due to deteriorating weather conditions.
Kimberley is confident that U.S. farmers will continue to produce the needed soybeans to meet supplies both domestically and globally.
"U.S. farmers always seem to rise up to the occasion and produce the needed amount of product. With new research and technology, we will continue to provide the needed food for the future," concluded Kimberley.
Jennifer Carrico can be reached by phone at 515-833-2120, or by email at email@example.com.