The export perspective on soybeans

The window is open for producers and the trade alike, but be forewarned. As our experts tell us, not all markets provide the same opportunities for IP growers

When looking into how soybeans get traded around the world, the important thing is to keep it all in perspective. In fact, nothing is more important. But that’s not to say it’s easy. On the U.S. side, there are plenty of challenges, thanks mostly to the political upheaval of the last couple of years and the so-called trade wars, and particularly with President Trump’s strategic squeezing of one of his country’s largest customers, China.

On the Canadian side, things might appear quieter and rosier, with greater demand to export soybeans into the world market. But is that appearance real?

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For those who produce and ship identity preserved (IP) or food-grade soybeans, nothing is ever simple. Demand for soybeans is one piece of good news but it doesn’t automatically translate into success on the IP/food grade side. And it’s not simply a matter of “insufficient premiums.”

The climate in row-crop production has changed in the past five years, and will see more alterations in the next few. Some of those will mean higher consumer demand for traceability, often with the expectation that those higher standards be incorporated by the farmer as part of the cost of doing business, instead of generating a premium to be paid by the end-user.

Country Guide sought the input of three individuals involved in the Canadian IP soybean trade: Shannon Bieman of SeCan, Colin Richardson from Snobelen Farms and Martin Vanderloo of Huron Commodities Inc. Each participant was asked a number of questions on world markets, opportunities and the conditions influencing IP demand, in Canada and abroad.


Shannon Bieman.
photo: Supplied

Shannon Bieman

SeCan, market development, western Ontario

Country Guide: When we say, “soybean export market,” is there a distinction between crush beans and IP soybeans or is that across the board?

Beiman: If I drew a box that said, “Export,” it would break off into “Food” and “Feed.” But from there, it’s broken down further into IP, non-GMO or crush. The problem is that a lot of people now refer to IPs for almost everything, because if you think of identity preservation, you think of traceability. And a majority of people want products traced. It doesn’t matter whether it’s a food-grade product or a feed-grade product.

True IP food-type soybeans are unique in that we have the ability to differentiate ourselves from other exporting nations of the basis of our quality.

Country Guide: What has been the impact of the recent trade action by the U.S. against China? Is that driving more demand abroad?

Beiman: Canadians are shipping more soybeans into China, and the expectation is that that number is going to increase quite substantially going into 2019.

Country Guide: What about the Chinese preference for buying South American soybeans?

Beiman: We have to remember that demand overall is strong, world-wide, both for food-grade and for crush. I don’t think we can produce the volumes required for all world markets and remain secure in what we’re doing. Exporters are responsible to supply quality soybeans 365 days of the year, no matter the yield or quality issues that arise. Where we can develop a preference for Canadian soybeans is in the value-added food types.

Country Guide: Is there something in the past six to 12 months that points to an opportunity for IP soybeans?

Beiman: Premiums for IP soybeans are very cyclical. Recently, supply has been restricted, driving anticipated premiums back up. As times have changed, everyone’s busier and they want less of a workload. That often translates into varieties that yield and are easy to keep clean.

Since weather is unreliable, farmers want something that’s easy to spray. Some growers who got out of IP this year want to be out for two to three years to try to clean up weed issues such as Canada fleabane- or Group 2-resistance.

Country Guide: Are there new traits or properties that are in higher demand to entice growers into IP? Or is it a matter of those growers who contract for IP acres will continue to do so, regardless of world conditions or traits and properties?

Beiman: While the vast majority of breeding programs focus exclusively on GMO soybeans, there are new conventional varieties coming into the marketplace with improved combinations of yield, protein and other quality traits demanded by end-use customers.

Many growers will continue to grow IP beans as long as the variety and the chemistries can compete with what I would refer to as the crush marketplace.

It’s also important to recognize that what works for the neighbour may not necessarily work for you.

Growers need to know their cost of production: take time to pencil out the premium on offer and make sure that both the variety and the premium will work for your business.”

Colin Richardson.
photo: Supplied

Colin Richardson

Food grade products manager, Snobelen Farms

Country Guide: When we say, “soybean export market,” is there a distinction between crush beans and IP soybeans or is that across the board?

Colin Richardson: The Canadian Agri-food Policy Institute has recently come up with a lofty target of doubling Canada’s farm and food exports by 2027. Although a portion of that growth is focused on commodities such as crush beans, Canada has rather limited volumes and we need to make a high return on those exports. Therefore, value-added products such as IP soybeans will have an important role to play to meet those targets.

Country Guide: How has the IP soybean market been for farmers in the past year or two?

Richardson: The IP markets have been strong in the past couple of years for both growers and processors. The number of food acres grown regionally (Ontario and Quebec) has stagnated or even decreased. This fact, coupled with a strong demand for high-quality, Canadian food-grade soybeans in Japan and Southeast Asia, has led to attractive grower premiums even as the CBOT softens.

Country Guide: What has been the impact of the recent trade action by the U.S. against China? Is that driving more demand abroad?

Richardson: The volatility in the markets has quickened the pace of change to the export crush/feed market. There have been some opportunities in the export crush markets that maybe weren’t as appealing this time last year. I could speculate that due to the way IP soybeans are contracted it may be that the pace of change won’t be fully realized until new crop is harvested and end-users start looking at the next year’s supply.

Country Guide: How much of this boils down to the convenience from a herbicide-tolerant system versus the opportunity to make a premium off of what is essentially a traceability system?

Richardson: The described convenience of a herbicide-tolerant or “one-pass” system is often not the case. With sporadic weather the last few years and the growing issue of herbicide resistance expanding throughout Ontario, it’s often not as easy as advertised. Many areas of Ontario are already seeing growers utilize IP-like spray programs in their fields to combat some of these issues.

Describing the premium as getting paid for a traceability system is very accurate. Canada has maintained a strong market share of food-grade soybean exports into countries like Japan for exactly that reason — our IP system is well-respected and results in high-quality end products. Regardless of how you view growing conventional versus GMO soybeans you really have to understand your cost of production. Many growers have found success managing both conventional and GMO soybeans in their rotations by capturing efficiencies during planting and harvesting.

Country Guide: Are there new traits or properties that are in higher demand to entice growers into IP? Or is it a matter of those growers who contract for IP acres will continue to do so, regardless of world conditions or traits and properties?

Richardson: Our end-users are very aware of the properties they are looking for in an IP soybean to produce their product whether it is natto, tofu or soymilk. As an industry, we are always looking for the next big opportunity with traits and characteristics, and that takes a co-ordinated effort through the entire supply chain. For our growers, agronomic profile and performance in the field is still the top priority.

Martin Vanderloo.
photo: Supplied

Martin Vanderloo

President, Huron Commodities Inc.

Country Guide: What were the changes in the soybean export market that were taking shape last March that prompted one seed company rep to suggest this as a story?

Vanderloo: There has been a significant shift in available non-GMO food-grade soybean inventory both in Japan and in North America. Collectively, we’ve been choking on surplus supplies caused by the over-enthusiasm of buyers and suppliers. The other issue which caused this to be much longer than experienced in the past is the arrival of new soybean cleaning plants to newcomers who had no concept of this market and how sensitive it is. The difference between a surplus and a shortage is a very fine line with severe consequences.

Country Guide: When we say, “soybean export market,” is there a distinction between crush beans and IP soybeans or is that across the board?

Vanderloo: Absolutely. These two markets trade very independently of each other. The main reason for that is the large price difference for the IP market. The pain inflicted comes when IP soybeans become crush beans, which occurred in a big way for the 2015, 2016, and 2017 marketing years.

Country Guide: How has the IP soybean market been for those farmers growing that particular market — in the past year or two?

Vanderloo: Premiums rose substantially for the 2018 crop once the trade realized the surplus was essentially gone. Initially, buyers did not accept the higher premiums until they quickly found that all suppliers were singing the same song. The big challenge here is that once a farmer turns away from growing IP soybeans, it is very tough to get them back unless the premium is at a level they simply cannot ignore. It will be interesting to see how farmers react to a $2 per bushel drop in soybean prices, the fact that they must tank mix herbicides for their GM varieties now, and the instances of dicamba drift and the costs involved with that.

My suspicion is that IP soybean production with a premium may look more attractive for the 2019 crop.

Country Guide: What has been the impact of the recent trade action by the U.S. against China?

Vanderloo: A large number of soybean cargos have been traded into China for the coming harvest out of Canada. The problem for exporters of food-grade soybeans is that the basis levels for Canadian beans have increased substantially for crush beans while we base our IP soybean price on crush bean values plus a premium… frankly, those of us in the food-grade soybean business take enormous risk: we buy acres and sell tonnes.”

Country Guide: Is there something in the past six to 12 months that points to opportunities for IP soybeans?

Vanderloo: Canada will never be able to compete head-to-head with the U.S., Brazil and Argentina on crush beans. The situation with China is a recent exception. We are back to that $8- to $9-per-bushel price level on soybeans again which should prompt the farmer to do the math, particularly when we are seeing premiums of $3 and higher. The only caution flag is that the U.S. soybean industry has been aggressively pursuing IP markets now that the Chinese trade issues have caused so much disruption. The U.S. industry does not do it as well as we do in Canada, but you can be sure they will catch on quickly.

This article was originally published in the October 2018 issue of the Soybean Guide.

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