South America dethroning U.S. as soybean king


WEST LAFAYETTE, Ind. – Foreign competition is nibbling away at U.S. soybean export volume, at a time when world markets are devouring soybeans by the shipload.

Global soybean consumption continues to rise, and with it expectations for higher farm prices.

But South American soybean growers – not their North American counterparts – might be in a better position to cash in, said Purdue University agricultural economist Chris Hurt.

World soybean demand is extremely strong, Hurt said.

“Over the last six years we’ve seen an annual growth in the world consumption of soybeans of about 7 percent. The initial reaction from most of us would be to jump up and down and say, ‘Let’s go plant more soybeans!’ The reality is, South America has been filling that need.”

Surpassing U.S. In the past six years Argentina has nearly tripled its production of soybeans and Brazil has just about doubled its production. Combined, those two countries now have more acreage than the United States.

Hurt said the crop that the two countries are producing this year exceeds the largest crop ever raised in the United States by at least 12 percent

Tale of the planter. South American farmers currently are harvesting soybeans. The USDA estimates Brazil and Argentina’s harvests at 1.87 billion bushels and 1.29 billion bushels, respectively.

Together, the South American neighbors expect to produce 17 percent more soybeans than a year ago.

The USDA projects U.S. farmers will plant 73.2 million acres of soybeans this spring. If accurate, the estimate would represent a 1 percent decrease in soybean acreage from 2002 and the lowest planted acreage since 1998.

U.S. soybean production was 2.73 billion bushels in 2002, a 6 percent decline from 2001.

Dethroned. Not long ago the United States enjoyed a near monopoly in world soybean trade, Hurt said.

“For a very long time, the United States had a dominant position in world soybean exports,” he said. “If we go back into the 1960s and 1970s, the United States had about a 90 percent share of all of the soybeans in world trade.

“That went down over time but even into the 1980s we were at about 80 percent.”

Then in the ’90s, that really began to change, Hurt said.

In the mid-1990s, the United States had a 70 percent share of world soybean trade.

“This year, we’re looking at the U.S. having the smallest share ever – 43 percent. Over time we think we’ll be back around a 50 percent share, but that’s a tremendous drop from a 90 percent share 30 years ago.”

Still in demand. Despite a shrinking export base, U.S. soybeans remain popular in world markets.

Asian export volumes have been particularly high this year, Hurt said.

“The reason for that is China,” he said. “We continue to see the Chinese buy U.S.-origin soybeans even here into the month of April, when we expected them to shift their purchases to South America.”

Sales to China are contributing to a surge in U.S. soybean futures.

Price pushers. Another factor moving prices upward is a shortage in soybean carryover stocks, brought on by the smaller-than-normal 2002 U.S. soybean crop.

Weather concerns during the upcoming crop season also could play a role in future soybean prices.

In recent weeks soybeans have traded above $6 a bushel. That compares with a U.S. average price of $4.38 a bushel for the 2001 crop.

Prices could climb higher still in the weeks ahead, Hurt said. He cautioned against expecting futures to reach the outlandish levels they attained in 1997, however.

“As we go into planting we could see highs on futures in the $6.50 a bushel range,” he said. “Can they go higher than that? There’s a possibility they could go higher, but we want to back away from having producers think about the 1996-97 marketing year, when futures went to $9.

“This year we could actually import soybeans from South America if U.S. stocks get too tight this summer.”


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