The Future of Soybeans
Are soybeans on a roll? Soybean prices have remained more stable than corn (percentage wise), and soybeans cost less to grow per acre. Still, Kansas farmer Bob Haselwood plans to stick to his strategy of a 50-50 corn-soybean rotation.
“Corn benefits from the nitrogen that soybeans leave in the soil,” said Haselwood, who grows about 925 acres each of corn and soybeans near Berryton, southeast of Topeka. “Rotating corn and beans helps control weeds since you use different types of herbicides for each. Also, in our area, the soybean planting window is more forgiving—normally I plant beans by Memorial Day weekend; this year, because of our wet spring, I planted beans between June 9 and 23.”
Haselwood is a soybean booster. He’s chairman of the United Soybean Board and serves on the Kansas Soybean Commission, national and state organizations that oversee checkoff funds.
Other farmers are growing more soybeans where the soils and weather allow for it. USDA estimates that U.S. farmers planted a record high 84.8 million acres of soybeans in spring 2014, up 11 percent over last year, when soybean acres also hit a record. USDA estimates corn acres planted at 91.6 million acres, down 4 percent from 2014—the lowest since 2010.
We talked to Haselwood and two other soybean experts in our region, asking them to predict what the future may hold for the bean. Profits may be down compared to the last few years for both corn and beans. The real hope for improved bean profits will come if U.S. growers can boost yield, expand exports and succeed with new high oleic oil varieties.
Others on our panel of experts include:
Patrick Westhoff, director of the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri and a professor in the university’s Department of Agricultural and Applied Economics. He grew up on a dairy farm in Manchester, Iowa, and earned his Ph.D. from Iowa State University.
Kirk Leeds has been chief executive officer of the Iowa Soybean Association for 25 years. He’s held leadership positions in many soybean organizations, including serving as vice president of the U.S. Soybean Export Council. Last year, Leeds helped found the Iowa Agriculture Water Alliance.
1. What do you project for soybean profitability?
Westhoff: Strong international demand, competition from high-priced corn and a variety of other factors led to good profitability between 2010 and 2013. Prices have declined and FAPRI expects soybean profitability to be much lower over the 2015-2019 period. In estimates we released in March, average net returns over variable production costs, including seed, fertilizer, chemicals and fuel (but not land or other fixed costs) were about $383 per acre between 2010 and 2013, but were projected to average $257 per acre over the next five years.
2. How do soybean prices compare to corn?
Westhoff: In 2015, soybean acres increased at the expense of corn in many states, and prices were a factor. We expect soybean prices to return to a more normal price relationship to corn, more like 2.4 or 2.5 times the corn price instead of the much higher ratios of the last two years. Relative to the record soybean area planted the last two years, that may result in fewer soybean acres being planted in 2016 and beyond, depending on market developments.
3. USDA reports that U.S. soybean yield grew from an average of 30 bushels per acre in 1984 to 48 bushels in 2014. Will the trend continue?
Leeds: Soybean yield increases continue to be driven by improved genetics and better weed, disease and pest management. We believe the trend will increase at an accelerating rate in the next several years, driven by private sector research and checkoff-funded work in the public sector. With more extremes in weather, we will continue to see year-to-year swings, but the trend is clearly upward. One concern is water regulation—we’re working to help farmers more effectively manage inputs to reduce any negative impact on water quality.
Haselwood: We’ll continue to see increased yields in Kansas. We’re learning about new production techniques and better varieties. Using no-till practices stabilized our yields—they allow roots to take hold better. However, heat evaporation limits yields in our dry climate, and it’s gotten warmer and dryer, so we have less top-end potential than other places. As a result, we’re reluctant to put a lot of inputs on soybeans.
Westhoff: Yields will vary from year to year based on weather and other factors, but we expect continued yield growth.
4. Soybeans are Missouri’s top-producing crop in terms of dollar value. Why do Missouri farmers grow so much soy?
Westhoff: Compared to the rest of the country, Missouri soybean yields are a bit higher relative to our corn yields. That makes soybeans look a little more attractive when farmers are setting crop rotations. While many Missouri producers use 50-50 corn-soybean rotations like producers in many other states, more here may plant two years of soybeans for every year of corn. Bootheel farmers routinely rotate soybeans with cotton and rice.
5. In 2014, Iowa was the second-largest producer of soybeans in the U.S., behind Illinois. Why is Iowa a good place for soybeans?
Leeds: The soil and climate are key. Also, the soybean is a great partner in the corn-soy rotation system that dominates the Midwest. Iowa has the largest soybean crushing capacity in the nation. The state generally embraces agriculture. Finally, we have a lot of animals to feed; Iowa continues to be a leader in pork production and egg layers—both are increasing—and a top-10 producer of turkeys and cattle.
6. What’s up with Kansas soybeans?
Haselwood: Soybeans are concentrated in the eastern part of the state, which receives more moisture. During dry years, our yield drops off more than states to the east. New varieties do better in dry weather, but they didn’t help during 2012, a severe dry year. In the spring of 2015, we had plenty of rain—we had trouble getting a crop in the field. We finished a couple of days before the crop insurance cutoff date—and some in northern part Kansas didn’t plant at all. Kansas averages 35 to 36 bushels an acre; I was pleased with my 2014 average of 45 bushels.
7. New acres were plowed during the corn boom. Are farmers planting soybeans on those acres?
Westhoff: The corn boom did not result in as much displacement of soybean acres as might have been expected. In 2007, soybean acreage was reduced dramatically by increased corn. Since then, soybean acreage generally increased, in part because soybeans and corn both displaced other crops such as wheat, sorghum, barley and cotton in different parts of the country. Ethanol fueled the corn boom in large part. Growth in Chinese demand has been key for soybeans. The total amount of land used to produce 13 major crops that we keep track of is only slightly greater now than 10-15 years ago, and the entire change can be explained by reduced hay acres and a smaller Conservation Reserve Program. Those acres aren’t all used to produce corn and soybeans, but corn-bean rotations are used on some.
8. Are farmers sticking to 50-50 corn-soybean rotations?
Leeds: Ultimately, farmers decide what to plant based on their best guess on profits and their farm size and structure. In the last couple of years, we have seen soybeans gain acres in Iowa, but many want to stay close to a 50-50 rotation. If you look at demand for corn and soybeans over the last five to 10 years, clearly corn demand increased mostly as the result of domestic demand, while international demand drove the soybean increase. I doubt this is going to change much in the next five years, with the biggest unknown factor being U.S. ethanol production. The other wild card is on the international side—I believe China could become a major customer for U.S. corn in the next five years.
Westhoff: Corn-soybean rotations continue to dominate. Some farmers at the margins plant an extra year of one crop or the other on at least some of their fields. Corn and soybean production is expanding westward and northward, displacing other crops.
9. Soybeans cost less to grow than corn. Are farmers taking note?
Westhoff: Variable costs per acre are lower for soybeans, primarily because of lower fertilizer costs. The lower cost is a factor for a farmer who needs to borrow to cover operating costs. This is probably more important when commodity prices are low. I expect it’s a bigger factor now than during 2010-2013.
Leeds: This year, many farmers expect to make a few more dollars and take less risk with soybeans than with corn. With lower market prices and even more uncertainty about prices this fall and into next year, we have seen a few more acres planted to soybeans. In Iowa, the shift was not significant.
Haselwood: In our area, corn requires a lot of nitrogen, which carries a big cost. Corn seed costs more than soybean, and corn herbicides may cost a little more as well. We don’t need to add phosphorus or potassium to soybeans after growing corn in the same field—soybeans benefit from corn’s carry-over. But again, you get better results with rotation.
10. What’s coming with production research?
Leeds: Big data—what we call digital farming—will enhance farmers’ ability to better manage their soybean crop. Although we have been collecting lots of data in agriculture for many years, we are finally seeing new tools that will enable farmers to put this data to work on their farms.
Haselwood: The Kansas Soybean Commission joins with 11 other states through the North Central Soybean Research Program to study common problems in our region, including cyst nematodes, sudden death and weed control. (Missouri and Iowa take part in the program.) We’re seeing glyphosate resistance but we’re handling it with pre-emergent herbicides. Also, check out the United Soybean Board program called Take Action on Weeds.
11. What’s the greatest hope for soybean marketing?
Westhoff: Soybean meal will always be used primarily as a livestock feed, so its demand growth depends on livestock sector growth here and in other countries. China will continue to be critical—how fast will the Chinese livestock sector grow, and how will livestock rations change? In the U.S., the pork and poultry sectors will probably account for most future growth in soybean meal demand.
Leeds: As we like to say at the Iowa Soybean Association, “our customers are real pigs.” Feeding soybean meal to pigs, chickens, cattle, cows, turkeys and fish continues to drive soybean demand, domestically and internationally. The world’s consumers want more meat protein, and the U.S. soybean industry is positioned to meet the demand.
12. What about oil, especially high-oleic oil?
Westhoff: Most soybean oil is used for food purposes. Prospects depend on overall vegetable oil demand. The movement to limit or eliminate trans fats could cause shifts away from some traditional soybean oil-based products, but could result in increased demand for new high-oleic soybean oils.
Leeds: We hope that high-oleic soybeans will help us recapture vegetable oil market share lost because of trans fats concerns. It appears that private seed companies have developed varieties of high-oleic soybeans that have good yield potential and solid defensive packages.
Haselwood: The United Soybean Board is working to spread high-oleic soybean acreage to a wider area. This oil has better characteristics for cooking than regular soybean oil—comparable to sunflower and canola. A lot of partially hydrogenated soybean oil users turned to palm oil, which has no trans fat but is higher in saturated fat. Processors in Ohio and Indiana are making most of the high-oleic oils. Some farmers grow all high-oleic soybeans, as they don’t have to clean their equipment between handling the two types of beans. We’re working with Pioneer and Monsanto to expand more high-oleic varieties. Our goal is to produce 18 million acres of high-oleic soybeans by 2023, making it the fourth largest crop grown in the U.S.—behind corn, wheat and regular soybeans. We’re also working to gain approval for high-oleic oil in more importing countries; we want to avoid problems that corn went through when non-approved product got mixed in with approved product for export.
13. What role will biodiesel play?
Haselwood: Biodiesel helped everybody by creating a demand for soybean oil surplus. The United Soybean Board is working with fuel oil suppliers in the eastern U.S. who want to combine biodiesel with fuel oil—it’s cleaner-burning, and it’s starting to gain share. In addition, cities are using biodiesel in buses and fleets because it reduces emissions without a lot of vehicle modifications.
14. What do you project for export growth?
Westhoff: Soybean exports have increased greatly in recent years, primarily because of demand from China. We expect continued growth in Chinese demand, but the pace could slow if growth in consumer incomes and in meat and fish production also slows. Other markets may grow as well, but China accounts for well over half of global soybean imports. Future prices for soybeans and competing crops, exchange rates and government policies will affect soybean market competition from Brazil and Argentina. We project slower growth in U.S. soybean exports over the next five years, given slower expected growth in Chinese imports and continued competition from South America.
Leeds: We already export approximately 60 percent of all U.S. soybeans and the trend will continue. Even with a slowdown in its economy, China will remain our largest export customer. We also believe we will see strong growth from other countries in Asia. Longer term, we remain hopeful of growth in exports to Africa and India.
Haselwood: I just returned from a United Soybean Board trade mission to China. We talked to officials about approving biotech products for import. Our delegation included representatives from South America; some items we discussed benefit us all. Mexico, our second-largest customer, is also important. In the future, we hope to increase soybean meal exports. We’re working to keep our piece of the export pie.
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