Soybean

Soybeans are the largest of all the oilseeds, when looking at production volumes. Even though soybeans are called oilseeds, they only produce about 20% oil and they are mainly known for their high protein level. With a protein level of between 45-50% soybeans have increased in popularity in recent years. Soybean prices are very much correlated with the amount of protein they provide. Living standards in emerging economies have risen significantly causing the demand for meat to increase. The increased demand for meat has increased the demand for soybeans and consequently soybean prices have been rising in recent years. China has become the world’s largest importer of soybeans, and the economic prosperity of the country correlates directly with soybean prices. In the USA, soybean prices have been influenced heavily by the increased demand from biodiesel.

The US is the biggest producer and exporter of soybeans, followed by Brazil and Argentina. These three countries are very important on the supply side when it comes to soybean price levels.

In recent years soybean production has gone up significantly. The rise in soybean production has several reasons. First of all: the yields of the planted areas have gone up significantly and part of this increase can be attributed to the rise of GMO. GMO soybean varieties are more resistant to pests, which results in less loss of crop. More than 50% of the soybeans in the world are genetically modified, which is a higher percentage than any other crop in the world.

A more important reason for the increase in soybean production is higher soybean prices. Soybean production has risen to well over 300 million metric tons per year worldwide. The United States is expected to harvest 108 million metric tons in 2014/2015, up from 91 million tons the year before. With this, the United States is the biggest producer of soybeans worldwide and produces around a third of the world total production. Brazil is expected to produce a crop this year of 95mmt, and Argentina of 56mmt, ranking second and third. The USDA reports are leading in the market sentiment of where the prices are going.

Country Percentage of World Production Percentage of Bean Export Percentage of Oil Export Percentage of Meal Export
United States 34% 42% 18% 10%
Brazil 30% 39% 22% 12%
Argentina 18% 7% 45% 46%
China 4% 0% 3% 1%
Paraguay 3% 3% 4% 7%

Brazil produces slightly less than the US but exports about the same amount. Because the countries are located on different sides of the hemisphere, the export seasons do not overlap. This ensures that there is a steady supply of the beans throughout the year. In Brazil soybean exports normally start late February and gain momentum in March. In Argentina this cycle is normally one or two months later. In the United States soybean harvest starts at the end of September. New crop exports start flowing during October. The quality of the soybeans and soybean prices tend to differ in the two regions. In general, Brazilian soybeans tend to have a higher protein levels, resulting in higher soybean prices. Also, Brazil produces Non-GM soybeans which are significantly higher in price than their GM counterpart. Argentina has been struggling with soybean protein levels the last few years, resulting in lower soybean prices.

Exports in both North and South America have gone up significantly in the last decade. The main driver of the increase in exports has been the demand in China. This factor has been the single biggest determinant of higher soybean prices in recent years. Farmers in Brazil have gotten very inventive with their agriculture practices. Furthermore farmers in Brazil always have the possibility to plan corn instead of soybeans. This normally happens if soybean prices are becoming less favorable than corn prices. Brazilian farmers also have the possibility to plant two crops each season. When a farmer decides to harvest their soybeans early, they can plant a quickly maturing Safrinha corn crop right after the soybean harvest.

China is the largest importer of soybeans in the world followed by the European Union. China is responsible for around 60% of worldwide soybean imports, the European Union around 15%. In China almost all soybeans arrive in the port of Dalian. The commodity exchange of China is also located in Dalian, which makes it by far the most important area for soybean price discovery.

Most of the soybeans arriving in Europe will enter through Rotterdam, followed by Hamburg. The two cities are also the locations of the two largest soybean crush facilities in Europe, owned by Archer Daniels Midland Company.

Uses Of Soybeans

Rarely are soybeans used in their uncrushed form. In some cases soybeans are used as food or feed but in general more value can be added to crush the beans. Most soybeans are crushed for the high protein meal and the oil. In almost all cases soybean meal is used for animal feed. The high protein value has been the main driver of soybean demand and higher soybean prices. In a few countries in the world they use soybean meal also for human.

Soybean oil has a variety of uses; the most obvious one being for human consumption in frying oil and sauces. Soybean oil however has also many industrial uses in paint, lubricants or plastics. In recent years the use of soybean oil in biodiesel has also become very popular. In the US, 30% of soybean oil goes into biodiesel, and this number is still growing. Soybean prices have consequently been supported through increased demand for the meal and increased demand for the oil.