John Baize believes in beans. "The world will need an additional 70 to 80 million metric tons (mmt) of soybeans in the next decade,” says the international trade and policy consultant.
What's driving demand is global consumption. "The demand for soybean meal is coming from outside the U. S.,” says Baize, whose Falls Church, Va.,-based consulting company specializes in oilseed analysis. "Problems in the domestic livestock sector coupled with an abundance of ethanol byproducts hurt soybean meal demand domestically. The trans-fat mandate of 2008/2009 also damaged the soybean oil market here at home.”
International demand is another story. China has quickly become the world's largest importer of soybeans. A net exporter of soybeans in 1995, China's rise in soybean meal consumption began in 1991 as the country began liberalizing its economy. Since then, China accounts for 37% of the growth of global soybean consumption. In 2010, the hungry dragon is expected to buy 41.1 mmt of soybeans.
"China is growing like crazy, experiencing 9% to 10% economic growth in 2009. Double digit growth is expected in 2010,” Baize says. Soybean meal consumption has skyrocketed since 1990, mainly because China now produces 48.5% of the world's pork.
China's eye-popping gross domestic product (GDP) growth is helping drive food demand through the roof, says Scott Rozelle, Stanford University ag economist and expert on China. For example, GDP growth was 8.9% in the third quarter of 2009, according to the World Bank. By contrast, U.S. GDP was up 2.8% in the same time frame.
As the income of China's more than 1.3 billion people rise, food demand beyond traditional staples of rice and wheat will jump 50% during the next seven years, according to Rozelle's analysis. "This is a food demand pressure the world has never seen before,” he adds.
"The crop I see at risk is wheat. When people get money, they take a little bread out of their diet and replace it with meat,” Baize says.
China meets 70% of its soybean demand by importing from the U.S., Brazil and Argentina. The U.S. is expected to haul in the largest crop on report, 90.3 mmt, in the 2009/2010 marketing year. Brazil will produce 63 mmt, and Argentina will produce 53 mmt.
"Argentina production is increasing, but they seem to be running into a wall with available acres,” Baize says. "Brazil is pulling back because they haven't been able to achieve the desired seed quality.
"It's quite possible Argentina's product may not exceed 40 mmt, and Brazil's may not exceed 55 mmt,” he adds.
Ending stocks for 2009/2010 are projected to be among the lowest on record. That signals U.S. farmers that we need more beans.
However, producers and Mother Nature never fail to provide enough to fill the plates. "Every time it looks like we're tight, we seem to find [soybean] stocks.”
Top Producer, February 2010