Producers see future in soybean market
Trade worries dampen price, not grower optimism over soybeans
Facing trade issues that dampened prices this past year, North Dakota soybean growers aren’t necessarily turning their backs on a crop that has attained a solid foothold in their crop rotation systems.
Looking at crop profitability, risk diversification and long-term demand, North Dakota producers will continue to plant soybeans, say two farmers who have been active in the industry.
“Soybean has just been a really sound rotational crop for us. It just works so well, whether you’re rotating with wheat or corn or a number of other crops,” said Monte Peterson, Valley City, a director on the board of the North Dakota Soybean Growers and American Soybean associations.
“On my farm, it’s been part of my rotation for three decades,” he said. “I just don’t see that changing. I think a lot of North Dakota producers want to grow soybeans, and they look for any way possible to continue growing soybeans.”
Chris Brossart, Wolford, a member of the North Dakota Soybean Council, said farmers need to look at their individual operations in determining what is best for their diversification and profitability. He doesn’t expect farmers who raise soybeans to reverse course because of the benefits of soybean to diversification, soil health and crop rotation – and because of continued demand for the crop.
“We have still seen some decent demand. That’s something we need to keep working on,” he said.
The trade war with China that caused demand to drop rattled the market and left growers nervous. Prices dropped off significantly in mid-2018. The average soybean price hit a low of $7.81 and high of $9.46 during 2019, according to information from businessinsider.com. That’s down from prices that have seen highs from $15 to $17 nationally in the past several years.
Prices strengthened as 2019 came to a close, following the announcement of new exports planned to China. Soybean futures rose to their highest level since June 2018.
“If we look back six months ago, producers are questioning, ‘Are we going to get to trade negotiations resolved?’ and we’ve got poor prices, poor demand – demand that has been slowed down with trade negotiations,” Peterson said. “But over the last few months, we’ve also witnessed increased exports to other regions of the world. We’ve increased some market share into the European Union. We’ve had the good fortune of increasing exports into Egypt, Pakistan. Southeast Asia remains strong. So I think that while we were having difficulty exporting to China, we were having the good fortune of picking up some exporting into some other countries.”
However, he acknowledged replacing the volume of the China market is tough to do.
Soybeans made up more than half of China’s agriculture purchases from the United States in 2017, at about $12.2 billion, according to the news agency Reuters. China bought about 60% of all exports of U.S. soybeans before the trade war. Since the current marketing year started on Sept. 1, China has purchased about 10 million metric tons of soybeans, worth about $3.5 billion, according to government data reported by Reuters.
“We may remain cautiously optimistic that we’re going to get a phase one signed agreement,” Peterson said of a trade pact with China, “and that’s going to lead to more exports. So I think that’s all good news, and because of that, we’ve added some sort of an uptick in the market here just recently that helps producers with the idea that soybeans are going to remain profitable to grow here in North Dakota.”
“In this area, it looks just as good as anything else when you look at the budget,” Brossart said, noting the rise in price “is not where we would like to see it but it’s moving in the right direction.”
Will soybeans be a factor in North Dakota agriculture for years to come?
“My opinion is yes,” Brossart said. Even 10 years ago, he might not have been so sure, he said, but improved seed genetics and the potential new uses for soybean in non-food markets have him optimistic.
“I think there’s a lot of potential new uses we haven’t discovered yet for soybeans,” he said. “It’s amazing the amount of new uses that have been found for soybeans in the last 10 years.”
Peterson also believes soybeans will be profitable long term.
“Demand looks like it will continue to grow worldwide for soy and soy protein. That’s reason to be optimistic,” he said. “One thing we probably have learned is that we don’t want to put all our eggs in one basket. I think the U.S. soy industry has been diligent in seeking other markets around the world. We’ve always realized that we don’t want to just be marketing just to one country. We want to build a preference for soy worldwide.”
Areas of potential market growth include Africa, South Asia, Egypt, Pakistan, Nigeria and India. In addition, Peterson said, there’s more market to be captured in China as African swine fever there is brought in check and hog numbers begin to grow, creating a appetite for soy meal.
To sustain soybean production in North Dakota, producers need to look at adding value to their crop, Peterson said. A crushing facility could provide oil for commercial use and meal to fill domestic demand that could be enhanced by growing North Dakota’s livestock industry, he said.
“We should be looking at exporting not only whole soybean but we should be looking at exporting soybean meal,” he said. “But even beyond that, we should probably think about how we could export animals that utilize that soybean meal here.”