Friend or Foe?

By Joli A. Hohenstein

As the global landscape for oilseeds changes, ebbs and flows, Illinois soybean producers must assess where they fit into the market scheme to be successful. Who is friend and who is foe?

The answer is unsurprising: It depends.

The September World Agricultural Supply and Demand Estimates (WASDE) report (most recent) estimated higher U.S. soybean exports and crush, as well as higher global oilseed trade despite lower production. So, where do soybeans stack up with other oilseeds?

Soybeans the Global Big Dog

Soybeans command the largest share of oilseed production and consumption globally. Only a handful of markets play in rapeseed, another popular oilseed, with European Union (EU) countries being the biggest producers. However, with a three-year low for global rapeseed production, as competition, rapeseed may get less of a spotlight than soybeans.

“The EU had a poor crop this year, though there might be some rebound next year on yield,” says Mark Ash, USDA senior agricultural economist. “They’ve had some issues that hurt the profitability of growing rapeseed. They have banned certain insecticides in the EU that hurt the ability to control flea beetles in rapeseed fields. And a lot of farmers in the EU are going to be more reluctant to grow it. They are more likely to grow wheat, barley and other crops.”

That, says Ash, becomes the opportunity for other oilseeds to gain ground there. The EU does not have much room for increased production of sunflowers, for example. Both Russia and Ukraine sunflower output can increase and fill gaps left by the loss of rapeseed oil, although much of global sunflower production goes into birdseed and confections rather than getting crushed. Flax is a non-factor. It is primarily used for linseed oil and is not a huge market.

On the meal side, soybeans may gain ground on rapeseed worldwide, but Ash says there generally hasn’t been as big a gap in that category.

“The footprint of all these other oilseeds is so small, I don’t think it’s a story,” says Thomas Hammer, National Oilseed Processors Association (NOPA) president. “Soybean consumption is still going up. But if you don’t get the Chinese market back, then all bets are off.”

Competing with Canola

Global swine inventory: Asia has by far the largest number of pigs. Soybean meal is tops in pig feed rations with room for market growth.On this side of the pond, canola (rapeseed) is the second most produced oilseed. It is tops in Canada and number two in the U.S. In fact, Canada is one of the biggest producers.

“They have the ability to export to global markets, although right now it’s difficult exporting to China,” says Ash. “If that trade issue clears up, they should be able to expand to other areas.”

However, much uncertainty remains for the U.S.’ neighbors to the north, he explains. The country already favors small grains and canola production. And while expansion has slowed, Ash anticipates an increase could still occur, depending on how oilseeds around the world fare.

One challenge is that canola oil’s market is small, notes Hammer. “They have to decide where to market it,” he says. “Canola oil is sort of equivalent to our high oleic soybean oil, and we are trying to emulate canola oil. High oleic is coming along, but not as fast as farmers like.”

Hammer notes high oleic soybean oil must be identity preserved – a premium is paid and it has to be segregated. “We’re trying to compete with the quality of canola oil, but it’s important to remember that it doesn’t have the nutritional bundle and building blocks of soybean oil,” he says.

Likewise with canola meal, which goes largely to animal feed. Canola meal is not competitive with soybean meal nutritionally, Hammer says. “It doesn’t contain the same amino acids. It doesn’t have the nutrition animals need. Soy is the ‘cadillac’ of animal nutrition.”

Managing all the Moving Parts

Given all the production and consumption possibilities worldwide with oilseeds, keeping track of all the moving parts is tough. That includes oil and protein preferences.

“It’s all about consumer choice,” says Hammer. “We need to make sure soy is the preferred choice of animal nutritionists, for example, whether they’re feeding pigs or chickens.”

One thing Illinois soybean farmers can do is monitor protein levels of what’s coming off the field, says Hammer. “If they’re dropping, is that Mother Nature, or is that the seed? They may be drought- or disease-resistant, but if you’re losing protein, is it worth it?” he asks.

When you compare crude protein levels, Brazilian soybeans have higher levels than the U.S.

However, “protein levels are dropping in all three top protein growing countries. It’s important for farmers to educate themselves about what nutritionists want,” says Hammer. “Soybean protein lives and dies with what’s going on with meat consumption.”

Meal production continues to climb worldwide: total meat production, measured in tonnes. Meat includes cattle, sheep/mutton, goat, pigmeat, and wild game.U.S. per capita consumption of meat is 223 lbs. per year, according to USDA.  “We’re eating a lot of meat,” says Hammer. “Ninety-seven percent of soybean crush goes to feed animals.”

With most of the world’s future middle class projected to be in India, China and Asia in the not-too-distant future, Hammer encourages Illinois farmers to make sure customers understand soy’s advantages. That may help boost demand as more of it goes into food and feed applications.

Other oilseeds will continue to have a role in meeting human and animal nutrition needs. From a broad, long-term view, market watchers predict certain oilseeds in certain parts of the world will continue to grow faster than others, depending on exchange rates and more.

Ash says countries such as Argentina, Russia and Ukraine could provide incentives for farmers to expand oilseed production when currencies are being depreciated. That, in turn, would help farmers in South America and Eastern Europe gain a foothold.

Even now in Ukraine, soybean production is increasing dramatically, though new tax changes may make that less appealing. Ukraine is the world’s largest sunflower producer. More than two-thirds of Ukraine can raise crops or livestock, reports crop protection company ADAMA.

“In this current environment where you have a conflict with a major soybean importer such as China, that opens the door for other oilseeds,” Ash says. “The longer that goes on and the faster these countries produce other oilseeds and China takes more of them, they more likely they will be able to take fewer and fewer soybeans from the United States.”

Finally, while oilseed processing plants are the same for soybeans and soft seeds, incentive is low for U.S. farmers to put canola or other oilseeds into their current production regimes.

“They don’t fit into a rotational pattern,” he explains. “Sunflower and canola grow in colder climates with shorter growing seasons. We rotate between corn and soybeans because soybeans fix nitrogen in the soil. There’s really no infrastructure and no market for other oilseeds.”