Market Merge Ahead?
By Candace Krebs
The tofu made at Phoenix Bean is comparable to flavorful craft beer or small-batch artisan cheese: fresh and distinctive enough to convert a new wave of consumers who otherwise might never develop a taste for soy products into regular customers.
“We have been growing by double-digit percentages for four years, consistent with the healthy food market worldwide,” says Jenny Yang, who owns Phoenix Bean, a Chicago-based company.
According to current estimates, around 15 percent of U.S. soybean production goes into food-related uses. Artisanal food businesses like Yang’s show there’s room for growth.
Yang goes through one million pounds of soybeans a year and sells products through more than 300 grocery stores, farmers markets and restaurants, while her geographic reach continues to expand. Her interactions with millennials and even younger generations have convinced her that tomorrow’s decision-makers will be more concerned about environmental issues and responsible sourcing and generally more food aware than previous generations. They may recognize tofu is made from soymilk, not bean solids.
When Yang first bought the business 13 years ago, she had no idea how to go about getting the specialty non-GMO, organic, sustainably grown beans she wanted. She began by working through a broker, but couldn’t get the consistency she needed.
Then she met a farmer from the area who was already using traditional growing practices. The two forged a cautious but increasingly collaborative relationship. It eventually grew into a valuable partnership that has continued under the next generation to run the farm.
Now Yang relies on two different farms in the Chicago area to harvest, dry down and store the beans, then deliver them to her throughout the year.
If her current suppliers disappeared tomorrow, however, she believes she’d have no problem replacing them. For one thing, she’s willing to buy from farms that are just beginning the process of transitioning to organic. For another, farmers themselves seem more willing to convert a portion of their acreage to specialty production.
New Consumer Frontier
According to Andy Harig, vice president for tax, trade, sustainability and policy development at the Food Marketing Institute (FMI) in Washington D.C., consumer trends appear to be pointing to a future with more identity-preserved crops, third-party verification and special labeling claims.
“FMI does an abundance of market research, but I think the challenge is knowing what the trends are and how we catch them early, versus what is a fad that is not going to have legs. That’s tough sometimes,” he says.
FMI, which represents 75 percent of the nation’s food retailers, has identified some key market drivers that appear to have staying power. They include customer personalization, transparency and social responsibility. Consumers often express values in the marketplace by seeking recommendations from third-party verifiers like Monterey Bay Aquarium Seafood Watch or The Non-GMO Project.
“According to recent research on 2019 shopper trends, 46 percent of shoppers say they look at business practices when they decide where to shop. That’s a very significant number,” says Harig.
Those expectations also color how they view the farming community as a whole. “Ten or 15 years ago, if you went up to a consumer and asked if soybeans are something people eat, they would have said no. Now you have a much better educated consumer,” he says.
Harig’s group works to convey the data it collects to grower organizations, while individual retailers are constantly relaying similar information to their suppliers.
“One thing I want to stress is that retailers’ decisions are driven by the market; these aren’t the retailers just pulling ideas out of thin air,” he says.
The same consumer trends that impact domestic markets are also emerging overseas. Bob Sinner, a fourth-generation farmer and owner of SB&B Foods in Casselton, North Dakota, believes there’s a vast market for identity preserved, food-grade specialty crops outside of the U.S. that has not been fully tapped.
“What’s the focus of global agricultural trade today? Ever since 9-11, it’s all about food safety and buzzwords like traceability, sustainable and stewardship,” he says. “People around the world want to know how and where their food was produced.”
Sinner’s company handles three million bushels of food-grade soybeans a year, produced under contract by more than 250 growers. Most of what they sell is non-GMO, a market segment Sinner says is seeing consistent annual demand growth of around 15 percent.
He observes producer interest in getting closer to the end-user or food manufacturer is on the rise. While he recommends that farmers start slow and shift gradually into non-GMO production — growing practices and management requirements differ dramatically — he adds that many of his suppliers have chosen to simply switch exclusively to non-GMO.
Barricades to Food-Grade Growth
Many more would likely jump on the bandwagon if the industry could get past a few critical barriers, Sinner says.
“If anything is going to affect our capacity to grow, it’s the ability to ship products in a timely basis. That is our number one issue,” he says.
Sinner’s business relies heavily on shipping containers that come into the country filled with imported consumer goods. “Before they get unloaded, they are generally headed to large metro areas like Chicago,” he says. “But our exports come out of rural areas like North Dakota. Therein lies the challenge. We have to transport our products by covered truck to containers in large metro areas or get containers to our facilities to load them.”
Sinner estimates he spends 25 percent of his time dealing with logistical issues, which are admittedly a complex problem to solve. But there’s another issue where he thinks the industry could be more proactive.
“The soybean industry, in my opinion, has not completely accepted the demands from consumers and food manufacturers worldwide that want non-GMO soybeans. We must embrace their requests and not turn our backs on them,” he says.
He believes the U.S. industry isn’t doing enough promotion in potentially lucrative markets overseas that refuse to buy GMO products. He considers that a mistake, since the U.S. already has a sterling reputation for quality that is the envy of the world.
Commodity Soybeans Still in Play
While talk of consumer trends definitely filters down to the countryside, the reality on the ground is that, to be competitive in a global market, farming has evolved into a super-efficient, commodity-driven system.
Terry Bline, manager, Roanoke Farmers Association, a grain origination cooperative in central Illinois that handles soybeans, corn and wheat, estimates about 10 percent of their beans are sold into non-GMO markets, a figure that’s remained relatively stable.
“It is something we’ve been handling for 25 years now, and I would say our volume has stayed pretty flat,” he says.
Most farmers are reluctant to enter into the market for one main reason: weed control. “It requires a lot more manual labor,” Bline says. “With the volume and size farmers are operating at these days, they find that, for the most part to operate efficiently, they have to stay with conventional soybeans.”
Like farmers, local grain originators have to decide where to put their resources. In Roanoke’s case, the priority has been on enhancing storage and receiving capacity.
It’s likely many farmers who diversify into niche markets are going direct to the end-user — just like Yang’s suppliers—which Bline concedes is a concern for managers like him.
“That is something you worry about it — people trying to cut out as many players in the supply chain as they can,” he says. “But I think there’s probably a limit to that. There are just some people who won’t do it or who aren't equipped to do it from an equipment or management standpoint.”
Recent spring flooding and late-planted crops and the impact of those challenges on production and trading volumes has consumed the attention of grain handlers, pushing talk of food trends or new marketing niches to the backburner, he says.
But that doesn’t mean those issues are going away any time soon, and the industry knows it. Bline says he’s constantly re-evaluating his priorities.
“Right now, we don’t see niche markets as being a place where we want to focus our energy,” he says. “But I could have a totally different opinion in a few years.”