The Resilience of Illinois Soy Trade in Uncertain Times
By Eric Woodie
As I take my regular walks along the banks of the Mississippi River, I watch the barges as they travel up and down the waterway. Despite everything seemingly changing around us because of the COVID-19 pandemic, the river continues to flow. And in turn, so does trade. Barges continue to transport products around the world and that means Illinois soybeans can continue to reach export markets.
It’s a hopeful reminder that there is still some normalcy out there. That things will get better as we conquer the challenges of COVID-19 together. That said, the Illinois Soybean Association Checkoff Program has been crunching numbers outside of my walks by the river to understand how the soy market is being affected by the pandemic.
The big takeaway is a positive: soy continues to move. As everyone is figuring out the new normal, the global trade system continues to pack, move and transport soy all over the world to feed people and livestock and deliver biodiesel. Bulk shipping has been very nimble in reacting to the crisis and containers have been reallocated and rescheduled as overall shipping volume has declined.
Yes, retail sales are down because of widespread shelter-in-place orders, and large retailers are looking ahead to late summer months as they prepare inventory for the holidays. The overall reduction in imports means retailers will potentially be looking for alternative domestic soy sources to supply their needs.
Despite the effects of the global pandemic, U.S. soybean exports are up this year over last year. There is a reduced short-term market demand domestically, and we are paying close attention to how the feed market is being affected by plant closures, while we also look to additional international markets.
Shifting transportation behaviors is another key consideration when analyzing the U.S. and Illinois soy export market amid COVID-19. As people are driving less, fuel production, including biofuels, is down. This is causing a shortage of Distillers Dried Grains with Solubles (DDGS), a high-protein byproduct of ethanol production used mainly as a high-protein animal feed. A cost-effective alternative for DDGS is soymeal which is why we’re seeing soybean crush volumes experience a year-over-year growth of 7 percent. This DDGS shortage has the potential to continue to generate a huge demand for soybean and soymeal exports as Southeast Asian countries look to replace the ethanol byproduct DDGS to support their livestock feed sectors.
Overall, despite the challenges, I’m encouraged by the resiliency of the trade network and our Illinois soybean producers. They’ve quickly implemented hygiene and work-place distancing protocols to ensure they can safely continue the essential business of helping to feed our nation and the world.
The ISA Checkoff Program will continue to analyze this evolving situation and implement a data-driven approach to understanding how we are engaging with the trade system. Stay tuned for continued updates on what we’re seeing in this unprecedented time as we trade and work with people around the world.