China and increases in domestic crush dominate soy discussion at ISA-Cargill roundtable

March 7, 2023 | Aaron Putze, APR

Increased biobased fuel demand and the need to diversify America’s portfolio of soybean buyers dominated conversations held during a meeting of soybean farmers and industry stakeholders March 3 in Cedar Rapids.

“It’s an exciting time to be involved in the soybean industry, but that doesn’t mean it’s absent of challenges and perhaps even a few dark clouds,” said Iowa Soybean Association (ISA) CEO Kirk Leeds.

ISA and Cargill sponsored the farmer-focused roundtable discussion at the Kirkwood Center in the state’s second most populous city.

A robust dialogue centered on issues impacting the production and profitability of growing soybeans. They included demand for soybean meal and oil, essential ingredients for animal nutrition, biodiesel, renewable diesel and sustainable aviation fuel.

“China is the largest purchaser of soybeans in the world but its interest in buying from the United States is diminished when tensions rise between the world’s two largest economies,” Leeds said.

Trade agreements wane

The tensions are exacerbated by waning interest by Congress in developing new trade agreements to expedite the export of U.S. commodities.

“Trade issues remain extremely important to open markets,” said ISA Director of Public Affairs Michael Dolch. “Unfortunately, not seeking new trade agreements seems to be the strategy of the day in Washington.

“This mindset won’t deliver the expansion and access to markets that will be needed as we grow biobased fuel and soybean meal production.”

An anticipated 25% increase in domestic soybean crush over the next three years – compared to 2-3% historically – amplifies the angst.

Driven by rocketing demand for biobased fuels, more domestic soybean crush will produce sizeable new inventories of soybean meal.

Historically, the U.S. has exported 12.4 million metric tons (MMT) of soybean meal annually. While the economics of supply and demand will make meal more affordable for domestic and international customers, favorable trade agreements will also be needed to dramatically increase meal exports.

Policy matters

“Public policy has a role to play, whether advancing markets for biobased fuels or moving soybean meal to export destinations around the world,” said Leeds.

This work is made more difficult during a year when a new farm bill is needed.

Officially called the Agriculture Improvement Act, the federal legislation last passed in 2018 includes expansive and costly provisions involving food assistance, risk management and market development programs impacting every American.

“There are more than 260 new faces in Congress who’ve never voted on a farm bill,” Dolch said.

So many fresh faces in the nation’s capital is a call to action. Every farmer, said Dolch, must make their opinions known on a host of issues – from the need for trade and farm legislation that works for farmers to increasing the renewable fuels volumes established by the Environmental Protection Agency (EPA).

“The EPA is proposing reduced volumes for biomass fuels at a time when demand for homegrown energy is increasing,” Dolch added. “Anytime you lower those volumes, it’s less feedstocks and oil used in biofuels production. Less demand will negatively impact the prices farmers receive for the soybeans they grow and market.”

China demand

As with most meetings involving topics centric to soybeans, the conversation started and ended with a focus on China. That’s understandable, given the country of 1.4 billion people imports more than 100 MMT of soybeans annually.

For comparison, the European Union ranks second at 14.8 MMT and Mexico third at 6.4 MMT.

Leeds, who recently celebrated 30 years as ISA’s CEO, is uniquely familiar with efforts to expand soybean consumption in China.

“The country has been very clear it doesn’t want to be dependent on foreign-owned crush facilities for soybean meal and oil,” he said.

Therefore, China continues to subsidize the industry to excess while its population ages and decreases, economy weakens and hog numbers decline.

“We talk about the advantages of buying U.S. soybean meal and oil,” Leeds added, “but those selling points may become more difficult if China has excess soybean meal, too.”

Family owned

The success of Cargill is directly tied to the fortunes of Iowa soybean farmers. The family-owned company employs 2,000 Iowans and operates soybean crush facilities in Cedar Rapids, Iowa Falls and Sioux City. This represents nearly one-third of its annual U.S. soybean processing.

“Our investment in Iowa is significant and will continue,” said Tim Coppage, Cargill vice president and regional commercial leader. “It’s where a large percent of our soy crush is located nationally.”

More than 75 farmers and industry stakeholders attended the farmer roundtable, a follow up to last year’s inaugural ISA-Cargill meeting held in Iowa Falls.

Additional points of interest referenced during the Cedar Rapids discussion:

• Argentina’s soybean crop once estimated at 47-48 MMT is getting smaller, perhaps as short as 30 MMT. The country was dry going into the growing season and has received just 40-60% of normal rainfall through the growing season.
• While China imports the most soy on volume, the EU is America’s largest soybean meal importer followed by Indonesia, Vietnam, Philippines and Thailand.
• There’s enough biodiesel, renewable diesel and sustainable aviation fuel capacity now or planned to use all additional soybean oil produced. The RFS proposed volumes are well below where capacity will be, creating both a policy challenge and opportunity.
• The challenge will be use and or export the additional 14 to 19 MMT of soybean meal that added crush capacity will produce. It will be moved but only at the right price.
• Additional meal in the marketplace will drive down prices, benefiting livestock producers.
• Crush margins are staying strong in the U.S. due to production issues in Argentina. “We’re back to the old days,” says Cargill Trading Manager John Buboltz, “as the crush margins right now are being driven by soybean meal and that will likely continue for the next year.”

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